Get ready: 2027 state minimum wage increases are around the corner!

For many employers, annual state minimum wage increases are common. Many states (and cities) adjust their minimum wages each year, often effective on January 1. Employers in such states are likely used to preparing for the changes.

As a reminder, the highest applicable rate generally governs. Some states also have industry-specific, tipped-employee, youth-worker, or small-employer rates. Recent changes in Ohio, New Jersey, and Washington, for example, include special provisions beyond the standard minimum wage rate.

Employers need to be ready for the changes. Steps they might need to consider include the following:

• Review all hourly employee pay rates to see which employees are affected and ensure no employee is paid less than the minimum wage. This can include tipped employees, youth training wages, shift differentials, and so on.
• Audit compensation strategies to ensure pay scales remain logical, fair, and compliant to avoid wage compression. The pay of other employees, such as supervisors, leads, or long-time employees, might need corresponding increases to maintain internal pay equity.
• Adjust payroll systems, timekeeping methods, and any other HR tools and resources to reflect the changes. This might mean that not only positions that earn the minimum wage need to be adjusted, but positions that generally get more than the minimum wage might, too.
• Watch for exempt salary threshold increases. Several states tie exempt salary thresholds to the minimum wage. An increase in the minimum wage might require higher salaries for exempt employees. Washington's recent increases, for example, also affected exempt salary thresholds.
• Look at the budget. Pay increases affect the budget, which also might need adjusting, based on overtime pay and payroll taxes.
• Update required posters. Many states require employers to post updated minimum wage notices.
• Tell employees about upcoming wage changes before they take effect. This can help ease confusion.

While it’s only October, January 1 will be here before you know it. Employers should start taking steps to ensure their pay processes remain compliant with all applicable state minimum wage laws and any changes.

Not all minimum wages increase in January, however. Employers must be aware of changes that occur during the rest of the year as well, particularly those with employees in multiple states.

Key to remember: Employers have some steps to take to prepare for upcoming state minimum wage changes.

Additional resources from J. J. Keller