New York Minimum Wage: What Small Businesses Need To Know

Many small businesses operate in industries like food and beverage, hospitality, and retail that pay employees minimum wage and supplement their income with tips, commissions, and other perks. That makes it essential for owners and managers to stay up to date with the state and federal minimum wage requirements that apply to them.

If you’ve got a small business based in New York, you’ve come to the right place. We’ll outline the current minimum wage rates in New York State, Long Island, Westchester, and New York City, as well as discuss any upcoming changes and suggest how Homebase can help with your payroll and HR and compliance needs. Let’s get going.

Current New York minimum wage rates

Let’s get straight down to it and break down what the minimum wage rate currently is in New York State as well as a few specific New York State regions according to the Department of Labor:

*Tipped service employees have a variety of jobs, but the common thread is that customers give them tips to show appreciation for their services. Some examples include hair stylists, estheticians, massage therapists, tour guides, chauffeurs, and hospitality workers.

**Tipped food service employees work specifically in the food and beverage industry and often depend on tips for a significant portion of their income. Some examples include bartenders, servers, bussers, and other waitstaff.

The above minimum wage requirements apply to the vast majority of employees in New York State. However, there are some specific exceptions, like:

• Professionals
• Outside salespeople
• Taxi drivers
• Some government employees (certain non-teaching employees are covered)
• Part-time babysitters
• Ministers and members of religious orders
• Volunteers, apprentices, and students working in non-profit institutions
• Students obtaining vocational experience

It’s worth noting that independent contractors or freelancers aren’t considered “employees” in a typical sense, so they aren’t covered by the above minimum wage requirements either. It’s up to them to negotiate their own rates with their clients.

Last, the United States has its own minimum wage requirements at the federal level. When there are differences between the federal minimum wage and the state minimum wage, the worker gets the higher rate. But it’s always best to talk to an accountant or human resources professional if you have any questions or concerns surrounding how much you should pay your small business employees.

Recent and upcoming changes to New York minimum wage rates

The minimum wage rate in New York has slowly increased over the past couple of years and is projected to continue rising. Basically, lawmakers are trying to ensure that the rate stays consistent with the rising cost of living while still making it feasible for business owners to keep up. For example, the general minimum wage rate for New York State rose from $13.20 per hour in 2021 to $14.20 per hour in 2022. It’s also projected to go up to $15 per hour on January 1st, 2024.

The minimum wage rate in New York City, Long Island, and Westchester is also planned to increase to $16 per hour as of January 1st, 2024. New York Governor Kathy Hochul has also recently announced that by 2026, minimum wage will rise to $17 per hour in New York City, Long Island, and Westchester, and $16 per hour throughout the rest of the state. After that, there will be annual minimum wage increases in accordance with inflation rates.

Why it’s vital for SMBs to keep up with changing minimum wage rates

There are two main reasons why it’s essential for your small business to stay up to date with shifting minimum wage regulations in the area where you operate:

1. Minimum wage rates impact both the way you run your business and your bottom line
2. Your business is legally required to comply with minimum wage requirements

Let’s break down what that really means for small businesses a little more closely.

Minimum wage rates impact your business operations and bottom line

If you’re a small business owner or manager, you’ve no doubt spent a fair share of time worrying about labor costs. Labor costs are how much employers have to pay employees (along with any applicable taxes and/or benefits) as a result of their work within a certain period.

So, it only makes sense that when minimum wage increases, your team members’ hourly rates increase, and so do your labor costs. Let’s say you own a small coffee shop and typically pay three employees minimum wage ($15 per hour) for a total of 120 hours of labor per week:

• 120 hours x $15 = $1800

In this simple example, your labor costs might be $1800 per week. But what if the minimum wage went up to $17 per hour?

• 120 hours x $17 = $2040

That might not seem like a huge difference, but it amounts to a $240 difference in labor cost per week, or up to $960 per month. That means your business would need to bring in an additional $960 per month to enjoy the same level of profitability it did before the minimum wage increase.

You’re legally required to comply with minimum wage regulations

This might seem obvious, but we feel obligated to emphasize the importance of keeping track of and abiding by state minimum wage requirements. Remember, you’re legally required to follow minimum wage regulations. That means if you don’t, you’ll have to deal with unpleasant and even legal consequences, like:

• Reputation damage — Put simply, if your small business doesn’t pay workers the minimum wage they’re entitled to, it won’t look good. Your reputation will suffer and you’ll get negative publicity in your community, which may lead to lost customers and opportunities. 
• Lost licenses and permits — If your business requires any licenses or permits to operate, your state may suspend or revoke them if you don’t abide by minimum wage requirements.
• Government audits — If the state suspects that your business isn’t complying with minimum wage regulations or knows that you haven’t in the past, they may audit you (or officially inspect all of your accounts). That’ll be equal parts frustrating, time-consuming, and expensive.
• Legal penalties — These include fines and back wage payments to underpaid employees.
• Lawsuits — Team members may sue you (and win) if you don’t pay them minimum wage. And if they win the lawsuit, you’d likely be responsible for all their unpaid wages, plus interest and their legal fees.
• Criminal penalties — This is reserved for very large sums of money or repeat offenses, but business owners and managers can face high fines or even jail time when they don’t pay employees what they’re due.

Homebase is the payroll and compliance partner your SMB needs

As you can see, there’s a lot more to New York minimum wage than meets the eye. It might currently be sitting at $15 per hour in New York City and $14.20 per hour in New York State, but it’s projected to grow yearly and even in accordance with inflation and metrics like the Consumer Price Index in the years to come.

Minimum wage might seem simple, but it can have serious implications for small businesses, especially when it comes to payroll, labor costs, and HR and compliance. If you feel concerned about that as a small business owner, an SMB-friendly team management platform like Homebase can help. Specifically:

• Homebase payroll is designed for hourly teams and makes it easy to adjust hourly rates and pay employees what they’re due correctly.
• Our labor cost control features help owners and managers proactively manage labor costs with clock in/clock out controls, use forecasting tools to build schedules, and break down costs based on factors like hour, department, and role.
• Homebase HR and compliance can alert SMB owners and managers about changing state and federal minimum wage requirements and provide access to HR experts should they need any specific questions answered.

Because Homebase is passionate about helping small businesses like yours thrive and succeed — without the administrative hassle.