How Will Minimum Wage Increases Affect Your Restaurant or Hotel Business?

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While recent changes to the minimum wage have had a big impact on the restaurant and hotel industries, business owners should be aware that we expect to see another wave of increases over the next couple of years.  Staying ahead of the curve and knowing when these changes are set to occur will greatly reduce the potential for headaches in the future.

The federal hourly minimum wage currently stands at $7.25 per hour and $2.13 per hour for tipped employees. There has been recent conversation about raising the federal minimum wage to $10.10 per hour in the near future, which would apply to both tipped and non-tipped employees. In regards to tipped employees, their base hourly wage and tips combined must equate to the federal minimum wage.

Below is a summary of where state minimum wages currently stand in the DC metropolitan area, as well as anticipated changes over the next several years:

District of Columbia

  • Effective July 1, 2015, the hourly minimum wage increased from $9.50 to $10.50 per hour. Tipped employees must be paid at least $2.77 per hour.
  • Effective July 1, 2016, the hourly minimum wage will increase to $11.50 per hour.

Maryland

  • Effective July 1, 2015, the hourly minimum wage increased from $8.00 to $8.25 per hour. Tipped employees must be paid at least $3.63 per hour.
  • Effective July 1, 2016, the hourly minimum wage will increase to $8.75 per hour.
  • There are plans to phase in annual increases to make the statewide hourly minimum wage $10.10 per hour by July 1. 2018.
  • Montgomery and Prince George’s Counties will increase their hourly minimum wage from $8.40 to $9.55 per hour effective October 1, 2015. Tipped employees must be paid at least $4.00 per hour in Montgomery County and $3.63 per hour in Prince George’s County.
  • There are plans for Montgomery and Prince George’s Counties to phase in annual increases to make the local hourly minimum wage $11.50 per hour by October 1, 2017.

Virginia

  • Matches the federal hourly minimum wage of $7.25 per hour and $2.13 per hour for tipped employees.

As minimum wages continue to climb, restaurant and hotel operators will need to take these changes into account and budget accordingly to minimize the financial impact. Labor is a major component of a restaurant or hotel’s “prime costs” that needs to be monitored on a regular basis.

Aronson can help you prepare for the business challenges ahead so that when the time comes, your business can withstand the changes and continue to thrive. For more information, call Aaron Boker of Aronson LLC’s hospitality industry practice at 240.364.2582.

 

About Aaron Boker

Aaron Boker has written 10 post in this blog.

As a senior manager in Aronson LLC's Tax Services Group, Aaron Boker is a proactive advocate for his clients, which include restaurants, hotels, C corporations, S corporations, partnerships, individuals, trusts, and private foundations. In addition to his tax compliance and planning work, he is committed to building the firm's hospitality industry practice and has a deep understanding of the unique business issues faced by companies in this market. Aaron's clients benefit from his dedication to excellent service and his commitment to his work as part of a results-driven tax team committed to staying at the forefront of the profession.

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One thought on “How Will Minimum Wage Increases Affect Your Restaurant or Hotel Business?

  1. […] The federal hourly minimum wage currently stands at $7.25 per hour and $2.13 per hour for tipped employees. There has been recent conversation about raising the federal minimum wage to $10.10 per hour in the near future, which …read more […]

    September 3, 2015 at 3:56 pm

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