As many of our Total Accounting Care clients are small business owners in the state of Virginia, we know you are eager to stay on top of the Commonwealth’s minimum wage rules. Therefore, we have put together a quick guide with all the information you need to know about the minimum wage increase taking place in Virginia beginning May 1.
What is the minimum wage in Virginia?
The current minimum wage rate in Virginia matches the federal minimum wage rate, which is $7.25 per hour. Some employees who are exempt from this minimum wage rate include:
·Tipped employees, who may be paid a minimum cash wage of $2.13 per hour (employers may utilize a maximum tip credit of $5.12 per hour).
Full-time students, who may be paid no less than 85 percent of the minimum wage ($6.16) for up to 20 hours of work per week when school is in session.
Any other employee who is exempt from the federal minimum wage under the Fair Labor Standards Act.
Keep in mind that counties, cities, and towns may have their own minimum wage laws, and TAC clients should check on the local wage laws that may apply to you.
When will the minimum wage increase?
Virginia’s state minimum wage is set to increase to $9.50 on May 1, 2021, and will gradually increase each year, until it reaches $15 starting January 1, 2026. It will then be $15 per hour for workers whose employment is covered by the federal Fair Labor Standards Act (FLSA) and to public employees. A higher minimum wage may also be required by the FLSA for some workers.The last time the minimum wage increased in our state was 2009, when it met the federal minimum wage of $7.25 per hour.
What will happen to the Virginia minimum wage beyond 2025?
Because the minimum wage in Virginia will increase from $7.25 to $15 over five years, the plan beyond 2025 is uncertain. Most Virginia minimum wage employees will be earning gradual increases per hour each year until it caps at $15 in early 2026. Some mitigating circumstances could change this. For instance, the current law allows the Virginia Commissioner of Labor and Industry to stop wage increases, if negative job growth occurs in our state.
How should small business owners prepare for changes to the minimum wage?
With changes to the minimum wage on the horizon, TAC clients should be prepared. Here are a few options you may consider as the Virginia minimum wage begins to increase:
Audit your expenses: Check your cash flow in detail and create a hiring plan you can afford. In some cases, you may find that hiring temporary workers as needed is less expensive than taking on full-time regular staff.
Make sure you hire and keep the right employees: Replacing an employee can be costly. You can decrease the total cost associated with recruiting and training when you hire and retain the right people. Look for candidates with good track records, who come recommended and fit within the company culture.·
Entrust TAC with additional accounting duties: In addition to tax advising and preparation, you can reduce production costs for your small business by outsourcing bookkeeping and back office accounting functions such as accounts receivable and accounts payable processing; job costing and expense tracking; bill payment and payroll setup and processing to TAC.
If you don’t already – consider entrusting TAC with these important duties that will ultimately save your small business time and money in the long run. As always, keep in close contact with us to make sure your business is prepared and staying in compliance throughout the year. Feel free to contact us with questions about the new Virginia minimum wage laws or any other important tax or accounting questions you might have. Total Accounting Care is here to help!