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Impact of financial decisions

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Minnesota’s minimum wage increases are effective starting August 1, 2014. For many employers, the law will phase in an hourly wage increase to $9.50 between 2014 and 2016.

Impacts of financial decisions

Business Planning for Minnesota Minimum Wage Increase

  • 7/31/2014

Earlier this spring, Governor Dayton signed a bill into law raising Minnesota’s minimum wage for the first time since 2005.

For many employers, the law will phase in the hourly wage increase to $9.50 between 2014 and 2016, and it will increase to $8.00 for large Minnesota employers starting Friday, August 1. The bill also indexes the minimum wage to inflation for increases beginning in 2018.

The wage requirements vary based on classification as either a “large employer” or “small employer.” A large employer is defined as any entity with annual gross revenue of $500,000 or more, and a small employer is one with annual gross revenue of less than $500,000.

“Because the threshold of distinguishing large employers from small employers was $625,000 prior to the law change, many companies who were small employers under the old law may not realize that they are now large employers,” says Dan Kidney, a technical tax director with CliftonLarsonAllen.

According to guidance provided by the Minnesota Department of Labor, gross annual revenue is calculated by beginning with the employers’ past four quarterly tax estimates or previous year audit statement, adding the gross revenue for the four most recent quarters, and then subtracting any separately listed excise taxes. If the resulting number is $500,000 or more, the employer must pay the large employer wage rate outlined below.

Provision Previous Law New Law
Large employer $6.15/hour $8.00/hour on August 1,2014
$9.00/hour on August 1, 2015
$9.50/hour on August 1, 2016
Small employer $5.25/hour $6.50/hour on August 1, 2014
$7.25/hour on August 1, 2015
$7.75/hour on August 1, 2016
90-day training wage (18 and 19 year olds) $4.90/hour $6.50/hour on August 1, 2014
$7.25/hour on August 1, 2015
$7.75/hour on August 1, 2016
Youth wage (under 18) No youth wage $6.50/hour on August 1, 2014*
$7.25/hour on August 1, 2015
$7.75/hour on August 1, 2016
*Federal minimum-wage rate may apply.
Indexed to inflation No inflationary increases Indexing begins January 1, 2018

How we can help

Some entities may have questions about their employer status. We can help you determine your employer category and answer any of your questions about this new law.