Seattle, WA $15 Minimum Wage Offers Lower Rates for Small Employers

Seattle_worker

The Seattle minimum wage law requires large employers (or “Schedule 1” employers) to pay a minimum wage of $15 per hour beginning in 2017. However, it allows small businesses (or “Schedule 2” employers) to phase in the increases more gradually, in some cases giving them until 2021 to pay $15.00 per hour.

The Seattle minimum wage law defines small employers as those with non-franchise operations that employ fewer than 500 employees nationwide.

Under this definition, a firm with only one employee in Seattle but 499 workers in other states is not a small employer. In addition, when an employer is a franchisee, all of the franchise’s employees nationwide count, even though various locations have different ownership.

So, for example, the non-franchise Joe & Tina’s Sandwich shop with 8 employees in its only location is a small employer in Seattle. The Subway sandwich franchise across the street, with 8 employees in Seattle but thousands of employees nationwide is not a small employer. The Seattle minimum wage law allows small employers to phase in the higher minimum wage on an extended schedule, to minimize the impact on small business owners. Both small and large employers can count bonuses and commissions as part of the minimum wage earned by employees. Unlike large employers, under the Seattle minimum wage law small employers are permitted to count verifiable tips as part of the employee’s total compensation.

In addition, a small employer can count the dollar amount that the company contributes to the employee’s health benefit (silver level or better) as part of the employee’s minimum total compensation. These credits to minimum total compensation extend far beyond those available to Seattle employers with 500 or more employees.

It may be easier to keep in mind that in Seattle, Minimum Wage = the hourly rate paid to workers by the employer. Minimum Total Compensation = the hourly rate paid to workers by the employer + tips + health benefits paid by the employer.

Effective April 1, 2015 small employers must pay workers a minimum wage of at least $10.00 per hour.

Beginning January 1, 2016 the minimum total compensation for small employers is $12.00 per hour. Of that amount, at least $10.50 must be hourly wages (including commissions and bonuses.) The remaining $1.50 per hour can include verifiable tips reported to the IRS, and health benefits paid by the employer. However, even if the employee earns $20 per hour in tips and health benefits, the employer must pay at least the minimum wage of $10.50 per hour in 2016.

 

* Effective January 1, 2021 the minimum compensation for workers employed by small employers will be the same as the city-wide Seattle minimum wage for large employers, including annual increases that occurred between 2018 and 2021.

Beginning in 2025, the ordinance requires small employers to pay the same minimum wage rates and provisions as large employers with more than 500 workers. Obviously, this is a complex law and small employers can expect to see more details here, as information becomes available.

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