As you deck the halls you might want to hang up a stocking for your employees because they are getting a lot for Christmas. If you could box an increase in minimum wage or put a bow around paid sick leave, both would be found under the tree. Prop 206 passed in November this year which means AZ businesses will have a lot to contend with in 2017 and beyond. Here is a list of what AZ business should expect in 2017 as a result of Prop 206.
Prop 206 & AZ Businesses
For starters, all employers must increase their minimum wage to $10.00 per hour by January 2017. The average minimum wage in Arizona in 2016 was $8.05. Jumping to $10.00 will certainly affect the bottom line for every employer who will be required to pay out an additional $4,000 per employee – and that’s just in 2017.
This means adjustments will have to be made somewhere; lower quality goods or fewer employment opportunities could be the result. Small businesses in AZ are likely to feel the sting and employees just may be wishing to write a new letter to Santa.
Prop 206 Specifics
- Employers must increase the minimum wage to $10.00 per hour for full-time and part-time employees by January 2017.
- Employees that receive tips can be paid $3.00 less than minimum wage, or $7.00 per hour effective January 2017.
- If you have 1-14 employees, each employee must be given a minimum of 24 hours of paid sick leave (PST) each year.
- If you have 15 or more employees you must permit a minimum of 40 hours of PST per year.
- Employees must be allowed to use their PST the same year it is accrued.
- Part-time and temporary workers are considered “employees” under Prop. 206 and are entitled to PST.
- Employers may not fire an employee for using his or her PST.
- Employees are encouraged, but not required by the law to give prior notice of their leave unless the employer has a written policy containing procedures for providing notice.
- The employers cannot require employees to find their replacements as a condition for receiving PST leave.
- Unused sick leave carries over from one year to the next.
- Unused sick leave does not need to be paid to employees whose employment is terminated for any reason.
- PST begins to accumulate at the commencement of employment, or on July 1, 2017, whichever is later.
- Any employees hired after July 1, 2017, may be required to wait up to 90 days after his or her start date to begin accruing PST as determined by the employer.
- Continued Minimum Wage Increase
- After your payroll and accounting team get the new 2017 numbers situated, get ready for several more increases to follow. 2018 will require a $0.50 increase raising the minimum wage to $10.50 per hour. 2019 will bump to $11.00 per hour and 2020 will take us to an all-time high of $12.00 per hour.
Prepare Your AZ Business for Prop 206
We hate to say it, but we know Prop 206 will have negative effects for those it intended to help. In fact, a 2007 study by David Neumark and William Wascher, an economics professor at the University of California at Irvine, and a member of the research and statistics division of the Board of Governors of the Federal Reserve System, “reviewed literature on minimum wage and concluded that of the most credible analyses done almost all point to negative employment effects.” That means you, small business owner, may be forced to make hard changes like reduce the number of employees you hire, more to automated systems, raise prices, or reduce the quality.
If you have to make changes within your hiring department, make sure your HR team is well versed in the legalities of losing employees. You may consider hiring help on contract rather than full or part-time, in which case your HR team can make certain that you follow all the guideline and avoid costly penalties for incorrect categorization of employees.
PayTech Can Help You Make Sense of Prop 206 for 2017
If you’re looking at reevaluating costs, adjust prices, rework commission structures, you’ll want a dynamite accounting team on your side to ensure that you are functioning in the black. Any of these can be daunting tasks to an already overworked business owner. If you find yourself wanting help to navigate these changes, call PayTech. If you’re looking for help keeping your taxes and accounting books straight, let us help you. If you’re overwhelmed and frustrated with this new law, our team will come alongside and help make the transition easier. We know Prop 206 isn’t full of the all jingling bells and tinsel as some thought; use our team to help navigate this small storm so you don’t get lost in the snow banks.