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Navigating Pennsylvania’s new minimum wage law

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in Compensation and Benefits,Employee Benefits Program,Human Resources

For many Pennsylvania employers, the state’s new minimum wage law taking effect Jan. 1, 2007, is straightforward: It raises the minimum wage they must pay employees to $6.25 per hour from the current federally mandated rate of $5.15.

“Small employers” have to pay only $5.65 an hour to start. Small employer minimum wage rates are phased out until they pay the same as other employers effective July 1, 2008.

The law, however, has numerous loopholes that you need to know about.

The new wage

For most employers, the state minimum wage jumps from the Jan. 1, 2007, rate of $6.25 to $7.15 on July 1, 2007. Small employers must pay $5.65 per hour until July 1, 2007, when the rate jumps to $6.65 per hour, followed by another hike to $7.15 per hour on July 1, 2008.

Who's a small employer?

Those that employ the equivalent of 10 or fewer full-time employees can pay the lower minimum wage rates. Full-time equivalents are calculated based on 40-hour weeks. For example, four employees working 20 hours a week are the equivalent of two full-time employees.

Employers that pay workers for more than 400 hours in a week don’t qualify as small employers under the law.

Employers must count their employees at all locations when determining whether they are a small employer. Owners are not considered employees.

Training wage for young workers

The new law says you can pay employees under 20 years old a “training wage” of $5.15 per hour during their first 60 calendar days on the job. Employees can be paid the training wage only until the day before their 20th birthday. Breaks in employment don’t extend the period in which an employee can be paid the training wage.

Employers can’t displace current employees to hire a worker at the training wage. The law doesn’t actually require the employer to meet any training requirements during this training period.

Tip-earning employees

The minimum wage tip credit is $2.83 per hour. For employees who earn more than $30 per month in tips, the employer is required to make up the difference if the employee’s tips and the $2.83 don’t equal the minimum wage. Employees who receive less than $30 per month in tips must be paid the minimum wage.

The new minimum wage law doesn’t apply to learners and students who meet the Department of Labor & Industry’s criteria for this exception. Employers must apply for this exception and can access applications online at www.state.pa.us (do a keyword search for “minimum wage”).

Other exceptions to the new state minimum wage

  • Employees in a bona fide executive, administrative or professional capacity.
  • Farm laborers.
  • Domestic service workers in private homes.
  • Newspaper deliverers.
  • Workers connected with the publication of a newspaper of less than 4,000 circulation.
  • Employees in an educational, charitable, religious or nonprofit organization where no employer-employee relationship exists.
  • Employment by a public amusement or recreational establishment, organized camp or religious or nonprofit educational conference center, if (1) it does not operate more than seven months a year, or (2) the average receipts for any six months during the preceding calendar year were not more than one-third of those for the other six months.
  • Golf caddies.  

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