New Federal Minimum Wage Takes Effect July 24, 2007
President George Bush signed into law legislation that raises the federal minimum wage from the current $5.15 per hour to $5.85 per hour effective July 24, 2007; to $6.55 per hour effective July 24, 2008; and to $7.25 an hour effective July 24, 2009.
The Wage and Hour Division of the U.S. Department of Labor is expected to issue a new minimum wage poster in the next few weeks. Federal regulations require that a notice about minimum wage and other wage and hour requirements be displayed prominently in the workplace. Readers should check the Department of Laborï¿½s website for the updated poster.
Although the minimum wage bill had been the subject of heated partisan debate for months, the measure passed both the Senate and House with substantial margins of victory. Republican leaders and small business owners had opposed the measure because of concerns that the wage increase would impose an economic burden on small businesses. To address these issues, Republicans sought significant tax cuts for small businesses. Democrats opposed such tax breaks, but ultimately agreed to a compromise tax package for small businesses.
In total, the law provides $4.84 billion in tax breaks over ten years. More than half of these breaks will pay for an expansion of a tax credit program for employers that hire employees from certain targeted groups, such as former welfare recipients and at-risk youths. The law also raises the amount that small businesses may deduct for equipment purchases to $125,000.
In the meantime, employers are encouraged to coordinate with payroll providers and services for the July increase for minimum wage employees, check state law minimum wages, which may be higher or may increase if tied to the federal minimum wage, and study the tax benefits of the legislation for applicability to their businesses.
For more information about minimum wage and standards in your state, click here.
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