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Blog · Published: July 28, 2016 Updated: January 13, 2022

Chicago Minimum Wage Increase Impacts Employers

Small businesses in Chicago are coping with the latest minimum wage increase to $10.50. The current federal minimum wage is $7.25, but local and state governments can vote to increase wages above the federal level. In December 2014, Chicago City Council approved the Minimum Wage Ordinance raising the minimum wage gradually to $13 an hour by 2019. The annual phase-in schedule for Chicago takes places every July 1st with increases to $11 in 2017, $12 in 2018 and $13 in 2019. This unprecedented increase presents challenges for Chicago businesses employing minimum wage employees.

Balancing labor costs and prices

Business owners struggling to cover additional labor costs may increase prices. Pricing strategies require careful competitive research and monitoring to avoid customer attrition. The price increase might drive away too many customers to be a viable solution.

Prepare for ripple effect

If new employees are now being paid $10.50 per hour, then experienced workers who earn $11 or $12 will expect a raise. This means all labor costs will increase. Businesses should anticipate the worst-case scenario.

Tightening labor market

Employee retention for suburban businesses is a concern. While Illinois raised its minimum wage to $8.25, workers can now earn $2.25 more in Chicago. Also, many big box employers in and outside of Chicago are proactively raising pay for their lowest level employees making it even harder for suburban businesses to retain employees.

While businesses strategize on how to best handle increasing labor costs, they need to make sure payroll is compliant with the new ordinance to avoid fines ranging from $500 to $1,000 per violation or being subject to business license suspension or revocation. It can be tricky because the new overtime regulations also apply. By outsourcing payroll with MidwestHR, a top Illinois PEO (professional employee organization), businesses can rest assured payroll will always be compliant with the intricacies of any new ordinance and law. Call 630-468-9286 to discuss any concerns with one of our payroll experts.

Filed Under: Blog

Charmaine Hollaway

Working in the Professional Employer Organization industry since 1993, Charmaine has been involved in almost every aspect of PEO services. In her role as the Managing Director of HR & Benefits at MidwestHR, she oversees all HR compliance and employee benefits in addition to managing retirement plans.

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