Minimum Wage and Budget Update

Last night, the NYS Legislature passed the state’s $229 billion FY24 budget that the Governor is expected to sign into law, which in addition to funding the government includes items like raising the minimum wage, a pilot program for free bus service, a crackdown on unlicensed cannabis shops, changes to the cash bail law, an increase in payroll taxes for certain businesses, and more. 

The following explains a few issues of interest in the budget that will impact New York City’s restaurants, bars, and clubs:

MINIMUM WAGE AND TIP CREDIT:

• What was originally proposed in the budget but scaled back? Some labor advocates and government officials fought to increase the minimum wage from $15 an hour to $21.25 in NYC by 2026 (a 42% increase) and then index future annual increases to inflation. Additionally, some pushed to eliminate the tip credit for “food service workers,” which would have cost businesses approximately $25,000 more to employ a full-time tipped employee annually. You do the math on its cost to your business. The NYC Hospitality Alliance received significant concern about the amount and quick acceleration of this proposed increase, coupled with elimination of the tip credit, especially while so many small businesses are still struggling to recover from the pandemic. We communicated these concerns to lawmakers and played a constructive role in a comprise that will provide increases to workers on the lower end of the wage scale, while aiming to mitigate potential consequences on small businesses and jobs. 

• The following is the negotiated Minimum Wage increase that will be enacted in the state’s FY24 budget:
  • MINIMUM WAGE: In New York City the hourly minimum wage will increase from $15 to $17 according to the following schedule:
    • $16 on and after January 1, 2024  
    • $16.50 on and after January 1, 2025
    • $17 on and after January 1, 2026
    • Beginning on and after January 1, 2027, the minimum wage will be adjusted annually according to the consumer price index (“CPI”). Increases can be suspended if certain downward economic conditions occur. We hope that by indexing the minimum wage to the CPI, businesses can better plan for smaller automatic annual increases to the minimum wage based on actual economic factors, compared to much larger ad-hoc increases seen in New York City every handful of years based on political battles and negotiation, not the economy.
      
      
  • TIP CREDIT: In a major victory, we again preserved the tip credit, which if eliminated would have dealt a devastating financial blow to hospitality businesses, jeopardized jobs, and resulted in significant menu price increases for consumers. Instead, the tip credit and cash wage for food service workers is saved and will only be adjusted annually, pegging it at 2/3 the applicable general minimum wage listed above.
    • Preserving the tip credit will be an ongoing political battle. The NYC Hospitality Alliance will continue to separate fact from fiction by opponents on this issue which is complex to ensure a compensation system that works best for employers and employees. We will also continue to educate lawmakers that state law can be amended to provide restaurants that don’t take the tip credit the option of sharing tips with back-of-house workers, without eliminating the tip credit for the entire industry.

TEMPORARY LIQUOR PERMITS:

• The Temporary Liquor Permits law the NYC Hospitality Alliance secured last year will be extended for another year and will continue to help many new businesses open months faster than normal due to backlogged processing times at the State Liquor Authority. This legislative session we will advocate to amend the law to make more new businesses eligible for temporary liquor permits by removing the requirement that a premise had to have been licensed within the last two years to be eligible and other changes to speed up the process.

PAYROLL TAX:

• An increase to payroll taxes will be enacted on what lawmakers described as “larger businesses.” It will be based on the size of a business’s payroll, but the percentage increase was scaled back from what was originally proposed. The additional tax revenue will help fund the Metropolitan Transportation Authority. We’ll send a separate memo with details on which businesses this will apply to and how. 

The NYC Hospitality Alliance thanks our members for their support and we’ll keep you updated on these and other critical issues impacting our industry!