New Jersey employers should begin their New Year’s preparations now, as minimum wage increases are set to take effect on January 1, 2023.

For most employees, the minimum wage will rise from $13 an hour to $14.13 due to legislation signed by Governor Phil Murphy in 2019 that raises the wage floor to $15 an hour by 2024. Although the law envisions annual raises of $1 to meet this goal, it includes a provision that allows for larger increases tied to the consumer price index. Since the law’s passage in 2019, the scheduled $1 increases have always outpaced the rate of inflation. However, due to substantial inflation this year―8.7 percent―the new rate will be 13 cents higher than initially anticipated. After July 1, 2024, the minimum wage will increase according to the rate of inflation as provided by the consumer price index.

While the $14.13 minimum wage will apply to most employees in the state, there are certain exceptions.

Seasonal and small employers will have to pay $12.93 an hour, up from $11.90. Seasonal employers are those whose businesses operate only during the summer months or that pay 75 percent or more of their wages during a continuous four-month period; small employers are those that employ five or fewer employees. Nevertheless, these employers will have to increase their wages to $15 an hour by 2026.

Agricultural workers will be entitled to $12.01 an hour (up from $11.05), and direct care staff in long-term care facilities must be paid a minimum of $17.13, a raise of $1.13 an hour. By 2027, agricultural workers must be paid $15 an hour.

Finally, tipped workers’ cash wages will increase to $5.27 an hour, and employers will be entitled to claim a tip credit of $8.87 (up from $7.87). Where a tipped employee’s minimum cash wage and the actual tips received total less than $14.13, the employer will have to pay the difference.

What This Means for New Jersey Employers

Employers should immediately review their payroll practices to ensure that they are prepared to provide the new rates commencing on January 1. Prompt compliance is essential as New Jersey has one of the strictest wage theft laws in the country, the Wage Theft Act, which provides for fines, treble damages, suspension and/or revocation of businesses licenses―and in extreme cases, criminal penalties.