On Jan. 31, 2019, both the state Assembly and the Senate approved a measure that will raise New Jersey’s minimum wage to $15 an hour by 2024; Gov. Phil Murphy signed the bill into law on Feb. 4. By enacting the law, New Jersey becomes the fourth state in the country to take action on increasing the minimum wage to $15 an hour, joining California, New York, and Massachusetts.

The minimum wage in New Jersey is currently at $8.85 an hour. Raising it to $15 an hour will benefit more than a million people in the state. The law raises the minimum wage to $10 an hour on July 1, 2019. On Jan. 1, 2020 it will increase to $11 an hour and then would increase by $1 an hour every year until it reaches $15 in 2024.

There are some exceptions for seasonal workers and employees at small businesses which employ five workers or less. For those exceptions, the minimum wage base will reach $15 an hour by 2026. For farm workers, the minimum wage base will reach $12.50 an hour by 2024. A special committee will review whether or not to raise those workers’ hourly pay to $15 an hour at the time.

There hasn’t been much consideration how the $15 an hour state minimum wage law will impact school districts. School district administrators are still considering how to provide this level of minimum wage to district employees while living within a 2% property tax levy cap.

The New Jersey School Boards Association, along with the New Jersey State League of Municipalities and the New Jersey Association of Counties opposed the portion of the bill that tied the state minimum wage to municipal, county, and school employees. These organizations asked for state, counties, municipalities, and school districts to be exempt. All comply with federal minimum wage requirements.

NJSBA believes the increase in minimum wages will impact school districts directly and indirectly. Not only will a district’s own payroll costs increase, but so will the cost of contracted goods and services. This is because many private employers have testified that an increase in minimum wage forces costs to consumers, including school districts, to increase.

Some of the positions in a school district that may be impacted by an increase in the state minimum wage include teachers’ aides, bus drivers, school food service providers, security guards, and other non-certified positions. There is a concern that service providers for such services as food and transportation will pass increased costs on to school districts in order to balance these minimum wage increases as they are phased in through 2024. While some districts are reducing their workforce through attrition, others are contemplating cutting staff.

Salary guides are a method used to structure compensation for teachers and most other school district employees throughout New Jersey. The salary guide affects not only the district’s financial resources but also the district’s personnel resources. The composition of the guide directly and indirectly affects the board’s ability to meet many of its management goals, such as attracting new hires to the district, retaining excellent employees in the district, and appropriately compensating staff members for their work. The structure of the salary guide can also have strategic implications for the construction and negotiations of successor salary guides. For all of these reasons and more, it is critical that boards thoroughly understand their salary guides and the impact the minimum wage law will have on them.

Current Agreement If you have a salary guide that hasn’t expired where hourly rates are below the new minimum wage, it’s important to understand how to compensate these employees. NJSBA is recommending that you keep these employees currently on the salary guide moving through the guide until the next round of negotiations. However the board would compensate the employee at the new minimum wage at the time to comply with the law. For example, if on July 1, 2019, an employee moves to Step 2 on the current guide, which is $9.50, you move them to Step 2 but then compensate them at the state minimum wage.

This strategy is going to become important because it keeps the employee on their respective step despite the change in the minimum wage. When negotiating a new contract, the board will have to decide whether to bargain with the union to simply raise the salary guide steps that were below minimum wage up to minimum wage — even if that wage is the same as salary guide steps that are above it – or to increase all salary guide steps so that the first step conforms to minimum wage and every step above that pays a higher hourly wage.

The interrelationship of salaries on the guide can have a profound effect on a board’s ability to address district personnel goals. While each district’s personnel goals can differ at any point in time based upon the district’s immediate and anticipated needs, all districts need to assure that their compensation policies support their ability to address several major goals of school management:

  • To meet basic staffing needs: to attract, to retain and to compensate employees;
  • To provide the desired level of incentives for increased academic preparation;
  • To provide a logical, rational relationship between district salary rates and to avoid aberrations such as balloons;
  • To provide relatively equitable salary increases to staff throughout the guide.

A board that understands the effect the new minimum wage law has on the salary guide can better plan its staffing needs, educational objectives, and future costs. A board that takes time to analyze the guide and establish bargaining objectives aimed at improving the guide will be better prepared to ensure that successor salary guides are consistent with the educational, personnel, and fiscal goals of the district.

While many boards of education may find themselves in what appears to be uncharted territory when it comes to salary guides, there are resources available to help guide the way. The New Jersey School Boards Association offers training programs on analyzing and constructing salary guides. In addition, upon request by a local district, the NJSBA will provide, as a dues-based service, cost and structural analyses of a district’s expiring salary guide plus analysis of one proposal and telephone advice and an in-district consultation, if desired. Guide construction and counterproposals are available as fee-based services as is at-the-table representation for negotiating guides.

Kurt Rebovich is an NJSBA labor relations consultant.