- Are there plans for a gradual wage increase in Arkansas in 2022?
- Do small businesses have to pay minimum wage in Arkansas?
- How can small businesses adjust to the rising wages in Arkansas?
Minimum Wage Amount
Arkansas’ current minimum wage is $11.00. This is according to the Arkansas Department of Labor and Licensing Arkansas Minimum Wage Fact Sheet.
Arkansas’ minimum wage requirement applies only to employers with four or more employees unless an exception or exemption applies.
Arkansas employers must also comply with federal minimum wage laws, which currently set the federal minimum wage at $7.25.
If an employer chooses to pay employees minimum wage, the employer must pay those employees in accordance with the minimum wage law, either federal or state, that results in the employees being paid the higher wage.
In most instances in Arkansas, the federal minimum wage law will apply as it generally guarantees a higher wage rate for employees than state law.
Minimum Wage Calculator
Tip Minimum Wage
Arkansas’ current minimum wage for tipped employees is $2.63. This is according to the AR Dept. of Labor & Licensing: Minimum Wage and Overtime.
Arkansas defines a tip as a sum of money presented by a customer to an employee as a gift in response to a service.
It does not include any compulsory charges or fees the customer needs to pay to receive the service, including mandatory gratuities, even if the charges or fees are eventually distributed to employees.
Gifts from customers in a form other than money or its equivalents, such as tickets or merchandise, cannot be counted as tips.
In addition to paying this wage, employers must ensure that tipped employees get paid the standard minimum wage rate when the tipped wage rate is combined with tips received.
If the tipped wages earned plus tips received do not meet the standard minimum wage threshold, the employer is required to make up the difference.
The Arkansas Department of Labor may require an employee to show documentation to support a claim that the actual amount of gratuities received by the employee, during any workweek, was less than the amount required to cover the difference between the tipped wage and the standard minimum wage.
If the documentation supports the claim, the Director will require the employer to pay the employee the amount necessary to ensure the employee is paid the standard minimum wage.
Employers may pay the tipped minimum wage to employees who work in occupations in which tips are customarily and usually recognized as part of an employee’s compensation for hiring purposes.
These are especially true for those in the recreation business, hospitality industry, food services industry, and other service-oriented industries.
As for the occupations, these usually include barbers, beauty operators, bellhops, and servers, provided they actually receive tips.
For occupations where tips are not customarily and usually part of an employee’s compensation, an employer may pay an employee the tipped minimum wage if the employee actually receives more than $20 per month.
Suppose an employee works twenty or more minutes within an hour in a non-tipped occupation. In that case, the employer must pay the employee the standard minimum wage rate for the entire hour and may not take any credit towards the standard minimum wage requirement for tips earned. AR Wage and Hour Regs 010.14-107(E)(2)(b)(ii)
Tip Pooling and Sharing
Arkansas law permits employees to participate in tip pools.
Employees must consent to participate in tip pool arrangements where the employer collects all tips and redistributes them based on some pre-established formula.
Employees may also practice tip splitting, where the tipped employee gives a portion of their tips to other employees, such as a waiter splitting tips with a busboy.
The rules are unclear whether an employer may require employees to engage in tip splitting. AR Wage and Hour Regs 010.14-107(E)(3)(c)
There are different minimum wage effects and minimum wage categories that include not just full-time employees but also other members of the labor force. These include the following:
Employees with Disabilities
Arkansas law allows employers to pay employees with disabilities a wage that is lower than the standard minimum wage rate if the employer obtains a temporary special exemption license or a permit from the US Department of Labor or the Arkansas Department of Labor. AR Statute 11-4-214; AR Wage and Hour Regs 010.14-105
Arkansas minimum wage laws do not allow employers to pay trainees a wage rate less than the standard minimum wage unless the employee is subject to one of the other subminimum wage exceptions to the standard minimum wage requirements.
Arkansas law allows employers to pay apprentices a wage that is not less than 85% of the standard minimum wage rate if the employer obtains and maintains a valid certification from the US Department of Labor to do so. AR Statute 11-4-215; AR Wage and Hour Regs 010.14-104(A)
Arkansas law allows employers to pay learners a wage that is not less than 85% of the standard minimum wage rate if the employer obtains and maintains a valid certification from the US Department of Labor to do so. AR Statute 11-4-215; AR Wage and Hour Regs 010.14-104(A)
Arkansas law allows employers to pay student learners a wage that is not less than 85% of the standard minimum wage rate if the employer obtains and maintains a valid certification from the US Department of Labor to do so. AR Statute 11-4-215; AR Wage and Hour Regs 010.14-104
Arkansas law allows employers to pay student workers a wage that is not less than 85% of the standard minimum wage rate if:
- the employer obtains a certificate from the Arkansas Department of Labor to do so;
- the full-time student attends an accredited institution of education in Arkansas or a border town of a sister state;
- the full-time student works not more than (20) hours per week while school is in session or (40) hours per week when school is not in session;
- the full-time student qualifies for employment under any child labor laws.
AR Statute 11-4-210(b); AR Wage and Hour Regs 010.14-103
Arkansas Minimum Wage Laws 2022 FAQs
Are there plans for a gradual wage increase in Arkansas in 2022?
It is important to note that minimum wage effects, including increases, are decided by ballots in the state of Arkansas.
The state has experienced minimum wage impacts of the rates proposed in 2018 and 2021. Whether there will be other changes in average employee earnings in 2022 is still unknown.
Do small businesses have to pay minimum wage in Arkansas?
The answer will depend. As we have mentioned, any business with four or more employees should at least comply with the state’s set minimum wage.
This rate is also determined by the type of employee you have.
For instance, do you have full-time employees or subminimum wage earners?
What are the average rates by industry? Does your business fall under labor law exemptions?
How can small businesses adjust to the rising wages in Arkansas?
It can be challenging for small business owners to adjust the rates of their employees in an instant.
Thus, adequate planning and preparation are crucial to ensure the financial stability of your business.
That said, here are a few tips to keep in mind:
Keep Yourself Updated
Business resources are getting more and more accessible thanks to the advancements in digitization.
We recommend reading a book or a guide for business owners to learn about the common payroll mistakes and how to avoid them, proper business pricing, and depending on your chosen reference, even particular industry insights.
Implement Proper Hiring Processes
A good employee retention rate is key to avoiding expensive employee turnover costs.
Aside from that, losing an employee without notice can severely disrupt business activity.
Paying attention to your hiring practices and your employee’s job satisfaction will maximize your payroll expenses and even allow you to save money in the long run.
Assess Your Staffing Needs
The next thing that you should consider is your current staffing state. Is your business running smoothly?
Are all your employees constantly busy yet not burnt out? Do you really need to have full-time employees?
For instance, those who run a seasonal business might want to consider contract employees, hourly employees, or on-call ones.
It might also prove manageable to break down their payouts by giving them weekly or hourly wages.
Build a Strong Business
Finally, the best way to prepare for a wage increase is to build a stronger business.
The steps will, of course, depend on the industry you belong to. For instance, those in the retail trade can consider how to increase their monthly sales.
Meanwhile, those in the hospitality industry should figure out how to increase their customers’ time in hotels.
Each small step can accumulate savings that will definitely come in handy during payroll week and even prevent bankruptcy for your company.