OCEAN CITY- The state’s mandated minimum wage will continue to creep upward to $15 an hour by 2025, but the resort has a plan to absorb the financial impact.
Last year, the General Assembly passed legislation mandating an incremental increase in the state’s minimum wage over the next five years. As a result, the minimum wage will be increased by roughly 75-cents each year, from the $11 rate that began on January 1 to ultimately $15 by 2025.
The mandated increase set pangs of fear and trepidation through local governments struggling to find a way to fund the pay increases while continuing to make ends meet, including Ocean City. On Tuesday, Human Resources Director Wayne Evans and Budget Manager Jennie Knapp outlined a plan to absorb the incremental increases without straining the budget. The plan includes implementing the increases at the lowest end of the town’s pay scale without having them spread across the entire range.
“We actually created some new grades at the low end of the pay scale to help us absorb the increases at the entry level,” said Evans. “As a result, there will be little impact on the full-time employees and we will maintain the separation in the pay scale for the most part.”
The concern from the beginning has been the increases in the minimum wage at the lowest end of the pay scale would have to be implemented further up the line. Evans explained the plan allows for meeting the mandate without disrupting the pay scale further up the line. In other words, a part-time seasonal worker making $15 per hour in five years won’t be just below or even at the same level as an employee who has been with the town for years.
“The pay increases are absorbed in the bottom seven pay scale grades,” he said. “It’s not spread throughout the entire pay scale. Passing a 75-cent increase across the entire pay table would be cost-prohibitive. That being said, we will still have some separation between the grades.”
Evans explained the biggest impact will be at the bottom end of the pay scale. It’s no secret the town ramps up its workforce with seasonal workers in the summer and that’s where the minimum wage hike will be felt the most.
“This is driven largely by the temporary seasonal workers, which make up 65% of our workforce during the summer,” he said. “Those seasonal workers are mostly in the lower pay grades from 100 to 107. These changes will have little effect on the full-time employees.”
Councilman Tony DeLuca said the plan as presented allowed the resort to meet the state-mandated minimums without causing a major trickle-up through the pay scale.
“There really is little ripple effect on the full-time employees,” he said. “That seems to be the bottom line with this. That was a concern for me heading into this.”
Evans assured the wage increase would not result in a major revision throughout the town’s entire pay scale. Instead, it will be limited largely to seasonal personnel.
“This is a minimum wage increase,” he said. “It’s not an across-the-board increase. We tried to keep the increases minimal without disrupting the entire pay scale. The bulk of our employees are at grade 107 or below and that’s where the absorption is happening. When you get to grade 108, that’s where you start seeing seasonal police officers, lifeguards and PSAs, for example.”
Evans explained the proposed plan would result in an increase of around $177,000 in the remainder of fiscal year 2020, $322,000 in fiscal year and so forth to $470,000 by 2025 for a total impact of around $1.8 million. However, Councilman John Gehrig pointed out the changes should really be considered exponentially.
“You have to add each year,” he said.
“When you do that, it’s more like $5.2 million over the five next five years.”
Of course, meeting the state mandate while ensuring the resort remains competitive in recruiting and retaining employees remains a challenge.
“We’re coming to you with what we think is a reasonable plan to implement what has been mandated,” said Evans. “We also want to make sure we stay competitive in the labor market. We don’t want to fall behind, but we also don’t want to overpay.”
Councilman Dennis Dare said the plan allayed some of his concerns about sweeping changes in the town’s entire pay scale.
“When this was mandated, I had a lot of fear about the ripple effect, or the trickle-up,” he said. “It’s really not what I feared. There is a lot of internal equity in this. What we’re looking at is not a solution for this year, but a solution for the next five years.”
Evans said the wage hike changes will come with a review of each pay grade and re-evaluated job descriptions. However, Dare encouraged that to be done out in front of the pay increases.
“I’m not sure why we’re waiting until 2025 for a comparative pay scale study and job descriptions,” he said. “I think that’s too long. That needs to be done sooner rather than later.”
Councilman Mark Paddack praised the plan for meeting the mandate.
“The state legislature mandated this, so we have to deal with it,” he said. “This presentation outlines a plan to handle it.”