FAQ: Does the minimum wage impact benefits?

The minimum wage in Connecticut is set to increase to $14.00 per hour as of July 1st as part of 2019 legislation to raise the minimum wage to $15.00 in 2023.

Wages can have a big impact on an employee's benefits, especially when it comes to life and disability coverage. Many employers provide their staff with a life insurance benefit based on an individual's annual wages. The most common that we see is 1 X annual wages. An employee working 30 hours per week would see their life benefit go from $20,280 to $21,840 (the carrier may round this figure) based on the minimum wage increase.

While life insurance can also be provided as a flat dollar amount ($10K, $25K, etc.), disability benefits are nearly always a function of salary. Many policies will provide an employee with a benefit equal to 60% or two-thirds of their regular income up to a maximum per week ($500, $1,000, etc.). Using the same example above and a 60% replacement, an employee would be eligible to collect $252 per week (up from $234) based on the minimum wage increase.

If you have employees making the minimum wage who are also eligible for these kinds of coverages, it's vital that you or your insurance broker update the insurance company accordingly to ensure that premiums and benefits are accurate.

*Please also note that Connecticut Paid Leave benefits are calculated based on a function of minimum wage. The maximum weekly benefit prior to July 1st is $780 per week. The maximum weekly benefit as of July 1st is $840 per week. For more information on Connecticut Paid Leave benefits, please go to www.ctpaidleave.org.