Beginning Jan. 1, 2019, the state’s minimum wage will increase to $10.78 per hour. Also beginning Jan. 1, 2019, employers will see a reduction in the taxable wage base amount that they pay on unemployment taxes by $2,000.
Nearly 22,600 employers remit state unemployment taxes to the Vermont Department of Labor on an annual basis. These taxes are deposited into the Unemployment Insurance Trust Fund and are used for the payment of unemployment insurance benefits to eligible claimants. The unemployment trust fund is “forward-funded,” meaning tax schedules are designed to raise more funds during periods of economic growth to ensure that there is adequate funding during economic recessions. The department moved to Tax Rate Schedule III  in July 2018, which triggered a reduction in those tax rates for employers starting July 1, 2018. The additional reduction in the taxable wage base for Jan. 1, 2019, was also triggered by that move to the Tax Rate Schedule III.
Per legislation passed in 2014, for the last four years the state’s minimum wage was mandatorily set by statute. As that legislation has run its course, pre-existing legislation related to the annual change in the minimum wage resumed. The increase for 2019, and in years to come, will now be determined by a calculation of inflation set in statute using the Consumer Price Index (CPI). The recent increase of 2.7 percent to the CPI applied to last year’s minimum raised the rate by $0.28 per hour to the new level of $10.78 per hour starting Jan. 1, 2019.
This change also impacts the minimum wage of “tipped employees.” The Basic Tipped Wage Rate equals 50 percent of the full minimum wage or $5.39 per hour starting Jan. 1, 2019.