Last week, while settling the bill at my favorite noodle shop, I noticed a notice posted next to the counter. It was an announcement for employees stating that the hourly wage would increase starting next year, and the owner was sighing as he tapped on the calculator.

The number was $17.02. The minimum wage in Minneapolis will rise to $17.02 per hour starting January 1, 2027.

This year's amount for 2026 is $16.37. That means an increase of 65 cents per hour, which is just under 4%.

While 65 cents might not seem like much, the reality changes significantly when you look at the store's books.

First, let's clarify where this number comes from. Minneapolis adjusts its minimum wage every January 1 to reflect inflation, and the increase cannot exceed 5%.

The state government also raises the minimum wage on the same day. According to the Minnesota Department of Labor and Industry, the state minimum wage will be $11.87 starting January 1, 2027.

This means that even within Minnesota, crossing a city boundary can result in a wage difference of over $5. Whether you work in the city or not is more important than you might think.

Additionally, Minneapolis does not consider the size of the business. Whether it's a neighborhood shop with two employees or a large chain, the same amount must be paid.

Age is also irrelevant. The city has stated that this amount applies regardless of the employer's size or the employees' ages.

This is where the calculations can really confuse business owners. The city minimum wage is based on where the work is performed, not the company's address.

According to city regulations, employees who work more than 2 hours in the city from Monday to Sunday are eligible. If they work less than 2 hours, that week does not count.

Even if they exceed the threshold, only the hours worked in the city are subject to the city minimum wage. This means that employees who travel between suburban and city locations must record their hours separately.

Even if the headquarters is in another city, this cannot be avoided. The city mandates that regardless of where the employer is located, minimum wage must be paid for hours worked in the city.

There's also the issue of tips. Minnesota does not recognize tip credits that include tips in the hourly wage.

This means that servers must receive $17.02 as their hourly wage, and tips are added on top of that. Reducing the hourly wage on days when tips are high is not allowed.

Now, let's plug in some actual numbers. For a part-time worker working 30 hours a week, this year their weekly pay will be $491.10, and next year it will be $510.60.

That's a difference of $19.50 per week. Over a year of 52 weeks, that adds up to an additional $1,014 per employee.

For full-time employees, assuming 2,080 hours a year, the annual salary will increase from $34,049.60 to $35,401.60. The difference is $1,352.

But that's not all. Employers also have to pay Social Security and Medicare taxes of 7.65% on the increased wages, which adds about $103 per full-time employee.

If a business has five full-time employees, this means an increase of over $7,000 in labor costs annually. I can understand why the noodle shop owner was sighing.

Overtime also needs to be reconsidered. If subject to the Fair Labor Standards Act, employees must be paid 1.5 times the hourly rate for hours worked over 40 in a week, which would be $25.53 per hour.

However, depending on the size of the business, state law may apply instead of federal law, so it's important to check where your business falls.

So, what should business owners do now? First, they need to check the overlap between the last pay period in December and the first pay period in January.

The new amount will apply starting from hours worked after January 1. Entering the new hourly wage into the payroll program in advance is a good way to avoid mistakes.

Even if you are already paying over $17, you shouldn't be complacent. A violation can occur with just a 2-cent difference between $17 and $17.02.

You also need to update the minimum wage notice required by the city to the new version. You can obtain the notice from the city's minimum wage website for employees to see.

If you're an employee, check your pay stub for the hourly amount and work location. This is especially important if you travel between the city and suburbs.

Personally, I feel both happy and conflicted about this increase. From a worker's perspective, it's a necessary adjustment considering inflation, but it certainly feels like a heavy number for small businesses.

Still, I would prioritize organizing the work schedule and record-keeping before adjusting menu prices. Accurate calculations will show where cuts can be made.

There was quite a bit of calculation hidden beneath that small number of 65 cents. It seems there's plenty of reason to take a calm look at the books before the year ends.