How to Prepare for the Minimum Wage Increase

California has a long history of increasing the minimum wage–for a review of its progression since 1916, click here. This past January, minimum wage jumped from $9 to $10 per hour. In April, Governor Brown signed SB3, mandating a gradual increase of the minimum wage to $15 per hour statewide by 2022. Although you already know it’s going to cost you to meet the requirements of this “living wage,” you may be wondering specifically how your business will be impacted by the mandated increases.

Jennifer Barrera, writer for CalChamber, offers a few sobering answers. For starters, here’s the schedule of increases big businesses must implement beginning January 1, 2017 (small businesses get a one-year reprieve):

Year       Increase    Wage       Overtime   Double-Time

1/2017   $  .50         $10.50     $15.75        $21

1/2018       .50           11.00        16.50         22

1/2019     1.00           12.00       18.00         24

1/2020     1.00           13.00       19.50         26

1/2021     1.00          14.00       21.00          28

1/2022     1.00          15.00      22.50           30

SB3 doesn’t just affect nonexempt minimum-wage-earners, however. Beginning in January 2022, it also raises the wage that employees must make in order to qualify as exempt (to learn what makes an employee exempt, read this). Currently riding at $41,600, the base exempt amount will skyrocket to at least $62,400. (That $20,800 increase may cause you to rethink having exempt employees in five years!) (Editor’s note: As of December 2016, the threshold has been raised. See our post on the new rules for exempt and nonexempt employees.)

There’s more of which employers need to be aware in order to comply, warns Barrera. For instance, you’ll be required to post an official Minimum Wage Order (MW-2014) in a conspicuous place such as your break room. You’ll also need to provide itemized statements when you pay nonexempt employees. SB3 also affects the exemption of some commissioned inside sales employees under Wage Orders 4 and 7. Here’s what Barrera advises:

Generally, the exemption applies if the employee earns more than 1.5 times the minimum wage each workweek, and more than half of the employee’s compensation represents commission earnings. Employers will need to make sure that commissioned inside sales employees continue to meet this test after the January 1 minimum wage increase. Outside salespeople do not need to meet the minimum salary requirements.

If you listen to Florida’s Governor Rick Scott, it’s too expensive to do business in California and we should all move to Florida! But if you’re planning on staying in the Golden State, it’s best to be informed about how to prepare for the minimum wage increase. To get the full scoop, read Barrera’s thorough article on the full implications of this “job killer” bill.

We’ve been helping employers acquire top professionals since 1959, and in spite of many previous wage increases, California’s economy has survived. If your hiring team needs assistance landing the best people, we’re here to actively market your job opportunities, connect you to passive job seekers, and lend a hand with negotiating offers to top candidates. Click here or call (714) 993-1900 to start your search.