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California Minimum Wage Increases as Part of State’s Phase-in Requirement

Payroll
Article
05/08/2018

The minimum wage in California is set to increase each year until it reaches $15 per hour in January 2023 for all employees. The minimum wage phase-in requirements began with the first increase in January 2017. As you can see below, the annual increases depend on the number of employees an employer has:

Effective Date

Minimum Wage for Employers with 25 Employees or Less

Minimum Wage for Employers with 26 Employees or More

January 1, 2017

$10.00/hour

$10.50/hour

January 1, 2018

$10.50/hour

$11.00/hour

January 1, 2019

$11.00/hour

$12.00/hour

January 1, 2020

$12.00/hour

$13.00/hour

January 1, 2021

$13.00/hour

$14.00/hour

January 1, 2022

$14.00/hour

$15.00/hour

January 1, 2023

$15.00/hour

 

The governor can pause these increases under a select set of circumstances centered on economic impact and current economic conditions. After the state minimum wage reaches $15 an hour for all employees, the rate will be adjusted annually for inflation.

There are several areas related to this phase-in that employers should be aware of:

Who is considered an employer?

Labor Code section 1182.12 defines “employer” as: “any person who directly or indirectly, or through an agent or any other person, employs or exercises control over the wages, hours, or working conditions of any person [and] includes the state, political subdivisions of the state, and municipalities.”

Determining the correct minimum wage rate

Companies with 26 employees or more should apply the large-employer minimum wage rate to all employees for that pay period. But when factoring in seasonal, temporary, and part-time workers, making this determination could be difficult. An employer may also have fewer than 26 employees during some pay periods and 26 or more employees during other pay periods. The Labor Commissioner’s Office recommends that an employer with 26 or more employees at any time during a pay period should apply the large-employer minimum wage to all employees for that pay period.

Notice to employees

California employers are required to update the notice to employees that sets forth their rate of pay. Employers may use a template provided by the Labor Commissioner to meet this notice requirement. There is also a state minimum wage poster that must be posted.

Some cities such as San Francisco, Los Angeles, and Santa Monica increase their minimum wage requirements annually in July. There may also be posting requirements for covered employers.

When minimum wage requirements vary, higher rates prevail

Federal, state, city, and county minimum wage requirements can vary, as is the case with the cities mentioned above. Employers covered by multiple requirements are required to comply with the highest minimum wage rate that applies to their workforce. Local municipalities may also have different standards for determining a small or large company, as well as notice requirements to employees. It is the employer's responsibility to review and follow all applicable laws that may require a higher minimum wage than what is required by the state.

Based on the results from the 2017 Paychex Pulse of HR survey, compliance with employment laws is a top priority for business owners. The minimum wage requirements in California are just one example of how complex and challenging this can be for a business. You may want to consider using HR compliance services for help monitoring and staying up-to-date with ever-changing employment laws and regulations.

This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.
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