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What Is The California Minimum Wage Increase?

An increase in the California minimum wage seems simple enough.  But, as often is the case, the state of California has taken this seemingly simple concept and made it overly complicated and confusing. There are several unknown details that apply to our new minimum wage increases; which most employers and employees just don’t know.  Much of the available information is conflicting and incomplete, largely because not all of the details regarding the increase were well publicized by the state.

Did you know there were separate requirements based on state, city, AND company size? The staggered wage increase time-table is widely available, but there is an important fact that was originally not well disclosed. The California minimum wage is different for small and large employers. And add in the fact that various cities have added additional minimum wage increases on top of the state increase. Now you have a jumbled mess of misinformation! 

The Bottom Line

In short, the state of California will incrementally increase the minimum wage to $15 per hour no later than 2023 in staggered intervals.  The important facts are that the minimum wage rate varies based on the location and size, determined by the number of employees, of each employer.

Rate Increase Time Table is Based Upon Size of the Company

According to the state of California’s website, these rate increases are phased into effect over different anniversary dates based upon the size of the employer.  This fact sheet provided by the State of California’s website provides these details: https://www.gov.ca.gov/docs/Fact_Sheet_Boosting_Californias_Minimum_Wage.pdf.
Here’s a snapshot of what these increases will look over the next 6 or 7 years. 

2017-2023 minimum wage increases - CA

(Figures courtesy of http://www.govdocs.com/california-15-statewide-minimum-wage/ )

Location, Location, Location

The second major variable is the location of employer – the geographical location where the work is being performed, not necessarily the legal address of the company or of the employee.

Los Angeles, San Diego, and Sacramento are among the cities in California that have additional rules that need to be considered.  For example, San Diego has added an additional $1 per hour increase to the new California wage, phased in over its own timetable. UC Berkeley has created a great compilation of minimum wage details.

As a business owner, you will be required to adjust your employee’s earnings rate per hour according to:

  1. Tthe city and state your business is located in
  2. The year in which the pay date falls
  3. The number of employees that you employ.  

Keep in mind there are also new sick leave requirements for your employees. For a summary of State and local paid sick leave laws, have a look at their summary comparison, provided by the California Chamber of Commerce and Fox Rothschild LP.

 https://www.calchamber.com/hrcalifornia/forms-tools/form/preview/comparison-of-california-state-and-local-paid-sick-leave-laws

Contact our office to learn more about adjusting your payroll and complying with the new California and City of San Diego regulations.

Written by Jeff Johnson

Jeff Johnson has been helping individual and small business clients with tax and financial planning for over 15 years. Starting with a degree in finance from the University of North Dakota, Jeff has continually increased his financial education. He currently holds the industry designations of Enrolled Agent (EA) and Certified Financial Planner (CFP®). In addition, he holds a life and health insurance license from the state of California. Jeff is a member of the California Society of Enrolled agents and the Financial Planning Association.

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