Since January 1st of this year, California employers in almost every industry have been subject to the new wage increase for their minimum wage employees.
This is arguably one of the more costly labor laws California employers have had to comply with since the beginning of this year. In addition to the state mandated increase in minimum wages, a number of local municipalities have instituted additional wage hikes, as well.
Labor Laws: California Minimum Wage one of the Highest In the U.S.
The California Legislature passed legislation AB10 in September 2013, which raised the minimum wage for all industries. The California Department of Industrial Relations (DIR) website explains the law's requirements on California employers:
"Although there are some exceptions, almost all employees in California must be paid the minimum wage as required by state law. Effective January 1, 2016, the minimum wage in California is $10.00 per hour. There are some employees who are exempt from the minimum wage law, such as outside salespersons, individuals who are the parent, spouse, or child of the employer, and apprentices regularly indentured under the State Division of Apprenticeship Standards."
Only Washington D.C. has a higher minimum wage at $11.50 an hour, and Massachusetts has matched California at $10 with a dollar an hour jump scheduled for next year in 2017.
The fiscal impact on California employers and the state's economy is still being hotly debated. Part of the difficulty is that it will not only increase existing minimum wage salaries currently being paid, but could also impact the salaries of employees who had recent wage increases due to merit or promotion, and are now at or close to the new minimum.
Proposed New California Labor Law for 2016
the current increase may not be the last. A California initiative calling for a $15 minimum wage by 2021 is making progress towards being on the ballot for state voters in November after gathering more than enough signatures to qualify.
The Fair Wage Act of 2016 will raise the minimum wage for all California workers by $1 annually, effective January 2017. Once the minimum wage reaches $15, it will automatically go up each year to match the cost of living. Cities will continue to have the option of setting higher local minimum wages.
Additional Local Minimum Wage Increases Drive Costs Even Higher
California employers in San Francisco and Oakland have recently been subjected to even far more significant mandatory wage increases that went into effect in 2015. On October 1, 2015 the minimum wage in Berkeley went up to $11.00 per hour and on October 1, 2016 the minimum wage in Berkeley will be $12.53 per hour.
Other cities are on track to do the same. San Diego and Los Angeles have already taken legislative steps towards substantially higher minimum wage requirements.
According to a statement issued by Christine Owens, Executive Director of the National Employment Law Project:
“The Los Angeles City Council today joined the ranks of U.S. cities tackling poverty wages and spiraling income inequality through adoption of strong local minimum wages. By a vote of 14 to 1, the council directed L.A.’s city attorney to prepare legislation setting a $15 wage floor. The new rate will be phased in over several years, reaching $15 in 2020 for large businesses and in 2021 for smaller businesses and certain non-profits, and providing for future adjustments to be pegged to increases in the cost of living."
It's been estimated that just in San Francisco and Oakland alone, the number of employees receiving newly increased wages are close to 200,000, or about 25% of the total workforce in those cities. The increase in minimum wage for Los Angeles will impact approximately 567,000 workers alone
The increase in required wages will have a direct impact on the cost of dong business in California. Businesses in the San Francisco area, for example, are already increasing prices and adjusting their hiring practices to accommodate the increased operating costs from mandatory wage increases in San Francisco, Oakland and Berkeley.
In San Francisco, the minimum wage increased to $12.25 per hour in May 2015, up from the previous rate of $10.74 per hour. The new law increases the minimum wage there again to $13 per hour in July 2016. From there, the wage will go up by one dollar every year until July 2018 when it tops out at $15 per hour.
This will make the annual pay for a minimum-wage employee, working full time, to $31,000 - an annual increase of over $8,800.
Voters approved a similar measure in Oakland that increased the citywide minimum wage to $12.25 on March 2, 2015, from the former state level of $9.00. For employees in Oakland the minimum wage rate will see increases every year on January 1st based on cost of living adjustments.
Minimum Wage Law Impact on Employers
It is estimated that in San Francisco alone there were over 142,000 minimum wage workers who saw a pay raise last May. In Oakland, this increase came two months earlier, but represented a greater percentage of increased wage costs for the employers of an estimated 48,000 workers.
While many of the actual totals are based on estimates, the total increased cost for San Francisco and Oakland city employers was over $430,000,000 in hourly wages paid just in 2015. This does not take into account increased payroll and employment taxes.
Administrative and compliance requirements are also an issue for these employers as wage increases will come into effect every July beginning in 2016 for San Francisco, and every January 1st in Oakland.
You Can Get Expert Help With Labor Law Compliance
Payroll compliance is a labor-intensive requirement of all employers, but it can be achieved and there are scores of resources available for the employer who chooses to manage their own payroll processes. The state of California provides information at the Department of Industrial Relations website:
http://www.dir.ca.gov/dlse/faq_minimumwage.htm
Another option to consider is utilizing a managed payroll service. By outsourcing these functions you can also outsource all of the requirements that are currently on your HR staff to maintain compliance. If you have questions regarding this, or other HR issues and practices, let us help you in managing your HR needs, payroll processes, and staying on top of compliance demands. Get your Free Download: Payroll Outsourcing Guide to help you make an informed decision or call Accuchex Payroll Management Services at 877-422-2824.
