California minimum wage is set to increase on January 1, 2023. And, if inflation increases by 7% or more this fiscal year, there will be additional minimum wage obligations taking effect in the new year.
The current California minimum wage is $15 per hour for employers with 25 or more employees and $14 per hour for employers with less than 25 employees.
Governor Newsome recently announced that all California employers, regardless of size, must pay $15.50 per hour minimum wage beginning on January 1, 2023, if inflation increases by more than 7% between the 2021 and 2022 fiscal years (the 2022 fiscal year ends June 30). At current, the California Department of Finance projects inflation to be at least 7.6%, but official inflation figures won’t be final until this summer.
If inflation exceeds 7% this fiscal year and the minimum wage increases to $15.50 in the new year, the minimum salary for exempt employees in California will increase to $64,480 per year ($5,373.33 per month). This is an especially meaningful increase for smaller employers who must only pay exempt employees $58,240 at current.
If inflation does not exceed 7% this fiscal year, all California employers will be required to pay a $15 minimum wage beginning on January 1, 2023 (a one dollar increase for employers with 25 or less employees and no increase for large employers). Notably, certain California localities require a higher minimum wage be paid, so be sure to check your local city/county websites for other minimum wage requirements (e.g. Berkeley, Los Angeles, Oakland, San Francisco, and San Jose). Keep in mind that businesses must pay remote employees the minimum wage in effect in the city or county that the employee resides.
With minimum wage hikes incoming, employers should be sure to monitor their pay practices. This includes, for example, adjusting minimum wage and overtime payments, reviewing wage statements to confirm the appropriate hourly rates are reflected, and ensuring meal period and rest break premiums are paid correctly. Additionally, employers should review their exempt employees’ salaries to avoid misclassification issues once the new minimum wage laws go into effect. Most importantly, businesses should adjust their budgets now for what is likely to be wage increases in January 2023.