California Becomes First State to Raise its Minimum Wage to $15 an Hour

California Governor Jerry Brown recently signed a bill into law that will raise the minimum wage to $15 an hour over the next six years. In this historic move, California will have the highest minimum wage of any state in the country.  After 2022, future increases to minimum wage are tied to the cost of living and the governor has the power to delay any increase by a year if the economy weakens. This bill is an effort to bring the lowest paid workers in California out of poverty.

The bill will raise the wages for 5.6 million working Californians who are currently being paid the minimum wage of $10 an hour. The bill will increasingly raise the state’s minimum wage each year until 2022. Companies with fewer than 25 employees will have an extra year to implement each of these wage hikes:

• $10.50 an hour in January 2017
• $11 an hour in 2018
• $12 an hour in 2019
• $13 an hour in 2020
• $14 an hour in 2021
• $15 an hour in 2022.

To further complicate things for California business owners, four of the largest cities in the state - Los Angeles, San Diego, San Francisco and Oakland, as well as 18 other California cities and counties - already have minimum wages higher than $10 an hour. If you have business operations in California, this means that the minimum wage in your area, over the next six years, could be different than the minimum wage in other places throughout the state. You can email me at Jon.Siders@TriNet.com or contact TriNet for more specific information on how you can expect the minimum wage increases to impact your business.

As of the writing of this post, 14 states, in addition to California, and several cities have taken moves to begin increasing their minimum wage in 2016 to be between $10 to $15/hour. In fact, on the same day California enacted their law, New York state signed a law to increase the minimum wage to at least $12.50/hour by the end of 2020, with New York City having a minimum of $15/hour by 2018 and other counties reaching $15/hour by the end of 2021.

Some California businesses have voiced concerns that raising wages by 50 percent over the next six years would dramatically hurt their business, resulting in layoffs and a decrease in their ability to compete in the market. Others say that with the increased income, there would be fewer Californians who would require poverty assistance and their extra income would help boost the economy.

It is important to not only know about these changes but understand what your business must do to be in compliance. New employee posters, notifications, pay hikes and employee handbook revisions will be needed in order to be in compliance with minimum wage changes. Make sure you have a professional helping your business to stay compliant.

For a more in-depth analysis of your business, contact Jon Siders at TriNet:

Jon.Siders@Trinet.com.

(858) 333-7509

This communication is for informational purposes only; it is not legal, tax or accounting advice; and is not an offer to sell, buy or procure insurance.