California’s Minimum Wage Is On The Rise Again

California’s Minimum Wage Is On The Rise Again

The end of the year is approaching, and your business may be budgeting for minimum wage increases. Do you know how much you will be paying on January 1, 2025? Unfortunately, due to a ballot measure planned for this November, the answer is not yet certain.

CPI-Based Increases

Regardless of what happens with the ballot measure, you should be planning on an increase (if you’re not in an industry that’s already had hourly wages increased beyond $16). With the passage of Senate Bill 3 in 2016, California’s minimum wage started a climb to $15/hour. That law, Labor Code 1182.12, includes a provision to continue with increases beyond $15. On or before August 1 of each year, the state Director of Finance must issue an adjustment to the state minimum wage based on the Consumer Prince Index. This is the provision that led to increases to $15.50 in 2023 and $16 in 2024. Earlier this month, on August 1, the Director of Finance officially certified and announced that starting January 1, 2025, the minimum wage for all employers will increase to $16.50. Consequently, the minimum salary for an exempt employee will be $68,640.

Proposition 32

Does this mean that employers not already covered by fast food or healthcare minimum wage requirements can plan on paying $16.50 starting January 1? Not necessarily! As we wrote in August of last year, Proposition 32 – which failed to qualify for the ballot in 2022 – will be up for a vote on this November’s ballot. If passed, it would adjust Labor Code 1182.12 to increase the minimum wage even more. What’s more, these increases would happen suddenly, given that the proposition was not adjusted to account for its failure to qualify in 2022.

For employers of 26 or more, the passage of Proposition 32 would immediately raise the minimum wage to $17, and then to $18 on January 1, 2025. For employers of fewer than 26, the minimum wage would increase to $17 on January 1, 2025, and then to $18 on January 1, 2026. Starting in 2027, like now, the state Director of Finance would be empowered to make annual increases according to changes in the Consumer Price Index. A minimum wage of $17 corresponds to a minimum exempt salary of $70,720, and a minimum wage of $18 corresponds to a minimum exempt salary of $74,880.

How likely is Proposition 32 to pass? The idea of increasing the minimum wage is popular. In January, a USC Dornsife/Price Center for Urban Politics and Policy poll found that 59% of likely voters supported an increase to the minimum wage.

Other Industries and Municipalities

Other industries have already seen minimum wage increases. Fast food workers must earn at least $20/hour, and the healthcare minimum wage increases are currently planned for between October 15 and January 1 after a delay earlier this year, depending on the health of the state budget. Additionally, almost 40 different municipalities in California have set their own minimum wage.

Next Steps

Regardless of what happens with Proposition 32 in November, plan for a minimum wage increase to at least $16.50/hour and a corresponding increase to the exempt employee salary minimum to $68,640/year. At the same time, consider what changes may be required for both your minimum wage employees and your exempt employees should Proposition 32 pass in November. Additionally, even if you already pay above minimum wage, these increases might make it harder to compete for entry-level employees.

If you’re not sure about minimum wage increases or whether you’re in a municipality with its own minimum wage, contact one of our Consultants. We’re here to help!