California’s Shifting Minimum Wage

Recent History

California has had an especially dynamic minimum wage for several years. Senate Bill 3, passed in 2016, began a series of required annual increases at the start of each new calendar year. We have watched the minimum wage rate rise from $10.00 in 2016 to $15.00 per hour in 2022. Employers who adjusted payroll budgets every January looked forward to wage stability after that period of increases. Unfortunately, we have the opposite.

The same Senate Bill also added a provision to the Labor Code that requires the state Director of Finance to increase the minimum wage based on inflation. These increases must be determined “on or before August 1.” This is the provision behind the minimum wage increase to $15.50 for all employers effective January 1, 2023.

$16 Per Hour in 2024

Now, in a memo to Governor Newsom and other state leaders dated July 31, 2023, the state Director of Finance has announced that a similar minimum wage increase will be happening January 1, 2024. All employers, regardless of size, will be required to pay at least $16.00 per hour. This will not only impact those earning minimum wage, but also exempt employees who must earn at least twice the state minimum wage. Starting January 1, 2024, exempt employees must make at least $66,560 per year.

2024 Ballot Measure

While planning for the upcoming calendar year, employers should also take note of a 2024 ballot measure that proposes increasing the minimum wage to $18.00 per hour by 2026, with further hikes based on the Consumer Price Index.

Next Steps

For now, all employers should plan for the increase in minimum wage to $16.00 per hour and the associated changes (e.g., salaries for exempt employees and wages for employees required to use their own tools). We should expect additional announcements about the minimum wage for computer professionals later this year, and if you live in a municipality that has historically raised minimum wages above the state minimum (an early 2023 city ordinance in the city of Los Angeles raised the minimum wage there to $16.78 effective July 1, for example) we recommend keeping a close eye out for additional adjustments.

As always, Sierra HR Partners is here to help you navigate the ever-changing landscape of California regulations. Please contact one of our Consultants with any questions you have.