By Laurie Nooren, SPHR, PHRca, SHRM-CP
Earlier this month, Californians voted on Prop 32, the “Living Wage Act,” which would increase the minimum wage to $17.00 or $18.00 per hour effective immediately or on January 1, 2025, depending on the size of the employer. While most of the ballots have been counted, the final tally on Prop 32 at the time of this article is still to be determined. More to come…….but hopefully this will be one you don’t have to worry about.
Regardless, the CA minimum wage was already scheduled to increase from $16.00/hour to $16.50/hour for all employers regardless of size on January 1, 2025, based on the Consumer Price Index (CPI) and announced in August 2024. Depending on how your pay periods fall, this will likely mean that you will have non-exempt employees with two pay rates during the same pay period in which January 1, 2025, falls. Remember, this increase is effective January 1, 2025, and not the first full pay period that occurs in January.
Keep in mind that non-exempt employees in specific California cities with city minimum wage ordinances may be subject to local minimum wage ordinances that exceed the state’s new minimum wage. In such cases, the higher wage rate applies.
The new state minimum wage will also affect exempt employees. The minimum annual salary for exempt employees will increase effective January 1, 2025, from $66,560 to $68, 640 (not including commissions, bonuses or other types of incentives). Double the minimum wage for exempt employees applies to the state minimum wage, not local minimum wage ordinances mentioned above. Ensure that your exempt employees’ pay is increased to include the pay period in which January 1, 2025, falls (which may be in December).
Unionized worksites have collective bargaining agreements (CBAs) which may override state law. Most of the exemptions to the state law require that employees covered by the CBA are paid a minimum of 1.3 times the state minimum wage. If you have a CBA, please check to ensure you are compensating employees at a rate of no less than $21.45/hour ($16.50 X 1.3).
Please also note that healthcare workers (detailed in a separate ezine article) and fast-food workers also have higher minimum wage requirements than the state. In April of last year, all fast-food workers must earn at least $20/hour, which has not been raised since initially enacted.
We hope you all have a healthy and prosperous 2025. Please let your HR Consultant know if you have any questions.