California Minimum Wage Increase

State Law Alert

July 31st, 2023

California Minimum Wage Increase

On Monday, July 31, the California Department of Finance Director Joe Stephenshaw officially certified that beginning January 1, 2024, California’s minimum wage will increase from $15.50 per hour to $16 per hour for all employers, regardless of size.

Per California’s Labor Code, once the state’s minimum wage reaches $15 per hour — which already has occurred, as the current minimum wage is $15.50 per hour — the California Director of Finance must determine on or before August 1 of each year whether to adjust the minimum wage for inflation and, if so, calculate the increase.

The director calculates the increase by applying whichever of the following two options would result in the smaller increase:

• A 3.5 percent increase; or
• The actual rate of change per the U.S. Consumer Price Index (CPI).

For the 12-month period from July 1, 2022, to June 30, 2023, the department’s calculations showed that the CPI increased by 6.16 percent compared to the 12-month period from July 1, 2021, to June 30, 2022, meaning the minimum wage will increase by 3.5 percent — to $16 per hour — on January 1, 2024.

This hourly increase also affects the minimum salary requirements for full-time exempt employees, which currently is $64,480 per year ($5,373.34 per month). Beginning January 1, 2024, the minimum salary for a full-time exempt employee will be $66,560 per year ($5,546.67 per month).

Employers also must keep in mind that some cities and counties in California have adopted their own local minimum wage rates that are separate from the state rate. If the ordinance where employees are performing work requires a higher minimum wage rate than the state minimum wage rate (such as Berkeley, Los Angeles, Milpitas and San Francisco, to name just a few), the local rate must be paid. Keep in mind that only the state minimum wage — not local minimum wages — determines the minimum salary requirements for exempt employees.

Looking ahead, a measure that is eligible for the November 2024 ballot would, if passed by California voters, further accelerate the pace of minimum wage increases. If passed, by January 1, 2025, for employers with 26 or more employees, the statewide minimum wage would increase to $18 per hour, and employers with 25 or fewer employees would pay the same wage on January 1, 2026.

eAlert by Heartland Payroll/HR