By Jennifer Jacobus, PHRca, SHRM-CP SDEA Director of HR Services.
Confused over the current minimum wage increase? We get it. There is a lot of information in the news and social media that is delivered in a very confusing manner. Following is a comprehensive breakdown that will hopefully clear up some of the confusion:
- The minimum salary requirement under federal law was increased for the first time since 2004. In the news this is often being reported as “New Overtime Rules” which is naturally causing some confusion with business owners. Unless you operate a business outside of California, this is likely to have little to no effect on you; California’s minimum salary requirement for exempt employees has, and continues to be, much higher than federal requirements and California employers must comply with this higher rate. If you do have exempt employees outside of the state of California and you wish to keep them exempt, you must ensure that they are making at lease $35,568 annually effective January 1, 2020.
- California’s minimum wage increased on January 1, 2020 to $12/hour for companies that have 25 or less employees and $13/hour for companies that have 26 or more employees. As a reminder, California’s minimum wage will increase annually until we reach $15/hour in 2023 for employers with 25 or less employees. Larger employers, those employing 26 or more, will meet this standard in 2022.
- San Diego has a minimum wage ordinance for all companies operating within the San Diego city limits which also applies to employees who work for two or more hours a week within the San Diego city limits. As an example, a company that is headquartered in El Cajon (outside the San Diego city limits) but whose employees travel to different job sites, do deliveries, etc. in the San Diego city limits for two or more hours a week, would be required to pay the San Diego minimum wage to those employees.
The San Diego minimum wage increased to $13/hour effective January 1, 2020 and applies to all employers who meet the criteria as outlined above, regardless of company size. The San Diego minimum wage has the possibility to increase on an annual basis based on the CPI.
- California’s minimum salary requirement for exempt employees is based on the current state minimum wage; San Diego’s minimum wage, whether higher or lower, has no effect on the minimum salary requirements for an exempt employee in California. Based on California’s 2020 minimum wage of either $12 or $13/hour, minimum salary requirements are $49,920 for employers with 25 or less employees and $54,080 for employers with 26 or more employees.
Remember that this minimum salary is mandatory if you wish to keep your employees classified as exempt; you do have the option to reclassify employees who now fall below the minimum salary requirements by converting them to an hourly rate, making sure that they track all hours worked (including in and out for meal periods) and making sure they are compensated for overtime if applicable.
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