Get Ready! California’s Minimum Wage & Salary Increases Go Into Effect January 1, 2019

By Tyler Jensen, SPHR, PHRca, SHRM-SCP and Jennifer Jacobus, PHRca, SHRM-CP, San Diego Employers Association

The New Year is nearly upon us!  On January 1, 2019, minimum wages and the minimum salary threshold for exempt employees will increase depending upon your location, number of employees and other factors.

Starting with the City of San Diego, the minimum wage employers must pay to all employees increases to $12 per hour worked effective January 1, 2019.  In San Diego County, only the City of San Diego has a greater minimum wage than the statewide minimums.  Next, California continues with the minimum wage progression to a $15/hour minimum wage.  Effective January 1, 2019, employers with 25 or fewer employees will see minimum wage increase to $11 per hour worked, a $0.50 increase from the 2018 minimum of $10.50/hour.  Employers with 26 or more employees will see minimum wage increase to $12 per hour worked, a $1.00 increase from the 2018 minimum of $11/hour.

The San Diego City ordinance also extends the San Diego minimum wage to any employee who works 2 or more hours per year in San Diego.  For larger employers (26+ employees) in the City of San Diego, the 2019 City and State minimum wage are both $12 per hour worked.

For smaller employers not located in the City limits, this can get confusing.  If your employees qualify under the “2 or more hours per year” standard, an employer must pay no less than $12 per hour worked for all hours worked in the City of San Diego, and the applicable minimum wage for all other hours worked outside of the City ($11/hr or $12/hr depending upon number of employees.)  If a business can afford it and it makes sense, it may be best to simply set an hourly wage for these employees at $12 per hour or more.

California’s minimum salary threshold for exempt employees also increases on January 1, 2019.  California’s minimum salary is twice the applicable statewide minimum wage, depending upon the total headcount of the employer.  The San Diego City minimum is not used for this purpose.  On January 1, 2019, the minimum salary threshold for employers of 25 or fewer employees increases to $45,760 per year.  For employers of 26 employees or more, the statewide minimum salary increases to $49,920.  California does not allow proration for part-time salaried employees, meaning that the minimum salary must be met or exceeded regardless of hours worked.  For each $1 the statewide minimum wage increases, the salary threshold increases approximately $2.  When annualized over 2,080 hours per year, each time minimum hourly wage increases by $1, the minimum salary increases by approximately $4,160 each year.

SDEA has a number of workshops and classes related to this for a deeper understanding including our 2019 Employment Law Update, Exempt v. Nonexempt webinar, Payroll Basics for HR, Top 10 Wage and Hour Mistakes and others.

To order your updated posters, which will be available in January 2019, email us here.

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