Starting Friday, January 1st, 2016 – the California State Minimum Wage changes to $10.00 per hour. Since this change will almost certainly fall within a payroll week, there are certain things that should be done to prepare for this increase. Importantly, all employees are subject to this increase – there is no differential between tipped and non-tipped employees at the state level in California, only Collective Bargaining Agreements or Living Wage Ordinances are subject to different rates.
Your POS or Time Keeping System
Hourly rates for all non-exempt employees need to be at a minimum $10.00/hour. Rates should be changed with the effective date in your POS/Time Keeping System to become effective January 1st at 12:01 a.m. In most POS systems, you can make this change now as long as you properly set the effective date to start January 1. Since this increase starts on a Friday, most of the workweek will be at the old rate with Friday, Saturday, and Sunday at the new rate. Changing your POS system ahead of time will save your payroll processing person a great deal of time and effort – avoiding manual changes after the fact. It is also a better record keeping method than having to use work papers if there is any question regarding the increase. In addition, do not forget to ensure that your POS/Timekeeping System is accurately set to calculate meal penalties, split shifts and overtime at the new rates. Finally, the employees’ wage statements for the first payroll period should also accurately reflect all the hours worked at the old rate, as well as the new rate.
Your Exempt Employees
As a result of the increase in minimum wage, all exempt employees’ salaries may need to be adjusted. Going forward, the minimum salary for an exempt employee will be $41,600 (i.e., two times minimum wage [$20 per hour] times forty hours per week times 52 weeks for the year equals $41,600.00). This must be reflected in their pay as of January 1st, even if it means a pro-rata increase for just a few days to close out the first workweek and payroll period.
Be sure to change your employee postings to reflect new California Minimum Wage. Check to have to most updated postings available as there have been changes to several labor laws starting January 2016. In addition, in case you have not posted the new Wage Order that contains the increased minimum wage, you may wish to do so. A copy for your specific business can be found at https://www.dir.ca.gov/iwc/wageorderindustries.htm
Please feel free to contact us if we can be of any assistance with these changes.