As we approach the new year, it is crucial for your business to be aware of the upcoming changes to California's minimum wage and the impact these changes will have on your operations and budgeting.
Starting January 1, 2025, California's minimum wage will rise by 50 cents, reaching $16.50 per hour statewide. However, for employers in the Bay Area, it's likely that you are already adhering to higher minimum wage standards set by your specific city or county. These local minimum wage requirements often exceed the state's baseline. It's essential to keep abreast of these local mandates to ensure compliance.
This adjustment not only affects hourly wage earners but also has significant implications for your exempt employees.
To qualify for exempt status under the administrative, professional, and executive exemptions, an employee's annual earnings must be at least twice the state's minimum wage, calculated over a standard work year of 2080 hours. Consequently, the minimum salary for exempt employees will rise to $68,640 annually in 2025.
For organizations in certain industries, there are industry wage specific requirements. Fast food workers at large chains now earn $20/hr as of April 1, 2024; Healthcare worker wages will rise to $18-$23/hr by October 15, 2024, or January 1, 2025, based on state budgets and hotel workers in certain cities have unique minimum wage standards.
As you prepare your 2025 budget, we recommend considering the following:
To ensure your organization is prepared for the 2025 minimum wage policy changes, here's a streamlined action plan:
Reclassification Review: Analyze job roles and salaries to identify employees who may need to shift from exempt to non-exempt status due to the new $68,640 salary threshold. This ensures compliance with wage regulations.
Wage Practice Audit: Conduct a thorough review of your wage practices, including overtime, meal breaks, and final wage payments, to ensure they meet the new minimum wage standards of your locality.
Contract Updates: Review and amend employment contracts and offer letters as needed to align with the new wage requirements, especially for agreements extending beyond the start of 2025.
Clear Communication: Inform employees about any status changes, explaining the rationale and how it affects their compensation and work hours. Transparency is key to managing expectations. Ensure that the outcome or decision is properly papered in the employee file.
Pricing Strategy: Assess whether your product or service pricing needs adjustment to cover the increased labor costs.
Payroll Update: Adjust your payroll systems to reflect the updated minimum wage rates by January 1, 2025, ensuring accurate calculation of wages and benefits.
Staff Training: Educate your management and HR teams on the implications of the new wage laws, focusing on handling reclassifications and payroll adjustments.
Update Postings and Employee Handbook: Review and update all relevant postings, such as wage and hour notices, as well as the employee handbook to reflect the new minimum wage requirements. Ensure that these materials clearly communicate the changes to employees and align with the updated policies and practices implemented across the organization.
Legal Consultation and Legislative Monitoring: Consult with legal counsel to review your compliance strategy. Additionally, keep abreast of any further changes in wage laws or related employment practices, including the outcomes of relevant propositions and state regulations
Stay proactive in addressing these minimum wage changes and their implications, ensure compliance, maintain financial stability, and effectively manage your business to adjust with new changes.
As always, feel free to contact us if you have any questions or require further assistance in navigating these important updates.