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New Year, New Wages – California's 2024 Minimum Wage Laws Explained

Contributor: Tabitha Aliano, PHR, HR Consultant

December 1st, 2023 | 5 min. read

By Tony Calavitta

New Year, New Wages – California's 2024 Minimum Wage Laws Explained

Let’s cut right to the chase:

Minimum wage laws in California, as adjusted for 2023, are changing...again.

These changes, taking effect at the start of the New Year, represent an increase in the minimum wage requirements across a variety of employment sectors and will significantly impact businesses in California.

So, as 2024 approaches and you update your calendar, you also need to update your wage structure to comply with all the new minimum wage regulations.

In this article, we will comprehensively cover each of California’s new minimum wage laws, discussing the specific details you need to know to confidently implement these changes.

By reading to the end, you’ll have a clear, step-by-step guide to mastering minimum wage compliance in 2024.

California's 2024 minimum wage laws

The state of California is set to implement significant changes to its minimum wage laws in 2024.

These adjustments are designed to offer all workers wages that more closely align with the state's economic reality, ensuring fair compensation in an ever-evolving economic landscape.

Statewide minimum wage increase

Starting January 1, 2024, all employers in the Golden State, regardless of their size, must pay their employees a minimum of $16 per hour, an increase from the previous mandated rate of $15.50 per hour. The minimum exempt salary for California employees, directly affected by the minimum wage increase, will also rise from $64,480 to $66,560.

This increase from the 2023 rate is more than a nominal change – it's a significant move that universally impacts California’s employers.

Sector-specific minimum wage increases

In addition to the statewide increase, California is introducing sector-specific minimum wage adjustments in the following industries:

The healthcare industry

Under SB525, beginning June 1, 2024, healthcare workers in California will see a progressive increase in their minimum wage, ranging from $18 to $23 per hour depending on the type of healthcare facility and the nature and size of the business. This law aims to increase the minimum wage in all healthcare facilities to $25 per hour by June 1, 2028. This substantial increase reflects the critical nature of healthcare services and the state's commitment to ensuring fair compensation for these essential workers.

The law affects not only medical professionals like doctors and nurses but also includes support staff such as administrative workers, janitorial staff, and even independent contractors who provide services in healthcare settings.

The fast food industry

For the fast food sector, a significant change comes into effect on April 1, 2024. Under the introduction of AB 1228, fast food workers in chains with more than 60 establishments will be entitled to a minimum wage of $20 per hour. This rate will be subject to annual adjustments based on the Consumer Price Index.

This law not only elevates worker wages but also introduces a new regulatory framework, establishing a Fast Food Council aimed at setting standards and overseeing working conditions in the fast food industry.

Local minimum wage variations

It's important to note that many localities in California have established their own minimum wage requirements, which are higher than the state’s minimum wage. In regions where this is the case, employers are required to adhere to the higher local minimum wage rate.

Need information on  local minimum wage rates? Look no further! We've assembled a Complete Guide to California's City and County Minimum Wage Laws to help you comply with your area's requirements.

What do California’s new minimum wage laws mean for employers?

The upcoming changes to California's minimum wage laws present a complex mix of challenges and opportunities for employers across the state. Understanding and adapting to these changes will be crucial for maintaining compliance and ensuring business sustainability.

Here are some of the main implications that California’s new minimum wage laws will have for employers in 2024:

Financial and operational adjustments:

Payroll management

The immediate and most tangible impact will be on payroll. Employers must adjust their budgets to accommodate the higher wage rates. This involves not just increasing the hourly pay but also recalibrating related financial aspects such as overtime pay, payroll taxes, and employee benefits.

Strategic business planning

The wage increase also may necessitate a strategic review of business operations. Employers may need to explore ways to maintain operational efficiency, such as optimizing staffing levels or investing in automation, to balance out the increased labor costs.

Human resource considerations:

Employee retention and recruitment

The new wage laws could significantly impact workforce dynamics. Higher wages might aid in attracting and retaining employees, but they also raise expectations regarding working conditions and career advancement opportunities. Employers will need to reassess their employee value proposition in light of these changes.

Workplace morale

How these wage changes are communicated and implemented could significantly affect workplace morale. By communicating these changes transparently and empathetically, employers can help maintain a positive and productive work environment.

Market and pricing strategies:

Adjusting pricing models

To offset the increased labor costs, many businesses, particularly in the retail and service sectors, might need to consider adjusting their pricing strategies. For employers, this requires a delicate balance to ensure competitiveness and customer retention.

Market positioning

The wage increase could also lead to a shift in market positioning for some businesses. Companies might need to reevaluate their target markets, product offerings, and marketing strategies to align with the new economic landscape.

Compliance:

Staying current with legal changes and ensuring compliance is essential for all employers in California. The introduction of new minimum wage laws is more than a regulatory update – it's a call to action for businesses to align their practices with these evolving standards.

Want more information on all of 2024's most critical compliance updates?

Download our free compliance guide or watch our latest recorded webinar hosted by legal expert, Jason T. Yu, Partner with the law offices of Snell and Wilmer, for a complete breakdown of California's recent regulation changes. 

A step-by-step guide to compliance with California’s new minimum wage laws

And here is how you can effectively answer that call to action.

By following this structured approach, you can navigate these changes with confidence:


Update your payroll system


1. Update your payroll system:

  • Upgrade your payroll software to reflect the new minimum wage of $16 per hour.
  • Ensure accurate calculations for overtime, taxes, and other deductions based on the updated wage.
  • Test the system for accuracy before the first payroll cycle of 2024.

2. Review and revise your employee contracts:

  • Thoroughly review all employee contracts to ensure compliance with the new minimum wage requirements.
  • Focus on contracts of part-time, temporary, and contract workers for necessary amendments.
  • Reissue contracts, if required, to reflect the updated wage rates.

3. Double-check exempt employee classifications:

  • Reevaluate the status of exempt employees to ensure they meet the new minimum salary threshold of $66,560.
  • Assess job duties and hours to confirm alignment with exempt status criteria under the new wage laws.
  • Consider reclassifying employees as non-exempt if they no longer meet the exemption criteria.

4. Adjust your HR policies and keep your documentation current:

  • Revise HR policies related to wages, overtime, and breaks to comply with the new laws.
  • Ensure all employees are informed about the updated policies and understand the changes.
  • Maintain records of policy updates and communications for compliance tracking.

5. Conduct regular internal compliance reviews:

  • Schedule and perform regular audits of your payroll and HR policies to ensure ongoing compliance with the minimum wage laws.
  • Review payroll records, employee classifications, and wage-related policies during these audits.
  • Address any discrepancies or issues found during the reviews promptly to maintain compliance.

Need help with compliance? We have you covered!

Let’s cut right to the chase…again:

California's new minimum wage laws are just around the corner – Are you ready for them?

With the insights from this article, you're well on your way to keeping your business in line with these upcoming 2024 laws.

Here at Combined, we're here to support you further. Our team of HR experts is ready to provide you with comprehensive assistance to ensure your business stays ahead of the compliance curve.

Schedule a meeting with a team member to learn more.

 

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This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.