Changes to CA Minimum Wage Will Impact Employers’ Budgets for 2016- Are You Prepared?

by Jennifer Grady, Esq.

California’s minimum wage will increase again on Jan. 1, 2016

With just a few weeks until the end of 2015, employers are rapidly approaching the statutory California minimum wage increase set to take place on January 1, 2016.  This increase means that employers must review their monthly and annual expenses to determine how the salary increase will affect their overall budget, and how it may impact the wages of workers that are already earning more than the minimum wage. 

Employers who are preparing their budgets for 2016 must be able to answer the following questions as part of their planning:

–       What are the increased costs for adjustments to the minimum wage?

–       What are the increased costs for bringing employees up to salary-range minimums?

–       Does the organization have special needs that need to be implemented in 2016? Such needs may include adjustments to departmental organization, job classifications, or government requirements.

–       Are there any additional expenses generated by new or revised compensation packages?

–       Are employment offer letters, employment contracts, and Employee Handbooks up-to-date?

–       How will the budget be impacted by an increase in benefit costs?

–       Does the city have a higher minimum wage that the state-mandated minimum?  (For a list of minimum wages by city/county, click here).

Additional Facts and Projections to Keep in Mind as You Plan Your Budget

In addition to your business’s specific needs and adjustments, several changes at the state and federal levels may effect your budget planning:

–       Effective January 1, 2016, California will raise the state minimum wage to $10.00 per hour.  Minimum wages by city range from $10.00 to $15.00 per hour, and the new minimum salary required will be $41,600 for any California exempt employees.

–       According to the Society for Human Resource Management, employers are shifting toward variable pay (based on job performance), and away from cost of living raises. U.S. companies’ salary budgets for 2016 are projected to increase by 2.9 percent. In 2015, salary budgets increased by an average of 2.8 percent.

–       The consumer price index shows a 0.2% increase for CA for the past 12 months (Oct – Oct).

–       According to the Bureau of Labor Statistics, average hourly earnings for private-sector jobs have grown about 2% annually, below the 3% rate that was typical before the Great Recession.

If you have questions about how to adjust your budget, policies, employment documents, or Employee Handbook, a licensed attorney can help you review your business practices and determine which adjustments apply to you in the New Year.

About The Grady Firm

To schedule a complimentary 15-minute consultation with The Grady Firm’s employment law attorneys, call (323) 450-9010, or fill out a Contact Request Form.

The Grady Firm’s employment law department can update your business’ company policies/Employee Handbook, create new policies, prepare employment forms, and explain the detailed nuances of California employment and wage and hour law. 

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