Efforts to increase the minimum wage continue.

Effective January 1, 2016, California’s minimum wage is now $10 per hour. While higher than the federal minimum wage (presently $7.25), local cities in California are also moving full steam ahead with even higher local living wages. Employers should be mindful that these minimum wage increase not only affect the minimum amount of pay, but also meal and rest breaks, the minimum wage to qualify as overtime pay exempt, and the amount employees paid on a “piece rate basis” earn. Obviously of greatest concern to the majority of employers is compliance with the overtime pay exemptions for executive, administrative, creative professional, computer software, professional, and commission employees.

California’s 2016 State Minimum Wage.

California’s minimum wage increase also effects the minimum salary that must be paid to overtime exempt executive, administrative, creative professional, and professional employees. Effective January 1, 2016, the new minimum salary required to be exempt from overtime will increase from $37,440 to $41,600. Additionally, effective January 1, 2016, to be exempt from overtime a Computer Software Employee must be paid an effective hourly rate of $41.85, up from $41.27, a monthly salary of at least $7,265.43 (up from $7,165.12), or an annual salary of $87,185.14 (up $85,981.40 ). Similarly, effective January 1, 2016, to be exempt from overtime a Licensed Physicians & Surgeons must be paid an effective hourly rate of $75.24 (increased from $75.24).

Recommendations for Employers

First, update your posters. Second, check your payroll for both exempt and non-exempt employees. Remember to be exempt from overtime, most administrative, executive, and professional employees must earn a minimum monthly salary of at least twice the California minimum wage for full-time employment. Third, ensure that all non-exempt employees – tipped and non-tipped – are paid at least the minimum wage—going to $15 per hour. If you are using a third party payroll processor, confirm that they have updated your account to reflect the minimum wage increases.