As of January 1st 2016 California’s minimum wage increased from $9 to $10. This compared to the current federal minimum wage of $7.25 means California is amongst one of the highest in the US. This is the first of a series of increases that will be hitting $15 an hour by 2020.

We here at Bizimply have decided to look what these minimum wage increases mean for business owners.

What you might not know:

Overtime Increases Accordingly:
Not only do hourly rates increase, overtime rates also face increases. Currently, the overtime rate for minimum wage employee’s is $13.50, this will increase to $15 per hour. This is also applicable to double time rates, these will increase from $18 an hour to $20.

Staff Break Pay:
Employees break pay will rise in line with the minimum wage increases. This includes any missed breaks.

Salary Employees:
In order to avail of the “white collar” exemptions, employers must pay executives, administrative and professional employees a minimum salary that is double the minimum wage which equals $41,600 per year. Due to the increase in minimum wage, employers will have to implement the new minimum threshold for these employee salaries.

Salespersons:
In order to get salesperson exemptions, it is stated that they must earn 1.5 times the minimum wage that is set in California state law. Over half of this, however, has to be from commission sales. This means the previous minimum wage which was $13.51 will jump to $15.01 for exempt commissioned salespersons.

What About Tips?
Employers may not use an employee’s tips as a credit toward its obligation to pay the minimum wage.

Some of the myths

“My operating costs are going to skyrocket!”

Paying a higher wage to employees can also help employers cut costs in other ways, according to the Center on Budget and Policy Priorities “increasing the minimum wage may also spur businesses to operate more efficiently and employees to work harder.” It’s more expensive to hire and train new workers than it is to retain a long-term, loyal workforce. Workers win because they have more purchasing power, and employers win because they are able to rely on a happy, productive workforce.

“I will have to increase all my prices.”

A 2013 study by the Chicago Fed found that increasing the minimum wage even just to $9 would increase consumer spending by $28 billion. When spending—i.e. demand—increases, manufacturers and other purveyors of goods and services can actually charge less or, at least, avoid increasing their prices, because they’re increasing overall revenue.

“I will have to layoff some of my staff.”

Between January and December of 2014, while Seatac’s business owners (and their customers) were absorbing the cost of paying minimum wage employees $15, unemployment decreased 17.46%, falling from 6.3% to 5.2%. It turns out that you CAN increase the minimum wage (even in large increments) and increase overall employment at the same time.

 

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