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How Minimum Wage Affects Exempt Classifications

July 11, 2019 By Dawn Harris

It’s not too early to plan ahead for the impact of State mandated minimum wage increases. The California minimum wage is set by law for automatic increases each year until it hits $15 per hour. The schedule of increases depends on the size of your business. Large businesses with 26 or more employees will reach $15 per hour in 2022. Small businesses with 25 or fewer employees will have until 2023 to reach the $15 per hour rate.

Dates

Employers With 26 or More Employees

Employers With 25 or Fewer Employees

1/1/19

$12/hour

$11/hour

1/1/20

$13/hour

$12/hour

1/1/21

$14/hour

$13/hour

1/1/22

$15/hour

$14/hour

1/1/23

$15/hour*

$15/hour*

*Once the minimum wage reaches $15 per hour for all businesses, wages could then be increased each year up to 3.5 percent (rounded to the nearest 10 cents) for inflation as measured by the national Consumer Price Index.

For employees to be classified as exempt (from overtime requirements) certain criteria must be met. This month we will deal with the requirement that exempt employees must earn a minimum monthly salary. Exempt employees must earn a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.  However, be careful classifying your employees as exempt based on wage levels only.  There are strict guidelines published and you must adhere to them.

Using the above formula, it is easy to calculate the salary requirements for years 2020, 21, 22 and 23. Our next article will cover the other conditions that are required for an employee to be classified as exempt.

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