California will increase the minimum wage for all employers regardless of size to $15.50, effective January 1, 2023.

On January 1, 2022, the minimum wage reached $15.00 per hour for employers with 26 or more employees. The California Director of Finance must now determine and certify to the governor and Legislature whether the minimum wage must be adjusted for inflation and calculate the increase, which is the lesser of 3.5 percent or the rate of change in inflation.

The California Department of Finance calculated the U.S. Consumer Price Index for Urban Wage Earners and Clerical Workers (U.S. CPI-W) from July 1, 2021, to June 30, 2022, and noted an increase of 7.9 percent compared to the previous 12-month period. The CA Labor Code section 1182.12 (c)(3)(B) requires that when the rate of increase in inflation exceeds 7 percent upon minimum wage being at $15 per hour, the same minimum wage is to be set for employers with less than 26 employees effective January 1.

This will be a significant change for employers with 25 or fewer employees as the minimum wage is currently $14.00 and increasing to $15.50. Additionally, for all California employers with exempt employees, regardless of size, the new exempt salary threshold will increase to $64,480.

Now is the time to begin determining an action plan to ensure compliance with the new minimum wage requirements come January 1, 2023.

If you have any questions regarding the upcoming changes to the minimum wage in California and how to prepare, contact your Risk Advisor.