Insights California leads the nation in the call for higher minimum wages, emanating from the agricultural fields and reaching nearly every industry. Raising wages has been a major focus in the California Legislature – and federal and state courts – and employers in the state will likely see a higher wage hike than expected next year. The minimum wage was supposed to reach $15 an hour for all employers in the Golden State by Jan. 1, 2023, but Governor Gavin Newsom recently projected the rate would rise to $15.50 due to record-high inflation. Combined with labor shortages and supply chain disruptions, the costs associated with a higher minimum wage will undeniably impact businesses in 2023. Increased wages mean higher employer-side payroll tax obligations and related costs and will further strain businesses already reeling from the impact of the COVID-19 pandemic and the current economic environment. Given these critical developments, what are the five biggest takeaways for California employers? 1. Small Businesses Face Substantial Increase California’s current minimum wage law, passed in 2016, aimed to raise the minimum wage in phases until it reached $15 per hour for all employers in 2023. The law specifies that if inflation increases by more than 7% between fiscal years 2021 and 2022 (which ends on June 30), then the state’s minimum wage shall increase by 3.5%. The California Department of Finance projected that inflation will exceed 7.6% during this time, thereby triggering the increase in minimum wage effective Jan. 1, 2023. If the inflation rate exceeds the 7% threshold as expected, the $15.50 minimum wage will apply to all California workers. Although this may be a welcome change for an estimated three million workers in California currently paid minimum wage, it will also directly impact the labor costs for businesses across the state regardless of employer size and likely hurt small employers the most. Currently, the state’s minimum wage law is divided into tiers depending on the size of the employer. Effective Jan. 1, 2022, employers with 25 or fewer employees must pay $14 minimum Rising Inflation Will Lead to California Minimum Wage Hike in 2023: Five Key Takeaways for Employers By Fisher Phillips 8 San Diego Dealer
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