The New Minimum Wage Impacts More Than You Think


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By now you’ve probably heard so much about minimum wage, what it is, where it’s going and what that means to you – that you feel like you have it down.

Well, not quite so fast – there are some extra things to think about as the minimum wage continues it’s steady climb upward.

When the minimum wage changes – there a lot of things you should think about.  First off, whose minimum wage is moving.  Is it the state, the county, or maybe it’s even as local as your city.  This matters, because different governing bodies will impact different rules.

For instance, right now in California, we have a state minimum wage – it’s $14 an hour for large businesses (that’s those with more than 25 employees); and $15 an hour for small businesses 25 or fewer employees.  And it was effective January 1st of this year, 2022.

But Los Angeles county and LA city have their own minimum wage.  And, oddly, it doesn’t change on the calendar year – the upticks for LA’s minimum wage happens in the middle of the year, it’s in July.

Like the state, it’s tied to the Consumer Price Index, and in July of 2022 it’s slated to increase to $16.04 for large businesses and small employers.  So, if you are a business in LA or LA county, you can’t pay less than $16.04 per hour to your employees, no matter the size of your company.

“… compensation isn’t only the salary, remember bonuses and commissions.  Factor in the cost of benefits and fringe add-ons – it’s called a total compensation statement, and it’s one of my favorite things.”

So that’s the raw information on minimum wage – but what should you take into consideration before you make a move?

Well, first make sure you understand what the minimum wage actually is for your company.  Again, this may mean you have to do a bit of sleuthing to see what guidelines apply to your area, and size.

Then, once you know the number, do an analysis of your compensation.  Look at where everyone is – because remember, making an isolated move may have some unintended consequences with the rest of your team.  And yes, they can discuss what they make.  And no, you can’t stop them – in fact, that’s illegal.

So be sure you have identified any potential issues (like inadvertently setting the salary of a warehouse worker above the hourly wage of their team lead), and have developed a fix – or at least an explanation.

And, when you look at these things – remember compensation isn’t only the salary, remember bonuses and commissions.  Factor in the cost of benefits and fringe add ons – it’s called a total compensation statement, and it’s one of my favorite things.

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Another big factor to keep in mind – the hourly minimum wage isn’t just impactful for non exempt employees, it’s going to effect your exempt employees too.

Many states (California and New York come immediately to mind) have a minimum amount you can pay an exempt level employee.  If you don’t hit that level, the employee no longer qualifies as exempt.  So, unless you want to find yourself explaining to managers why they have to start clocking in and out – make sure you stay on the right side of this requirement.

New York’s number is just that – a number.  Exempt level employees can’t make less than $1,125 per week to be able to retain their exempt status.

California, on the other hand, has tied their exempt salary threshold to the minimum wage.  Exempt employees must make a weekly wage that is no less than twice the minimum wage weekly amount.  So, since the CA state (remember, this is a state law, so the local minimum wages don’t count); since the CA state minimum wage is $15 an hour, exempt employees can’t make less than $1,200 per week.

And in addition to that, CA changes the amount depending on the type of exemption.  So employees who fall under the computer professional exemption have a different rate they have to hit.

And finally – be proactive.  Look as far down the road as possible, at upcoming wage increases – and develop a plan to address them.  Really, it’s going to happen – isn’t it better to be prepared?

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