On September 25, 2013 Governor Brown signed the minimum wage bill into law. On July 1, 2014, the minimum wage will go to $9.00 per hour. It will then go to $10 per hour on January 1, 2016. Now is a good time to consider moving your payroll to an hourly wage if you do not do that now and installing time clocks. Paying exactly what they work is the cleanest approach to keeping out of trouble. With increased pay comes increased penalties and keeping good time records will pay off later.
If you have not heard yet, this week the California State Assembly approved a increase of the minimum wage in 2 stages. Minimum wage will go up to $9 per hour next July, 2014. Then, on January 2016 the minimum wage goes up to $10 per hour.
Our representatives, most of whom never ran a business, forget that when you raise the minimum wage, that is not the only cost. Besides the 25% raise in labor costs, there are matching taxes for Social Security, SDI, Unemployment that also go up. Since your Worker’s Compensation payments are based on your total payroll, a 25% increase in your payroll will also raise the amount you pay in Worker’s compensation premiums.
Beyond the obvious costs there are hidden ones as well. With wages going up, the reimbursement that must be paid to injured employees on Temporary Disability will rise as well. This will be another reason to raise rates on Worker’s Comp.
Governor Brown has already indicated that he will sign the bill so you need to start planning now for the impact on your business. Each business is unique and you all have different ways to deal with these rising costs. We encourage you to call us at the office if you have any questions before implementing a plan to handle the expense. Feel free to add your opinions here as well.