2016 Minimum Wage Increase

Dear Client,

Most of you are probably already aware that minimum wage is increasing to $10.00 per hour effective January 1, 2016.

This means that any employee that is considered non-exempt (paid hourly) that is being paid below that now MUST be raised to $10.00 NO LATER than 1/1/2016 (regardless of the payday).

For example: if employee works December 30th, 31st and January 1st and their current wage is $9.50 they could be paid $9.50 for any hours worked on 12/30 and 12/31 but they HAVE to be paid $10.00 per hour for all regular hours worked on 1/1/2016.

What should Employers do?

  • Employers should go through your payroll records and make sure to flag any employees under $10.00.
  • Then the person handling payroll needs to notify your payroll vendor of wage change and make effective date of 1/1/2016.

Other Considerations-Exempt Employees

While minimum wage changes for hourly non-exempt employees it can also affect exempt employees too.

Effective 1/1/2016, any employee deemed Exempt must make$41, 600.00 per year (AT MINIMUM). Previously it would have been $37, 440.00. So therefore if any Exempt employees (meaning those that don’t get overtime and typically in a management position or some other kind of exemption) are currently being paid between $37,440.00 and $41,600.00, we will need to adjust their salaries too.

Note: Keep in mind that the salary test for Exempt workers is just one aspect and you should always make sure before classifying an employee as Exempt that they meet the job duties test also.

What should Employers do?

  • Employers should go through your payroll records and make sure to flag any employees THAT ARE CURRENTLY EXEMPT AND MAKING LESS THAN $41,600.00 per year.
  • Then create a list of the following information: employee name, job title, current salary.
  • Next you have to determine if you will want to raise their salary to the minimum or if you want to move them to an hourly rate making them non-exempt. That hourly rate should be equal to what they are currently making. By doing this they would then become eligible for overtime and meal periods.
  • If you don’t find any employees classified as EXEMPT making less than the $41, 600.00 you don’t have to do anything at this time.
  • You may still need to review their job duties at some time in the future but the salary is the critical part at this time.
  • It is important to address this as soon as possible. Since the payroll vendors may be getting a lot of requests in the next couple weeks. I would recommend notifying the payroll vendor ASAP but no later than 12/15/2015. Some payroll vendors are sending out notifications but the responsibility here is on EMPLOYER not the vendor to make sure the changes take place.
  • Also make sure on your first payroll of January that you review your reports to make sure all changes were made.
  • Make sure to get new 2016 Labor Law posters since this change impacts your postings.
  • Make sure to give any employees impacted by this change the Labor Code Form 2810.5 notice that informs them of their wage change.

What else should an employer do? Employers should make sure that all employees that may fall into this category have their pay rates reflected correctly on or before the effective date. Employers should make sure that payroll vendors are notified in time to make changes. This is also a good time to review payroll practices in general. Failure to raise the minimum wage in accordance with this regulation or any pay related compliance issues could incur significant penalties under the Wage Theft Act. Employers should make sure they have the correct Posters to reflect minimum wage and all new 2014 regulations.

How can we help?

JR Consulting can assist with payroll audits, job classification analysis (exempt vs. non-exempt) and can recommend payroll and poster vendors if needed.

This information should not be construed as legal advice.

Leave a Reply

Your email address will not be published. Required fields are marked *