In July 2022, the California Department of Finance announced that the state minimum wage will be increased to $15.50/hour for all employers, effective January 1, 2023. This rate change deviates from the standard minimum wage rate schedule, which has been disrupted due to inflation.
Before this announcement, the minimum wage requirement was set to remain at$15/hour. On January 1, 2022, the minimum wage for employers with 26 or more employees was set to $15/hour, and employers with less than 25 employees were required to comply by January 1, 2023.
However, after reviewing the current economic conditions throughout the state, the Department of Finance determined that it was necessary to implement expedited increases to the current minimum wage rate in order to account for the overall increase in cost of living observed in the past six months. As a result, the department decided to amend the previous plan and add an additional fifty cents to the statewide minimum wage for all employers.
This also increases the minimum annual salary to $64,480 and will raise the limit on both employee and employer contributions to 401k retirement plans.
While nothing will be confirmed by the IRS until late October or early November, the anticipated projections are being discussed in an effort to generate thought around the planning process. Once the IRS settles on the official contribution caps, updated information will be released.
As we prepare for the new year, employers are encouraged to closely review payroll, budgets, and current pay rates to ensure that they are prepared to comply with these changes.
For more information on the minimum wage increase or other related matters, contact PBO Advisory Group’s Consulting CFO Rick Dahlseid.