Small business owners in the Golden State know how important it is to stay up to date on minimum wage regulations. You want to make sure you’re complying, of course. But staying aware of upcoming changes in the California minimum wage also lets you plan better for your business’ future.
That’s why we put together this quick guide with what you need to know about the minimum wage in California.
What is the minimum wage in California?
As of January 1, 2021, California’s minimum wage is $13 per hour for companies with 25 employees or fewer and $14 for companies with 26 employees or more. This is $5.75 and $6.75 more than the federal minimum wage of $7.25 respectively.
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Is the minimum wage going up in California in 2021?
The California minimum wage increase will happen each year until reaching $15 per hour for all businesses in 2023.
Once the minimum wage reaches $15 per hour, wages could then be increased each year up to 3.5 percent for inflation.
|Year||26 Employees or More||25 Employees and Fewer|
What is the minimum wage in L.A. county?
Many cities and counties in California have their own minimum wage that differs from the California minimum wage. The reason for the change is to keep up with the cost of living in cities where it is significantly higher than the rest of the state. The L.A. county minimum wage in 2020 was $14.25 for both large (26 or more employees) and small businesses (25 or fewer employees). The minimum wage in 2021 is $15 per hour for all businesses.
The city of Los Angeles has its own minimum wage laws that differ from the county as a whole. However, in 2021 the Los Angeles minimum wage is also $15 for all businesses.
Are there any other California cities that have a higher minimum wage?
Yes. The San Francisco minimum wage ordinance for 2020 set all minimum wage employees pay at $16.07 per hour. This is $1.07 more than the current California minimum wage, and it will increase each year by a percentage based on the Consumer Price Index.
Cupertino’s minimum wage is also currently greater than the state minimum wage. All businesses are required to pay a minimum wage $15.65 per hour starting on January 1, 2021.
San Diego’s minimum wage tracks more closely with the minimum wage in California, with some exceptions. The minimum wage in San Diego is $14 starting on January 1, 2021, regardless of the number of employees.
How should small business owners prepare for minimum wage increases?
Every business is different, so there isn’t one right way to prepare for the California minimum wage in 2021. Here are a few options you may want to consider:
- Audit your expenses: Check your cash flow in detail and create a hiring plan you can afford. In some cases, you may find that hiring temporary workers or contract workers as needed is less expensive than taking on full-time staff. If you are a new business, you need to get your free EIN so you can begin hiring and remain compliant.
- Make sure you hire and keep the right employees: Replacing an employee costs a lot. You decrease the total cost associated with recruiting and training when you hire (and then retain) the right people. Look for candidates with good track records, who come recommended, and who fit in with the company culture. Once they’re onboarded, make sure you build a relationship and provide paths for growth; it makes it more likely that they will stay in their role.
- Increase prices: This is a great way to increase cash flow. Customers are rarely happy with a price hike, but keep in mind that your competitors will be forced to do the same. Just make sure you keep track of trends, and don’t raise prices too high.
- Update tech: Consider automating certain aspects of the work (like payroll) and find ways to reduce production costs by learning how to do payroll yourself. Square’s software makes small business payroll a breeze and can even help you avoid common payroll mistakes.
Whether you need help understanding the California minimum wage, the California sick leave law, or resources to help your small business grow, Square is here to help both you and your business thrive.