As of January 1, 2016, the required minimum wage for most of California will increase to $10.00 per hour. If you are in a city or county that has approved a higher minimum wage rate, you are required to compensate employees at that higher rate.
This wage increase will affect not only non-exempt, hourly employees, but will also affect the compensation for exempt, salaried employees and for exempt, commissioned inside sales employees.
- Exempt employees in California generally must earn a minimum monthly salary of no less than two times the state minimum wage for full time employment. As of January 1, 2016, this means that an exempt employee will need to earn at least $41,600 per year to meet the minimum salary test for exempt status. In cities that have a higher minimum wage than $10.00 per hour, the baseline salary for exempt classification is set by the state’s minimum wage (not each city’s).
- Commissioned inside sales employees in California generally must earn more than 1.5 times the minimum wage per hour, with more than half of their income coming from commissions. As of January 1, 2016, this means that a commissioned inside sales employee will need to earn at least $15.00 per hour, in combination of straight pay and commissions, to meet the minimum salary test for exempt status.
If exempt employees in either category do not make the minimum salary thresholds, they will become non-exempt and entitled to overtime payments and meal/rest breaks.