Minimum wage increase in California

“Well, it just hit mid-year for 2014, and summer has started. Also, it is when most state governments (including California and its municipalities) start a new fiscal year. Another big item that has started here in California, which is a controversial issue with most employers, is a minimum wage increase. Remember back in late September 2013, California Governor Jerry Brown signed legislation to increase the minimum wage from $8.00 per hour to $9.00 per hour, effective July 1st, 2014. The legislation is (for those purists) California Assembly Bill 10 (2013-2014, as Chapter 351, Statutes of 2013). One of the main arguments for it is of course to keep pace with inflation.

What most employers has to be aware of about this minimum wage increase is, not just adjusting an employee’s pay check for this $1 per hour increase, but be attentive of the payroll tax consequences. With this minimum wage increase, the employer would have to adjust of how much Social Security and Medicare taxes to withhold and also to pay out directly. Employers are directly liable for one-half of federal Social Security and Medicare taxes, as well as withhold from the employee’s paycheck, the other half of federal Social Security and Medicare taxes. In addition, the employer is also directly liable for California’s Unemployment Insurance and Employment Training Taxes, and must withhold from the employee’s paycheck California Disability Insurance. Of course these payroll taxes are based on an employee’s gross pay amount, which would include to this minimum wage increase.

With this minimum wage increase in effect, the employer should go over his/her payroll to see if any adjustments on payroll taxes needs to be made, and be aware that he/she may pay more in payroll taxes, as well may pay more in wages. Its always best to ask a payroll tax specialist, to see what impact on your payroll and your payroll taxes will be on this minimum wage increase.” to read more on payroll services you can visit on our website. And of course if you have any questions feel free to contact us anytime at