Icon Tax Group: Do exempt salaries increase or are employees reclassified to nonexempt?


by Michael Lodge

Payroll tax rules are changing by new regulations set by the Federal and State Government.  As of January 1 there are several rules that are changing and as employers you need to keep an eye on.  If you have any questions please send us an email at:  tax@icontaxgroup.com.

Until recently, most California employers only needed to adjust their payroll systems and overtime rates when California’s minimum wage rates increased.

But that’s all changing. Employers must now consider federal and local wage requirements in addition to California’s minimum wage rates—all of which gradually increase over time.

Effective December 1, 2016, the new federal overtime rule changes the salary level for exempt employees. Since the new salary requirement is higher than California’s, employers have decisions to make.
 Under the new regulations, effective December 1, 2016, the minimum weekly salary for such exempt employees will rise from $455 to $913 per week (an annualized increase from $23,660 to $47,476). The Final Rule includes a mechanism to automatically update the minimum salary level every three years.Jun 29, 2016
Local municipalities are passing their own minimum wage requirements that exceed California’s rates. Depending on your business locations, this could mean different pay in different cities—right now and starting January 1, 2017.
Finally, California’s minimum wage rate will increase on January 1, 2017, and continue to incrementally increase thereafter.
California’s $15 Per Hour Minimum Wage Schedule
Rate (Jan. 1) 26 Employees or More 25 Employees or Less
2017 $10.50 $10.00
2018 $11.00 $10.50
2019 $12.00 $11.00
2020 $13.00 $12.00