California’s wage and hour provisions and tax laws can differ significantly from those of federal law, often making payroll processes more complex, a California payroll expert said May 8 at the 2013 American Payroll Association Congress in Grapevine, Texas.

California’s hourly minimum wage has been $8 since 2008, which is a higher rate than the federal hourly minimum wage of $7.25; however, some California localities mandate an hourly local minimum wage that is higher than the state’s minimum wage, said Valerie Alexander-Bailey, CPP, payroll manager with Vision Service Plan (VSP). 

The living wage ordinances of many California localities require employers that received economic development subsidies to pay local minimum wages that are higher than the state minimum wage, Alexander-Bailey said. 

These living wage ordinances often require certain benefits to be provided. If benefits are not provided, the ordinances often require a higher local minimum wage to be paid, she said.

For example, in Hayward, California, the hourly local minimum wage rate in effect from July 1, 2012, to June 30, 2013, is $10.87 if health benefits are provided and $12.55 if health benefits are not provided, she said. 

California’s overtime laws also are more generous to employees than the federal standard, Alexander-Bailey said.

California conforms to federal law by requiring that covered employees be paid time-and-one-half for hours worked over 40 in a week; however, California requires that employees be paid time-and-one-half their regular rate for hours worked over eight and up to 12 in a day and for the first eight hours worked on the seventh consecutive workday of a workweek, she said.

Under California law, employers must pay double an employee’s standard hourly rate for hours worked in a day over 12, Alexander-Bailey said. Employees also must be paid double their standard hourly rate for hours worked over the eighth hour on the seventh consecutive workday of a workweek, she said. 

Under California’s tax policies, deferrals to health savings accounts are not pretax payments deductible from wages, unlike under federal law, Alexander-Bailey said.

California requires taxes to be withheld from employees’ wages on the value of personal use of a company vehicle. The Internal Revenue Service gives employers the option of not withholding taxes from employees’ wages on this value, Alexander-Bailey said.

Health and accident benefits for domestic partners and same-sex married couples are not taxable in California; however, the benefits are taxable under federal law, Alexander-Bailey said.

Another difference between California tax law and federal tax law that is significant for payroll purposes is that California tax law bases tax deposit deadlines on business days, while federal law bases deposit deadlines on banking days, Alexander-Bailey said.

By Howard Perlman