Minimum Wage, Social Insurance Taxes Increased Jan. 1, 2023

Date: December 28, 2022

Overtime exemption threshold hits $57,300 for small firms

Small-business owners should be aware of seven changes in the operation of their enterprises that took effect Jan. 1, 2023.

MINIMUM WAGE

Washington state will again be in the running for the nation’s most generous minimum wage, $15.74, come January, eclipsing even California for this dubious distinction. Only Washington, D.C., will be higher at $16.10 per hour.

Inflation is the direct cause of this 8.7% year-over-year increase.

OVERTIME

As the state minimum wage increases so too does the salary threshold for exempting certain workers from overtime requirements. Executive, administrative, professional, and outside salespeople can be exempt from overtime under state rules, provided their base salary in 2023 is at least $57,293.60 for those employed by firms with 50 or fewer workers, or $65,478.40 for those employed by businesses with 51 or more employees.

The exemption for certain computer professionals requires they be paid the equivalent of at least $55.09 per hour beginning January 1.

WORKERS’ COMPENSATION

The state Department of Labor & Industries, which oversees the minimum wage and overtime requirements, also announced an average 4.8% increase in workers’ compensation rates beginning January 1. The department estimates this will add an average of $61 per full-time worker to employers’ industrial insurance costs. Since rates are impacted by an employer’s on-the-job injury record (experience rating), job classifications, and other factors, individual rates will vary from this average.

UNEMPLOYMENT INSURANCE

While the Employment Security Department still appears not to have published final 2023 tax rate information online, Washington employers should have already received their individual unemployment insurance rate notice. ESD is expected to post 2023 rate information here.

Unemployment insurance tax rates are expected to increase for all employers in 2023, regardless of whether the firm had layoffs or terminations, due to a scheduled increase in the social tax component. The social tax component is an assessment on all active employers to help cover benefits paid to workers whose employers are no longer in business. In addition, this particular social tax increase was authorized by the Legislature to help rebuild reserves used to provide several billion dollars of unexpected benefits during the COVID shutdowns.

In addition, employers who terminated, laid off, or otherwise experienced qualifying worker separations from employment over the past four years are likely to see their unemployment insurance rates increase further, due to experience-rated charges for benefits paid to those workers no longer in their employ.

PAID FAMILY & MEDICAL LEAVE

ESD administers the state’s Paid Family & Medical Leave (PFML) program, which will see rates increase January 1 as well. The new rate of 0.8% of each employee’s gross wages includes a 0.2% solvency surcharge.

(By the way, that’s double the initial rate of 0.4% anticipated at the program’s launch in 2019, and 33% higher than the maximum rate set by law when the bill took effect in 2017.)

This premium applies on all gross wages up to the 2023 Social Security wage cap of $160,200 per employee. If a worker’s earnings hit the cap, no further premium is due for that individual; however, the employer must still report that worker’s earnings for the remainder of the year.

Employers with 50 or more workers on payroll will pay about 27% of the total premium, with their workers paying the remaining 73%. Employers with fewer than 50 workers are exempt from paying the employer’s share of premium unless the firm has opted into the program.

Even if exempt from paying the employer’s share of premium, small employers must still collect and remit premiums owed by their workers.

Employers of all sizes are permitted to pay the worker share of premium, rather than deduct it from worker paychecks.

More information is available here.

In addition, the Legislature is expected to act in January on recommendations from a
special task force created to address funding shortfalls resulting from COVID-era and other higher than expected benefits payments, and an inadequate funding structure. The task force will recommend Option F as described in the group’s final report (see page 8).

WA CARES

Assessment and collection of payroll taxes to fund the new WA CARES long-term care benefit has been delayed until July 2023, giving the Legislature time to modify (or repeal) the program.

Under current law, the tax only applies to workers. For 2023, the premium is expected to be 0.58% of gross wages.

All employers are expected to deduct and remit worker premiums using ESD’s PFML reporting system.

More information about the WA CARES program is available here.

NEW JOB POSTING REQUIREMENTS

With the start of the new year, businesses with 15 or more employees must include the following in each job posting or advertisement:

  • Salary range or pay scale
  • General description of all benefits offered
  • Identify any other compensation.

Employers must also provide an employee who is promoted, or transferred to a new position, with the pay scale for the new position, if requested.

More information about the posting requirements is available in L&I’s administrative policy.

The department has also scheduled webinars to educate employers about these new requirements. Employers can sign up on L&I’s Workshops and Training Center webpage. The remaining webinar schedule is:

  • Jan. 12 at 9 a.m.
  • Feb. 9 at 2 p.m.

 

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