San Francisco is arguably the most entrepreneurial city in the world, drawing thousands of entrepreneurs and new startups every year. Its eclectic culture that fosters innovative thinking and dynamism provides the perfect environment for startups to blossom rapidly from two, to twenty, to two hundred employees.
San Francisco is special in other ways as well - in particular when it comes to making sure workers are treated fairly and provided with forward-looking work environments and benefits. Entrepreneurs need to be aware of these specific rules and obligations that come into play as their company grows.
New or updated rules that are effective January 1, 2014 are underlined below.
Paid Sick Leave Ordinance
All employers are required to provide paid sick leave to each employee who works in San Francisco, including part-time and temporary employees. For every 30 hours worked, an employee accrues 1 hour of paid sick leave. This may be in addition to the company’s existing vacation/PTO benefit.
Minimum Wage Ordinance
San Francisco has a minimum wage law in effect that is higher than the Federal or State mandated minimum wage. Currently the SF minimum wage is $10.55/hour. Effective January 1, 2014, the SF minimum wage will be $10.74/hour.
Health Care Security Ordinance
San Francisco’s Health Care Security Ordinance requires “Covered Employers” (applies to ‘for-profit’ companies with 20 or more employees, and non-profit companies with 50 or more employees) to spend a minimum amount of money each fiscal quarter on health care for their “Covered Employees”. Most health insurance offered by employers should meet this requirement. Those employers who do not offer health insurance are obliged to establish Medical Spending Accounts for employees and fund the accounts $1.63/hour to $2.44/hour (2014 effective rates) depending on the size of the business.
“Healthy San Francisco” Program
Healthy San Francisco is a program that was created to provide inexpensive medical care to uninsured residents of San Francisco. Only uninsured people between the ages of 18 - 64 qualify for this program. Employers must meet certain requirements and register in order for eligible employees to participate.
For 2014, the City of San Francisco is still unsure how this program will coordinate with the Affordable Care Act (ACA) (aka Healthcare Reform). There should be resolution as to how these two programs will coordinate by the end of 2013.
Commuter Policy and Programs
Employers with 20 or more full-time and part-time employees (10 or more hours/week) must offer a Commuter Program. Such programs provide for pre-tax contributions by employees to pay for public transit or vanpools, with some employers providing a small subsidy to participating employees. Many such programs now include benefits to bicycle commuters as well. Registration and compliance reporting for all employers is mandatory. The 2014 pre-tax contribution limit is $250 for parking and $130 for transit/carpool, per month.
Emergency Ride Home Program
Emergency Ride Home is a free program that provides transportation if an emergency situation occurs. All part-time or full-time employees of a registered San Francisco business are eligible.
San Francisco Family-Friendly Workplace Ordinance
Under the new San Francisco "right to request" Ordinance, after six months or more of employment, an employee who works at least eight hours per week on a regular basis has the right to request a "Flexible" or "Predictable Working Arrangement." The Ordinance applies to any employer who regularly employs 20 or more employees. The law defines "employee" as any person who is employed within the geographic boundaries of the City and County of San Francisco. This ordinance is effective January 1, 2014.
Labor Rule Posting Requirements
All employers are required to prominently display posters for their employees that incorporate the specific rules for San Francisco.
Other Important Requirements to Know:
Every entity conducting business in the City and County of San Francisco must have a valid Business Registration Certificate from the Office of the Treasurer & Tax Collector. This regulation also applies to entities that may be located outside of San Francisco, but perform business or services within the city. Eligible businesses must file with the City Treasurer’s office within 15 days of establishment in San Francisco, and must be renewed each year by May 31st. The fee varies based on size of the business.
Payroll Expense Tax
In addition to business registration, employers are required to file an annual payroll expense report each February for the prior year. Those businesses with payroll expense exceeding $250,000 annually must pay a payroll tax of 1.5% of total wages. Certain companies are required to make an estimated payment each July for a portion of their payroll taxes.
NEW FOR 2014 and beyond: Starting in 2014, San Francisco will phase out the payroll tax in favor of a “gross receipts” tax based on sales of the company. The transition and rules for the gross receipts tax is complex and based on business type.
Small Business Payroll Expense Tax Exclusion: As part of the new annual payroll expense tax filing starting in 2014, an ordinance has been enacted that allows small businesses with less than $500,000 in payroll expense to exclude up to $250,000 in growth of their payroll expense over the previous year’s level. See ordinance for details.
Get help with Compliance
As you can see, there’s a lot to understand and comply with when it comes to running and growing your San Francisco based startup, and this list is not all-encompassing. Make sure you get expert advice and assistance from knowledgeable advisors. The fines and penalties for noncompliance can be significant.
Resources and Further Reading