The 2025 rates for the San Francisco Health Care Security Ordinance (HCSO) were recently released by the San Francisco Office of Labor Standards Enforcement (OLSE).
Refer to the table below for the 2025 updated HCSO expenditure rates based on size and type of employer along with the 2024 rates:
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Employer Size
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Number of Workers
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2024 Expenditure Rate
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2025 Expenditure Rate
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Large
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All employers w/ 100+ workers
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$3.51 per hour payable
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$3.85 per hour payable
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Medium
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Businesses w/ 20-99 workers
Nonprofits w/ 50-99 workers
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$2.34 per hour payable
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$2.56 per hour payable
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Small
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Businesses w/ 0-19 workers
Nonprofits w/ 0-49 workers
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Exempt
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Exempt
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HCSO Background
The HCSO is a San Francisco law that established several employer health-care-related obligations enforced by the OLSE, and has been in place since 2008. The HCSO requires all covered employers in San Francisco to spend a minimum amount of money, called an expenditure, on a quarterly basis toward their covered employees’ healthcare costs.
Covered Employers: Under the HCSO, covered employers are those for-profit businesses with 20 or more employees and non-profit businesses with 50 or more employees who have employees working within the geographic boundaries of the City and County of San Francisco. Employers must count all employees, regardless of where they live or work, to determine if they are covered under the HCSO.
Covered Employees: Under the HCSO, covered employees are those employees who work for a covered employer (defined above) and:
- Are entitled to be paid the minimum wage
- Have been employed by his or her employer for at least 90 calendar days
- Perform at least 8 hours of work per week within the geographic boundaries of San Francisco
- Do not meet one of the five exemption criteria detailed directly below
Exempt Employees: The HCSO exempts the following employees:
- Employees who voluntarily waive their right to have their employers make health care expenditures for their benefit by completing the waiver form, certifying that they are receiving health benefits through another employer, including an employer of their spouse, domestic partner, or parent. The waiver form is voluntary and may be revoked by employees at any time.
- Employees who qualify as managers, supervisors, or confidential employees and earn more than the applicable salary exemption amount of $125,405 annually (or $60.29 per hour) in 2025.
- Employees who are eligible for Medicare or TRICARE.
- Employees who are employed by a non-profit corporation for up to one year as trainees in a bona fide training program consistent with federal law.
- Employees who receive health care benefits under the San Francisco Health Care Accountability Ordinance.
Who qualifies as an exempt “manager, supervisor, or confidential employee”?
Under the HSCO, these employees are defined as follows:
- Managerial employee: An employee who has authority to formulate, determine, and effectuate employer policies by expressing and making operative the decisions of the employer and who has discretion in the performance of his/her job independent of the employer's established policies.
- Supervisory employee: An employee who has authority, in the interest of the employer, to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees, or the responsibility to direct them, or to adjust their grievances, or effectively to recommend any such action, if the exercise of this authority or responsibility is not of a merely routine or clerical nature, but requires the use of independent judgment.
- Confidential employee: An employee who acts in a confidential capacity to formulate, determine, and effectuate management policies with regard to labor relations, or regularly substitutes for employees having such duties.
Calculating Health Care Expenditures
The minimum health care expenditure for each covered employee is calculated quarterly by multiplying the total number of hours payable to the employee in the quarter (capped at 172 hours per month) by the applicable expenditure rate. Click here for more information on calculating health care expenditures under the HCSO.
Making Health Care Expenditures
Covered employers can comply with the HCSO by making health care expenditures for their covered employees under the following options:
- Payments for medical, prescription, dental, and/or vision insurance.
- Payment into health savings accounts (HSAs) or other irrevocable reimbursement accounts.
- Payments to the San Francisco City Option (common option for those covered employees who waive employer-sponsored health plan coverage). Employers who make payments to the City Option program on behalf of a covered employee are required to provide the employee with a one-time Health Care Payment Confirmation notice and are encouraged to post the City Option poster, both of which can be accessed here.
- Payments to covered employees to reimburse them for out-of-pocket health care costs.
Note that the following do not qualify as health care expenditures under the HCSO:
- Payments made directly or indirectly for workers’ compensation or Medicare benefits
- Increasing hourly wages, or otherwise giving employees extra money in their paychecks
Click here for more information on making health care expenditures under the HCSO.
Health Care Surcharges
Some San Francisco businesses elect to impose a surcharge, such as an an extra fee or cost, on the goods or services they sell to customers to completely or partially cover the expense of complying with the HCSO.
The HCSO does not require or prohibit businesses from imposing surcharges. However, employers that choose to impose these surcharges must comply with specific requirements found here.
HCSO Recordkeeping, Posting & Annual Reporting Requirements
Recordkeeping: Covered employers are required to maintain sufficient records for 4 years from each covered employee’s employment dates, including itemized pay statements and records of health care expenditures for each covered employee. Click here for more information on HCSO employer recordkeeping requirements.
Posting: Covered employers must post the official 2024 HCSO poster in a conspicuous place at all workplaces with covered employees in English, Spanish, Chinese, and any other language spoken by at least 5% of the employees at the workplace or job site. Covered employers are required to post this official poster at every workplace where even a single covered employee works. For covered employees working in a location that is not controlled by the covered employer (such as those covered employees working from home or outsourced to a third party), employers must ensure that each employee is provided a copy of the poster.
Annual Reporting: Covered employers are also required to submit an annual reporting form to the OLSE by April 30th of each year, including information on total health care spending and any applicable surcharges that a covered employer imposes on customers to offset HCSO costs.
Penalties
Refer to the table below outlining the administrative penalties for failing to comply with HCSO requirements:
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HCSO Violation
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Maximum Administrative Penalty
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Failure to make the required minimum Health Care Expenditures within five business days of the quarterly due date (30 days after the conclusion of each quarter)
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$100 for each employee for each quarter that the violation occurred.
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Failure to submit the Annual Reporting Form
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$500 for each quarter that the violation occurs
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Retaliation against employees
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$100 for each person who is the target of the prohibited action for each day the violation occurs
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Refusing to allow OLSE access to employer records
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$25 for each worker whose records are not provided for each day the violation occurs
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Failure to maintain or retain accurate and complete records
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$500 for each quarter that the violation occurs
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Failure to post the Official HCSO Notice
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$25 per day for each workplace or job site where the Notice is not posted
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Next Steps for Employers
Covered employers are advised to note the increased HCSO expenditure rates for 2025 as they continue to comply with HCSO requirements.
Risk Strategies’ team of experienced professionals can help covered employers navigate the complex HCSO requirements. Contact your Risk Strategies account representative for assistance or email us at benefits@risk-strategies.com.
