California Minimum Wage Increase - Effective January 1st, 2026

Written By Jessi
Barista serving a customer in a coffee shop, california minimum wage increase

We want to make you aware of important updates regarding California’s minimum wage that may affect your business.

On August 1, 2025, the California Department of Finance officially confirmed that the state’s minimum wage will increase to $16.90 per hour starting January 1, 2026. This rate applies to all employers, regardless of size.

Why the Increase?

Under California law (Labor Code Section 1182.12), the Department of Finance reviews inflation data each year to determine if the minimum wage should be adjusted. The increase is based on the lower of:

  • A 3.5% increase, or

  • The annual change in the U.S. Consumer Price Index (CPI)

As of August 1, 2025, the CPI rose by 2.49% for the year, so that’s the percentage being used.

Updated Salary Thresholds for Exempt Employees

This increase also affects the minimum salary required for full-time exempt employees. As of January 1, 2026, the new minimum salary will be:

  • $70,304 per year ($5,858.67 per month)

This is up from the current rate of $68,640/year

Industry-Specific Minimum Wages

Certain industries have different wage requirements:

  • Fast food workers (covered by Labor Code Sections 1474–1476) must be paid at least $20/hour, and to qualify as exempt, they must earn twice that amount.

  • Healthcare workers have unique minimum wage standards, many of which changed on July 1, 2025. Exempt status in this sector requires employees to earn either:

  • 1.5 times the applicable healthcare wage, or 2 times the state minimum wage - whichever is higher.

Local Wage Ordinances

Many cities and counties in California (including Los Angeles, San Francisco, Berkeley, and Milpitas) have higher local minimum wages. If your employees work in one of these areas, the higher local rate must be followed. However, only the state minimum wage is used to determine minimum salary requirements for exempt employees.

If you have any questions about how these changes affect your business or need help staying compliant, please reach out to your Human Resource Consultant.

Jessi
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