The California Labor Code mandates the State’s Director of Finance annually (on or before August 1 of each year) determine and certify whether an adjustment for inflation should be applied to the statewide minimum wage once it reaches $15.00 per hour, which occurred on January 1, 2023. California’s minimum wage is currently $16.50 per hour.  

This year, the Department of Finance calculates the average U.S. Consumer Price Index for Urban Wage Earners and Clerical Workers (U.S. CPI-W) increased by 2.49% from July 1, 2024 to June 30, 2025. Consequently, the minimum wage will rise by 2.49% to $16.90 per hour, effective January 1, 2026.  

Employers should also keep in mind that this increase will also affect the minimum salary requirements for most full-time exempt employees (currently $68,640 per year or $5,720 per month).  Effective January 1, 2026, the minimum salary for a full-time exempt employee will increase to $70,304 per year or $5,858.67 per month.  

To prepare for the upcoming increase employers should: 

• Update Payroll Systems: Ensure that payroll systems are adjusted to reflect the new minimum wage rate beginning January 1, 2026. 

• Budget Adjustments: Review and adjust budgets to accommodate the increased labor costs. 

• Employee Communication: Be prepared to inform employees about the wage increase and how it will affect their pay by posting updated mandatory notices.  

• Compliance Check: Verify that all wage-related policies and practices comply with the new minimum wage requirements. This includes reviewing and adjusting as necessary premium pay calculations for reporting time, split shifts, and meal/rest period violations.