In August 2025, the California Department of Finance reported a 2.49% rise in the U.S. CPI-W from July 2024 to June 2025. The increase prompted a statutory change to California’s minimum wage which will rise by the same percentage from $16.50 per hour to $16.90 per hour, effective January 1, 2026.  

Consequently, 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.  

Some California cities and counties have local minimum wage ordinances that exceed the state rate. When employees work in one of those jurisdictions, the higher local rate applies for hourly pay. However, only the state minimum wage, not any local rate, is used to calculate the minimum salary required for exempt employees. 

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 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.