California Minimum Wage Increases to $16.90 in 2026

California Minimum Wage Increases to $16.90 in 2026

California employers must prepare for another adjustment to the state’s minimum wage. Effective January 1, 2026, the statewide minimum wage will increase to $16.90 per hour for all employers. This change reflects the annual adjustment based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), following the 2025 increase, which established the rate at $16.50 per hour.

As an employer in the Golden State, staying informed about these changes is essential to ensure compliance and proper payroll management. This update affects hourly employees and has significant implications for salaried employees who are classified as exempt from overtime.

Understanding the 2026 Statewide Minimum Wage

Under California law, all employees are entitled to receive the state minimum wage. The upcoming increase to $16.90 per hour is a mandatory adjustment for all employers, regardless of size. If employees believe they are being paid less than the required minimum wage, they have the right to file a wage claim with the local Labor Commissioner’s Office.

This annual adjustment is tied to inflation to ensure wages keep pace with the cost of living. Employers must ensure their payroll systems are updated to reflect this new rate for all pay periods starting on or after January 1, 2026.

Impact on Salaried Exempt Employees

The increase in the state minimum wage directly affects the salary threshold for employees to qualify as exempt from overtime. To maintain the administrative, executive, or professional exemptions, an employee must earn a salary that is at least twice the state minimum wage for full-time employment (40 hours per week, 52 weeks per year).

With the new minimum wage of $16.90 per hour, the minimum annual salary for an exempt employee in California will be $70,304. Employers must review the salaries of their exempt staff to ensure they meet this new threshold to maintain their exempt status. Failure to comply could result in significant liability for unpaid overtime.

Local and Industry-Specific Wage Rules

While the statewide rate is $17.00, many employers are subject to higher local minimum wage ordinances. A growing number of cities and counties have established their own rates that exceed the state’s requirement. If your business operates within one of these jurisdictions, you must pay the higher local rate.

Mid-Year Increases

Many local ordinances schedule their wage increases for July 1st of each year, not January 1st. This means you may need to adjust wages twice in one year if you operate in one of these areas. Cities such as Emeryville and Berkeley regularly set higher local minimum wage rates, often above the statewide mandate, and these can change mid-year. Additionally, certain sectors—including healthcare and fast food—are governed by specific wage orders that establish rates higher than both the state and many local rates. Employers should carefully verify both the effective dates and the applicable wage amounts for any local laws or sector-specific rules that apply to their business.

Numerous municipalities have their own rates. Employers must verify the specific minimum wage requirements for every city and county where their employees perform work. Contact the local city or county government for the most current figures as these are often adjusted annually for inflation.

Industry-Specific Minimum Wages

Certain industries in California have their own mandated minimum wages. For example, specific legislation has established higher minimum wages for workers in the fast-food and healthcare sectors. These industry-specific rates often exceed both state and local general minimums. If your business falls into one of these categories, you must comply with the applicable industry wage order.

Employer Responsibilities and Best Practices

To ensure full compliance, employers must take several proactive steps.

1. Verify All Applicable Wage Rates: Review the specific ordinances for each city and county where you have employees. The state rate may not be sufficient. The highest applicable rate (state, local, or industry-specific) always applies.

Update Payroll Systems and Handbooks: Adjust your payroll software and employee handbooks to reflect the new minimum wage rates, exempt salary thresholds, and any local or industry-specific requirements. Ensure all pay rates for both hourly and salaried exempt employees are correctly updated in your systems, and that policies in handbooks are revised where necessary.

Ensure Proper Posting of Wage Orders: Employers are required to display the current Minimum Wage Order in an area that is visible and accessible to all employees. These posters can be downloaded from the Department of Industrial Relations (DIR) website. You must also post any applicable local wage orders.

2. Update Postings: Employers are required to display the current Minimum Wage Order in an area that is visible and accessible to all employees. These posters can be downloaded from the Department of Industrial Relations (DIR) website. You must also post any applicable local wage orders.
3. Review Pay Stubs: Ensure your employee pay stubs accurately reflect the correct rate of pay. For employees paid by piece rate, their total earnings must average out to at least the applicable minimum wage for all hours worked.
4. Implement Reliable Payroll and Time Tracking: With various wage rates and mid-year changes, manual payroll processing creates compliance risks. Using a reliable time and attendance system helps you track employee hours, breaks, and overtime with greater accuracy. Modern payroll software can be configured to handle multiple wage rates, simplifying calculations and reducing compliance risks.

Staying ahead of these changes is essential to running a compliant and efficient business in California. Review your payroll practices now and prepare for the January 1, 2026, adjustments.