California’s 2026 Minimum Wage Hike

Compliance, Costs, and Next Steps

California’s Department of Finance has officially announced the minimum wage increase for 2026. Beginning January 1, the rate will move from $16.50 to $16.90 an hour for all employers, no matter the size of the business. This adjustment comes from the state’s cost-of-living formula, which is tied to the U.S. Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The law caps increases at 3.5% or the actual CPI-W change, whichever is lower. This year, the CPI-W rose 2.49%, and that’s what set the new rate.

For exempt employees, the minimum salary is also going up. To keep exempt status, full-time employees in executive, administrative, or professional roles must earn at least $70,304 a year in 2026, up from the current $68,640. California law requires exempt staff to make at least twice the state minimum wage for a 40-hour workweek, and the new hourly rate pushes that threshold higher.

It’s important to remember that many cities, counties, and even industries across California already have their own minimum wage requirements, and those rates are often higher than the statewide floor. Employers in areas like San Francisco, West Hollywood, or in certain industries such as fast food and healthcare, will need to follow whichever wage is greater. There are also special rules, like the computer software employee exemption under Labor Code Section 515.5, that set higher pay thresholds for certain jobs.

While this may feel like a small bump, it’s another reminder that wage compliance is always evolving. Employers should update payroll systems, review exempt employee salaries, and double-check local wage laws before January 1 to stay compliant and avoid surprises. A clear plan now will help ensure a smooth transition into 2026.