This annual adjustment, which responds to the consumer price index (CPI), is part of the state policy to maintain workers’ purchasing power.
Although the increase is smaller than last year, it will have a significant impact on employers and employees across the state.
How much will the minimum wage rise?
The new state minimum wage will be $16.90 per hour, up 40 cents from the $16.50 wage in 2025. This adjustment represents a 2.5% increase, according to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
This increase applies to all employers, regardless of size, and is in addition to local ordinances that may require higher wages in cities such as Los Angeles, San Francisco, and Berkeley.
Impact on Exempt Employees
With the new minimum wage, the threshold for exempt employees (executive, administrative, and professional) is adjusted. To meet legal requirements, these workers must earn a minimum annual salary of $70,304, which equates to $5,858.67 per month.
This change directly affects eligibility for overtime exemptions, as well as compliance with pay policies, split shift premiums, reporting time and breaks.
What should employers do?
Employers must take steps to ensure compliance with the new regulations:
Audit employee compensation to verify that they meet the new thresholds.
Update payroll systems to reflect the new minimum wage.
Review internal policies and informational posters in the workplace.
Train HR and payroll staff on the changes and their impact on overtime eligibility and paycheck accuracy.
Local and industrial considerations
In addition to the state minimum wage, local ordinances and industry-specific rules may require higher wages. For example, in July 2025, Los Angeles County increased its minimum wage to $17.81, while the city of Los Angeles raised it to $17.87. Minimum wages in fast food and health care can reach $20 per hour.
One step closer to pay equity
California’s minimum wage increase by 2026 demonstrates the state’s commitment to economic equity and protecting workers’ purchasing power. While it poses a challenge for some employers, it also provides an opportunity to improve working conditions and boost the local economy.
Being informed and prepared will be critical for complying with the law and ensuring a smooth transition.
