With budget season approaching for most clients, we want to ensure you have the most up-to-date information to plan and prepare for 2026. On August 1, 2025, the California Director of the Office of Finance announced a rate increase to the CA minimum wage. Effective January 1, 2026, California’s minimum wage will increase from $16.50 per hour to $16.90 per hour. Please ensure that all non-exempt employees are earning this new minimum wage for the payroll period that includes the date of January 1, 2026. Review the hourly rates of your non-exempt staff, include them in your 2026 budget figures, and adjust them accordingly, effective January 1, 2025.
As a reminder, to meet the “salary test” for exempt employees, their salary must be increased to at least twice the state minimum wage, exclusive of bonuses, commissions, or other additional compensation. The new minimum annual salary for exempt employees will be $70,304 effective January 1, 2026. It is essential to review the salaries of your exempt staff and make necessary adjustments in the payroll system for the payroll period that includes January 1, 2026. Remember that in addition to the salary adjustment, exempt employees must also meet the “duties test” to maintain their exempt status.
We hope this helps with your budget process. Please contact your HR Consultant for any questions relating to this upcoming increase.