---
title: California Minimum Wage Update for 2026 | Baron Payroll
description: "California employers need to prepare for a key payroll compliance change effective January 1, 2026: the statewide minimum wage is increasing again. These changes affect hourly pay, overtime exemption thresholds, and local wage requirements — all of which could impact your 2026 payroll if you haven’t already planned for them."
---

[Learning Center - Blog | Baron Payroll ](https://www.baronpayroll.com/blog)

# [California Minimum Wage Update for 2026 | Baron Payroll](https://www.baronpayroll.com/blog/california-minimum-wage-update-for-2026-baron-payroll)

 Written by [Baron Payroll](https://www.baronpayroll.com/blog/author/baron-payroll) | Jan 13, 2026 4:16:43 PM

California employers need to prepare for a key payroll compliance change effective **January 1, 2026**: the statewide minimum wage is increasing again. These changes affect hourly pay, overtime exemption thresholds, and local wage requirements — all of which could impact your 2026 payroll if you haven’t already planned for them.

## **Statewide Minimum Wage Increase**

Effective **January 1, 2026**, the **California statewide minimum wage increases to [$16.90 per hour](https://www.dir.ca.gov/DIRNews/2025/2025-118.html?)** for all employers, regardless of size. Employers must pay at least this rate — or a higher applicable local minimum wage — to non-exempt hourly workers.

This increase is part of [California’s annual cost-of-living adjustments](https://www.californiaworkplacelawblog.com/2025/08/articles/wage-and-hour/california-state-minimum-wage-for-2026-announced/) required under state law. 

## **Exempt Salary Threshold Goes Up Too**

Minimum wage increases also push up California’s **exempt employee salary threshold**. Under California law, exempt employees (executive, administrative, professional) must earn **at least twice the state minimum wage based on a 40-hour week** to qualify for exempt status.

For 2026:

- **Minimum annual salary for exempt employees = $70,304**  
  (i.e., $16.90 × 2 × 40 × 52).

If a salaried employee earns less than this amount — even if their duties otherwise qualify — they must be treated as **non-exempt** with overtime eligibility.

## **Local Minimum Wages May Be Higher**

Many California cities and counties set **local minimum wages higher than the state rate**. These local rates continue to adjust on January 1 and may apply depending on where the work is performed — even if an employee lives outside the jurisdiction.

[Examples of city increases include](https://www.dwt.com/blogs/employment-labor-and-benefits/2025/12/california-minimum-wage-state-and-local-increases):

- **Los Angeles:** higher than the state minimum
- **West Hollywood:** $20.25 per hour
- **San Jose:** $18.45 per hour  
  …and others, with dozens of local rates varying by location.

Employers must always pay the **highest applicable wage** — whether state or local.

## **What Employers Should Do Before January 1**

To ensure compliance and avoid retroactive pay or wage claims, California employers should:

**1. Update payroll systems**  
Set the default hourly rate to **at least $16.90** (or higher if local rates apply).

**2. Review exempt employee pay**  
Confirm all exempt workers earn **$70,304+ annually**; otherwise, reclassify them as non-exempt.

**3. Audit work locations**  
Check where employees perform work to determine the correct minimum wage — especially if they travel between jurisdictions.

**4. Update employee notices and postings**  
State and local wage postings must reflect the new minimum wage rates.

## **Compliance Risks If You Don’t Prepare**

Failing to adjust pay rates or exempt salary thresholds can result in:

- Wage claims and back pay
- Overtime exposure for misclassified employees
- Penalties and interest
- Increased audit risk from the California Department of Industrial Relations

Minimum wage and exempt salary compliance isn’t just about avoiding mistakes — it’s about **protecting your business and your team** as wage laws evolve.

## **Baron Payroll Can Help You Navigate These Changes**

At Baron Payroll, we help California employers:

- Implement **accurate wage updates**
- Maintain compliant **exempt classifications**
- Navigate **local and industry-specific wage laws**
- Reduce errors before year-end payroll runs

California payroll compliance is complex, but planning ahead makes it manageable.

If you have questions about how these wage updates affect your payroll, reach out before your first January payroll run.

## **Need Help Updating Your Payroll for 2026?**

Baron Payroll clients count on us to keep their business compliant — no guesswork, no stress, no last-minute scrambling. If you want help reviewing your pay rates, tipped-employee rules, or exempt thresholds, we’re here for you.

Use our instant price calculator to get your price estimate in seconds, without talking with a salesperson.

If you found this article helpful, here are some others you might like:

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- [1099 vs W2 Employee - An Honest Cost Comparison for Business Owners](https://www.baronpayroll.com/blog/1099-vs-w2-employee?hsLang=en)
- [Why are my W2 Wages Lower Than my Salary?](https://www.baronpayroll.com/blog/why-are-my-w2-wages-lower-than-my-salary?hsLang=en)
- [How to Choose the Best Payroll Company for Your Small Business](https://www.baronpayroll.com/blog/how-to-choose-the-best-payroll-company-for-your-business?hsLang=en)
- [The Pros and Cons of Paying Employees with Payroll Paycards](https://www.baronpayroll.com/blog/the-pros-and-cons-of-paying-employees-with-payroll-paycards?hsLang=en)

[View full post](https://www.baronpayroll.com/blog/california-minimum-wage-update-for-2026-baron-payroll)

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