As we approach 2026, California employers face a new round of legal and financial adjustments that will directly impact payroll budgeting, exempt classifications, and compliance risk. From statewide wage increases to industry-specific salary thresholds, these updates require careful planning to avoid misclassification claims, PAGA exposure, and penalties.

Here are the top five increases California employers must prepare for in 2026 — and what you should be doing now.

1. California’s Minimum Wage Increases

Effective January 1, 2026, California’s minimum wage increases to $16.90 per hour for all employers, regardless of size.

Remember:

• Many cities and counties — including San Francisco, Los Angeles, West Hollywood, Santa Monica, Emeryville, and Oakland — have higher local minimum wage rates.
• Employers must always pay the highest applicable wage, even if employees work remotely or split time across jurisdictions.

Employer Action Item:
Map your workforce locations now and confirm which local ordinances apply. Multi-location employers are particularly vulnerable to accidental underpayments.

2. Increased Minimum Salary for Exempt Employees

California’s exemptions require employees to meet both the duties test and the salary basis test. Because the salary test is tied to the state minimum wage, it will rise in 2026.

Beginning January 1, 2026, the minimum salary for the white-collar exemptions (executive, administrative, professional) increases to:

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