SPECIAL ALERT: 2027 California Minimum Wage Announced

In response to inflation, California is increasing its minimum wage again next year, from the current $16.90/hour to $17.40/hour as of January 1, 2027.

The State’s Director of Finance confirmed this increase in a July 31 letter to Governor Newsom. As explained, the 50-cent increase is due to a 2.99% increase in the national Consumer Price Index for urban wage earners, or CPI-W. (California’s minimum wage is adjusted annually based on the CPI-W increase, up to a maximum of 3.5%.)

Remember, the Statewide minimum wage increase also impacts exempt employee salary requirements. In addition to meeting a duties test, the administrative, professional, and executive exemptions require that the employee earn two times the State’s minimum wage (multiplied by 2080 hours/year) on a salaried basis. This means that the salary threshold for the white-collar exemptions will increase to $72,384/year in 2027.

Industry-Specific Wages

Keep in mind that certain businesses fall under their own industry-specific minimum wage and salary requirements. For example, fast food workers at limited-service restaurants that are part of chains with over 60 locations nationally have a minimum wage of $20.00/hour and an exempt salary threshold of $83,200/year. The Fast Food Council, which is responsible for adjusting the fast-food minimum wage, has not, as of now, announced a further increase.

For healthcare workers covered by the healthcare minimum wage law, minimum wages currently range from $19.28/hour to $25/hour depending on the facility type, with set future increases. A special calculation applies to determine exempt salary thresholds for healthcare workers.

Many hotel workers in various cities also have different minimum wage rates than the rest of the State.

Local Minimum Wages

It is important to remember that many jurisdictions in California have enacted their own minimum wage ordinances requiring employers to pay higher minimum hourly wages for work performed within their geographical boundaries. Many of these local minimum wages recently increased on July 1.

Be sure to check local minimum wage rates when you send non-exempt employees to job sites in different cities or counties, as well as for your non-exempt remote/hybrid employees working in different localities. Refer to CEA’s Local Minimum Wage Fact Sheet on our HR Forms page for more information

How Do We Prepare for 2027?

Be sure to communicate the increase to payroll. As a best practice, some employers choose to update their Wage Theft Notices in January for non-exempt employees’ personnel files to reflect the new pay rate. However, this is not required as long as the pay increase is reflected on a timely and compliant wage statement after the change goes into effect.

In budgeting for 2027, employers should calculate how increases will impact their bottom line. Some questions to consider include:

• Should we reclassify any employees from exempt to non-exempt going forward based on the new minimum salary of $72,384? We recommend documenting the effective date of the classification change for the employee’s personnel file. Be sure to also communicate with affected employees to discuss clocking in and out, meal and rest break rules, etc.
• Should we raise our prices on products or services to account for the wage increases?
• Do we need to consider any restructuring in 2027 to stay financially healthy?

CEA members may call us on our HR support line for additional guidance at 800.399.5331.