Golden State Growing Pains: Have You Budgeted for 2025 Wage Increases?

Inevitably, at each year’s end, California employers must budget for increasing minimum wage and salary requirements taking effect on January 1st. Because the last few years have been marked by persistent inflation, this has led to wage increases and “growing pains” for many small and mid-sized businesses.

Now is the time to plan ahead: assess your budget for the upcoming year, consider whether any personnel restructuring is needed, and make sure your organization is staying financial healthy.

2025 Minimum Wage and Exempt Salaries

California’s minimum wage for non-exempt employees will increase to $16.50 per hour for all employers, regardless of size, starting January 1, 2025.  This means that overtime pay (at time and a half) will be $24.75/hour.

This new minimum wage also impacts your exempt, salaried employees. The minimum exempt salary is bumped up to $68,640 annually for 2025.  The “white collar” exemptions (administrative, executive, and professional) for exempt employees, is always two times the State’s minimum wage (times 2080 hours/year). Remember, to be properly classified as “exempt,” employees must satisfy both a duties test and minimum salary requirement. CEA members can access our Exempt Analysis Worksheets for guidance on properly classifying employees, on our HR Forms page.

Computer Professionals

For those who are properly classified as exempt “computer professionals,” the minimum salary amounts are increasing for 2025 as follows:

• $56.97/hour
• $9,888.12/month
• $118,657.43/annually

Physicians/Surgeons

For those properly classified as an exempt “licensed physician or surgeon,” the minimum salary amount is increasing for 2025 as follows:

• $103.75/hour

Industry-Specific Wages

Additionally, certain industries are now subject to their own minimum wage and salary requirements. For fast food workers at limited-service restaurants that are part of chains with over 60 locations nationally, they must receive a minimum wage of $20/hour, and exempt employees are entitled to an annual minimum salary of $83,200.

For healthcare workers, new minimum wage requirements apply and vary based on the type of health care facility. These minimum wages became effective on October 16, 2024, and range from $18/hour to $23/hour, with set future increases. To be properly classified as exempt, covered health care workers must earn 1.5 times their applicable health care minimum wage, or 2 times California’s minimum wage, whichever is greater.

Local Minimum Wages Ordinances

Many jurisdictions in California have enacted minimum wage ordinances that require employer to pay higher minimum wages than the State requires, for work performed within their geographical boundaries. Some require a minimum amount of hours (e.g., 2 hours per week) before this rule will apply. Remember to check local minimum wages when you have remote non-exempt workers and when you send workers to various job sites in different cities or counties.

Depending on the city or county, most local minimum wages increase every year on either January 1 and/or July 1. CEA members can access all current local minimum wage requirements in our Local Minimum Wage Fact Sheet on our HR Forms page. Once all of the local increases are announced for January 1, 2025, we will update our Fact Sheet (so be sure to download the 2025 version in January)!

Budgeting Tips

When budgeting for 2025, 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 based on the new minimum salary?
• Do we need to change our practices in permitting overtime, based on the new overtime rates?
• Should we raise our prices on our products or services to account for the wage increases?
• Do we need to consider any furloughs or layoffs to stay financially healthy?

See our Layoffs, Furloughs and More Fact Sheet here for important considerations.

At CEA, we are experienced in “getting creative” when it comes to uncovering HR solutions for your business. CEA members can call us on our HR support line for additional guidance, at 800.399.5331.