California Minimum Wage Rises to $17.40 on January 1, 2027

California's Department of Industrial Relations has announced a $0.50 inflation-based increase in the statewide minimum wage for 2027. The change also raises the minimum salary for exempt employees — here's what payroll and staffing teams should update before the new year.

⚡Key Takeaways for Payroll Professionals
  • California's minimum wage rises to $17.40 per hour on January 1, 2027
    This is up from $16.90 in 2026 and applies statewide to all covered employees.
  • The increase is an automatic annual inflation adjustment
    The Department of Finance certified the new rate on July 31, 2026, and DIR announced it on August 13, 2026.
  • The exempt-employee salary threshold rises to $72,384 per year
    This is two times the state minimum wage for full-time work (2 × $17.40 × 2,080 hours), up from $70,304.
  • Local minimum wages may be higher than the state rate
    Some California cities and counties set their own rates. Where a local rate is higher, the higher rate applies.
  • Non-compliance carries real financial risk
    Underpayment can lead to back wages, penalties and liquidated damages.

California's 2027 Minimum Wage: $17.40 per Hour

On August 13, 2026, the California Department of Industrial Relations (DIR) announced that the statewide minimum wage will increase to $17.40 per hour effective January 1, 2027. The increase is the annual inflation adjustment required under California law; the Department of Finance certified the adjustment on July 31, 2026.

The new rate is $0.50 higher than the $16.90 rate in effect during 2026. Because California's exempt-employee salary test is tied to the minimum wage, the increase also raises the minimum annual salary needed to classify an employee as exempt.

📋 California Statewide Minimum Wage and Exempt Salary Threshold
California DIR
Item2026Effective Jan 1, 2027
Hourly minimum wage$16.90$17.40 +$0.50
Exempt salary threshold (2× minimum wage, full-time)$70,304$72,384 +$2,080
Calculation basis$16.90 × 2 × 40 × 52$17.40 × 2 × 40 × 52
⚠️
Local Minimum Wages May Be Higher
DIR notes that some California cities and counties set local minimum wages above the state rate. Employers must pay whichever rate is higher for the work location, so multi-site and staffing employers should check each worksite’s local ordinance when loading the 2027 rate table.

Exempt Salary Threshold Rises to $72,384

To qualify for the executive, administrative and professional exemptions, California employees must earn a monthly salary equal to at least two times the state minimum wage for full-time employment (2,080 hours per year), in addition to meeting the duties tests. At $17.40 per hour, DIR calculates the 2027 annual minimum at $72,384. Salaried employees currently paid below that amount will need a raise, or will need to be reclassified as non-exempt and tracked for overtime, meal and rest-period compliance.

What Payroll Teams Need to Update

State law requires most California workers, including those paid on a piece-rate basis, to receive at least minimum wage. DIR also reminds employers to post current wage notices and to list employee wage rates on pay stubs. Non-compliance can lead to back wages, penalties and liquidated damages.

1
Before Jan 1, 2027
Update the base minimum wage in your payroll and timesheet systems to $17.40
Apply the rate to pay periods that begin on or after January 1, 2027, and review any rate floors built into bill-rate, shift-differential or piece-rate calculations.
2
Before Jan 1, 2027
Re-test every salaried exempt employee against $72,384
Flag exempt employees below the new threshold. Decide whether to raise their salary or move them to hourly, non-exempt status with full time tracking.
3
Review
Check local minimum wage ordinances for each worksite
Where a city or county rate exceeds $17.40, the higher local rate applies. Confirm local rates for 2027 as they are published.
4
Best Practice
Refresh wage notices and pay-stub rate displays
Make sure postings and itemized wage statements reflect the new rate beginning with the first 2027 pay period.
📎 Source & Attribution
"California's Minimum Wage to Increase to $17.40 Per Hour on January 1, 2027"
Source: California Department of Industrial Relations (DIR)  ·  Published: Aug 13, 2026  ·  View source document ↗
This article represents independent analysis and editorial commentary by the einTime team, prepared for the benefit of payroll professionals. Content draws on publicly available regulatory documents and government publications. All compliance decisions should be verified against applicable regulatory guidance and reviewed with a qualified tax advisor or employment counsel.
ET
einTime Editorial Team
Payroll Compliance Analysts · einTime Resource Center
The einTime editorial team tracks federal, state, and local regulatory developments affecting payroll operations and translates regulatory complexity into practical guidance for payroll professionals.
📅 Key Deadlines
Jul31
Department of Finance certifies the 2027 adjustment
Aug13
DIR announces the $17.40 rate
Jan1
$17.40 minimum wage and $72,384 exempt threshold take effect (2027)
For Payroll Leaders
einTime keeps your payroll tables updated automatically
Stop tracking IRS publications manually. Stay compliant year-round.
  • Automatic federal tax table updates
  • Multi-state withholding engine
  • ADP, Paychex & Dynamics 365 sync
  • Built-in compliance audit trail
See It in Action →
🔗 Source Reference
California's Minimum Wage to Increase to $17.40 Per Hour on January 1, 2027
California Department of Industrial Relations (DIR) · Aug 13, 2026
View source document ↗
✉ Weekly Digest
Never miss a payroll compliance update
Join 14,000+ payroll pros. Federal, state & local updates every Tuesday.
No spam. Unsubscribe anytime.
←
Previous
Form I-9 Expiration Alert: New Edition Required Starting August 1, 2026
Next
New Jersey Minimum Wage Rises to $16.48 on January 1, 2027
→
Scroll to Top