On Thursday, August 1, the California Department of Finance Director Joe Stephenshaw officially certified that beginning January 1, 2025, California’s minimum wage will increase from $16 per hour to $16.50 per hour for all employers, regardless of size.
Per California’s Labor Code, once the state’s minimum wage reaches $15 per hour — which occurred January 1, 2023 — the California Director of Finance must determine on or before August 1 of each year whether to adjust the minimum wage for inflation and, if so, calculate the increase.
The director calculates the increase by applying whichever of the following two options would result in the smaller increase:
- A 3.5 percent increase; or
- The actual rate of change per the U.S. Consumer Price Index (CPI).
For the 12-month period from July 1, 2023, to June 30, 2024, the department’s calculations showed that the CPI increased by 3.18 percent compared to the 12-month period from July 1, 2022, to June 30, 2023, meaning the minimum wage will increase by 3.18 percent — to $16.50 per hour — on January 1, 2025.
This hourly increase also affects the minimum salary requirements for full-time exempt employees, which currently is $66,560 per year ($5,546.67 per month). Beginning January 1, 2025, the minimum salary for a full-time exempt employee will be $68,640 per year ($5,720 per month).
Employers also must keep in mind that as of April 1, 2024, all fast food restaurant employees covered in California Labor Code Section 1474–1476 have their own minimum wage of at least $20 per hour (which also affects exempt employee salary) — though the Fast Food Council may adopt an increase to this industry-specific minimum wage as early as January 2025. And by January 1, 2025, at the latest, California’s health care worker minimum wage will also take effect.
In addition, some cities and counties in California have adopted their own local minimum wage rates that are separate from the state rate. If the ordinance where employees are performing work requires a higher minimum wage rate than the state minimum wage rate (such as Berkeley, Los Angeles, Milpitas and San Francisco, to name just a few), the local rate must be paid. Keep in mind that only the state minimum wage — not local minimum wages — determines the minimum salary requirements for exempt employees.
Looking ahead, CalChamber-opposed Proposition 32 is on the November 2024 ballot, and if passed by California voters, would further accelerate the pace of minimum wage increases whether or not a California business is located in a high-cost region. Proposition 32, if passed, would raise the minimum wage for:
- Large businesses to $17 for the remainder of 2024 and to $18 an hour starting January, 1 2025; and
- Small businesses with 25 or fewer employees to $17 starting January, 1 2025, and $18 on January 1, 2026.
Beginning in 2027, the wage would be adjusted based on inflation, as is the current formula.
Jessica Mulholland, Managing Editor, CalChamber
CalChamber members can read more about Wage and Hour Enforcement and Penalties in the HR Library. Not a member? Learn how to power your business with a CalChamber membership.
