Question: As a business owner, I normally update my staff hourly wages and salaries each January. What is the minimum wage for 2025 and how does that impact my exempt salaried employees?
Answer: Effective January 1, California’s minimum wage will increase from $16 per hour to $16.50 per hour. This increase applies to all employers, regardless of size. The adjustment is based on the consumer price index (CPI), which saw a 3.18% increase over the past year.
With the increase to the minimum wage rate, employers also need to ensure that the annual salary for their exempt employees meets the minimum salary requirements for an exempt employee. Most exempt employees must be paid at least two times California’s minimum wage rate for full-time work. Therefore, as of January 1, most exempt employees must earn an annual salary of at least $68,640, an increase of over two thousand dollars from last year. Exempt employees must also satisfy a duties test to qualify as exempt.
Some exempt employees have unique minimum salary requirements. For example, exempt computer professionals must be paid at least $56.97 per hour, $99,888.13 per month, or $118,657.43 annually. Licensed physicians and surgeons must be paid a minimum of $103.75 per hour. If otherwise exempt employees do not meet these minimum salary thresholds, they cannot be classified as exempt. This means that such employees must be paid on an hourly basis, must track all of their hours worked, and are entitled to overtime pay and meal and rest periods.
Employers in the healthcare or fast-food industries should keep in mind that they may be subject to different minimum wage requirements. There is a higher minimum wage for fast food workers effective April 2024, and a higher minimum wage for certain health care workers effective October 2024. These higher minimum wages also impacts the annual salary requirements for exempt employees in these industries.
Moreover, employers with operations outside of Monterey County should note that some cities and counties in California have a local minimum wage that is higher than the state rate. A list of California city and county minimum wage rates maintained by University of California Berkely is available here: https://laborcenter.berkeley.edu/inventory-of-us-city-and-county-minimum-wage-ordinances/#s-2.
The new minimum wage rate also triggers an employer’s obligation to notify affected employees, in writing, of the new rate by providing the affected employees with advance notice of the change to the employee’s rate of pay. The notice must comply with the requirements of Labor Code section 2810.5. The California Department of Industrial Relations (“DIR”) publishes a notice that complies with this requirement. This “Notice to Employee” can be downloaded for use at https://www.dir.ca.gov/dlse/LC_2810.5_Notice.pdf.
Employers should ensure they are complying with California’s workplace posting requirements related to the new minimum wage rate. The DIR publishes the required minimum wage poster, which can be downloaded at www.dir.ca.gov/iwc/MW-2025.pdf. The poster is required to be posted in an area that is frequented by employees, like a breakroom.
To ensure compliance with California’s minimum wage rules, employers should make any necessary wage or salary increases effective January 1. Employers with questions regarding the minimum wage increase or its impact on exempt employees should consult with their employment counsel.