California payroll taxes for employers (2026)

What sets California payroll apart

Four things make a California payroll cost and behave differently from most states.

• SDI on every dollar. State Disability Insurance, which also funds Paid Family Leave, is 1.3% of all wages in 2026. The wage cap was removed on January 1, 2024, so a $50,000 worker has $650 withheld and a $300,000 worker has $3,900 withheld. Employees pay it; there is no employer share. The EDD had not posted the 2027 rate when we checked.
• Employment Training Tax. On top of UI, the EDD charges employers 0.1% on the first $7,000, which is $7 per employee per year.
• FUTA credit reduction. California is on the Department of Labor's potential 2026 list at 1.5%. The final list comes out after November 10, 2026. DOL data also shows a possible 5.3% reduction if an extra BCR add-on applies, so the 1.5% figure is the low case. If a reduction holds, you pay it with Form 940 in January, so set the money aside now.
• Fast final pay. Under Labor Code 201 and 202, a fired employee is paid at the moment of termination. An employee who quits with at least 72 hours of notice is paid on the last day; one who quits without notice is paid within 72 hours. Accrued vacation goes in that check.

Paydays must fall at least twice each calendar month (Labor Code 204), though exempt executive, administrative and professional staff can be paid monthly. Bonuses and stock options are withheld at 10.23% and other supplemental wages at 6.6% (statute text read through a secondary site, so confirm with your payroll provider). The state minimum wage is $16.90 with no tip credit, and many cities set a higher rate; check the 2026 state minimum wage table before you post a job.

There is no city wage tax to withhold anywhere in California. San Francisco does charge businesses a gross receipts and payroll expense tax, covered on our San Francisco business tax page. New construction employers get the same 3.4% UI rate as everyone else; California does not publish a separate construction rate. Workers comp is required from the first employee, and you can buy it from a private carrier, the State Compensation Insurance Fund or self-insure.

California employer payroll facts at a glance

Setting up as a California employer, step by step

1. Get a federal Employer Identification Number from the IRS.
2. Register with the EDD through e-Services for Business within 15 days after you pay more than $100 in wages in a calendar quarter. The EDD runs UI, ETT, SDI and state income tax withholding, so one employer account covers all four.
3. Put workers comp in place before the first person starts. California requires it at one employee.
4. Report every new hire and rehire to the EDD within 20 calendar days of the start-of-work date.
5. Set a payday schedule of at least twice a month.
6. Deposit and file on the EDD schedule your account notice assigns. Your UI rate stays at 3.4% for 2 to 3 years before experience rating moves it within the 1.5% to 6.2% range of Schedule F+.

What a $50,000 employee costs you in California taxes

Here is the employer tax on one full-year worker earning $50,000, using the new employer rate. The state taxes stop early in the year because California's wage base is only $7,000, the same as the FUTA wage base.

So the state UI and ETT lines add up to $245, and the federal lines are most of the bill. The 1.3% SDI ($650 on this salary) and state income tax come out of the employee's check, not your budget. Workers comp premiums and benefits are extra and depend on your class codes; see what workers comp costs by industry.

Run your own numbers with the calculator below. It starts on California and uses the same rates.

California changes already scheduled for 2027

• Minimum wage rises to $17.40 on January 1, 2027 (DIR release, August 13, 2026). The exempt salary floor becomes $72,384.
• The 2027 SDI rate and UI wage base had not been posted when we checked on October 16, 2026.
• The FUTA credit reduction for 2026 is decided after November 10, 2026, when the DOL publishes its final list.

Compare California with other states on our 2026 SUTA rate table.

Payroll providers and PEOs for California employers

California's uncapped SDI, twice-monthly paydays and same-day final pay are the places small employers slip. A full-service payroll provider files EDD returns and calculates SDI for you. Gusto's Simple plan is $49 a month plus $6 per person for single-state payroll; multi-state payroll starts on its Plus plan at $80 plus $12 per person (checked October 16, 2026; see Gusto pricing in detail). Compare other providers on our payroll software rankings.

If you also want benefits and workers comp bundled, a PEO is the other route. California has no state PEO license, so ask any PEO for its IRS certification status and its California client count. Our California PEO guide and PEO rankings cover the options and prices.