When you hire employees in California, you take on significant payroll tax and insurance obligations. This guide covers the essentials for compliance.
California Payroll Taxes
Employer-Paid Taxes
| Tax | Rate (2025) | Wage Base |
|---|---|---|
| UI (Unemployment Insurance) | 1.5% - 6.2% | First $7,000 |
| ETT (Employment Training Tax) | 0.1% | First $7,000 |
| Federal FUTA | 0.6% | First $7,000 |
| Social Security (FICA) | 6.2% | $168,600 |
| Medicare | 1.45% | No limit |
Employee Withholdings
| Tax | Rate | Notes |
|---|---|---|
| SDI (State Disability Insurance) | 1.1% | Wage limit $153,164 |
| PIT (Personal Income Tax) | 1% - 13.3% | Based on earnings, filing status |
| Social Security | 6.2% | Matches employer portion |
| Medicare | 1.45% | +0.9% over $200K |
EDD Registration
When to Register
You must register with California's Employment Development Department (EDD) within 20 days of paying $100 or more in wages in a calendar quarter.
Required: Register at edd.ca.gov for e-Services account
DE Forms
- DE 9: Quarterly Contribution Return (taxes due)
- DE 9C: Quarterly Wage Reports (employee details)
- DE 34: New Employee Report (within 20 days of hire)
- DE 4: Employee's Withholding Allowance Certificate
Workers' Compensation Insurance
Mandatory Coverage
California requires workers' compensation insurance for ALL employees, even if you have only one part-time employee. There is no exemption for small employers.
How to Get Coverage
- Private Insurance: Purchase from any licensed insurer
- State Fund: State Compensation Insurance Fund (SCIF)
- Self-Insurance: Only for large employers with approval
Cost Factors
- Classification Code: Based on type of work (higher risk = higher cost)
- Experience Modification: Your claims history
- Payroll: Premium based on payroll amount
| Industry Example | Approximate Rate |
|---|---|
| Clerical/Office | $0.50 - $1.00 per $100 payroll |
| Retail | $1.50 - $3.00 per $100 payroll |
| Construction | $5.00 - $30.00 per $100 payroll |
| Roofing | $20.00 - $50.00 per $100 payroll |
Penalties for Non-Compliance
Workers' Comp Violations
- Criminal misdemeanor (up to 1 year jail)
- Fines up to $10,000 per employee
- Stop order (business shut down)
- Personal liability for all medical costs
Payroll Tax Violations
- Late filing penalties: 15% per quarter
- Interest on unpaid taxes
- Personal liability for responsible persons