Key figures
California payroll
2026, with sources
Four payroll taxes, one account
California runs all of its payroll taxes through one EDD account: unemployment insurance (UI) and the Employment Training Tax (ETT), which the employer pays on the first $7,000 of each employee’s wages; and State Disability Insurance (SDI) and personal income tax withholding, which come out of the employee’s pay. New employers pay UI at 3.4% for two to three years; ETT is 0.1%.
SDI funds both disability and Paid Family Leave benefits. In 2026 it is 1.3% of all wages, with no cap since January 1, 2024, so it reaches every dollar of a founder’s or executive’s salary.
Take a two-person Delaware startup that hires its first engineer in Oakland at $180,000. Within 15 days of the first payroll it registers with EDD; within 20 days of the start date it files Form DE 34. The company pays UI at 3.4% and ETT at 0.1% on the first $7,000, about $245 for the year, plus a federal FUTA bill that is higher than in most states: because California has an outstanding federal UI loan, the 2025 FUTA credit was cut by 1.2%, which is $84 more per employee, paid with Form 940 in January. Meanwhile $2,340 of SDI comes out of the engineer’s pay. And at $180,000 of California payroll the company is “doing business” in California for the FTB, whether or not it has sold anything there.
Wage-and-hour rules that differ
California’s Labor Code is stricter than federal law at almost every point, and it applies to anyone working in California, including a remote employee of an out-of-state company.
- Daily overtime: 1.5× after 8 hours, 2× after 12 hours, and special rules on the seventh day.
- Exempt employees must earn at least $70,304 a year in 2026, twice the state minimum wage for full-time work.
- Pay at least twice a month on regular paydays posted in advance.
- Final pay immediately on termination; within 72 hours when an employee quits without notice.
- Paid sick leave of at least 40 hours or 5 days a year.
CalSavers and pay transparency
Employers with one or more employees that don’t offer a qualified retirement plan must register for CalSavers, the state’s auto-IRA, or certify an exemption; the last group’s deadline was December 31, 2025. Penalties start at $250 per eligible employee after notice.
An employer with 15 or more employees, at least one of them in California, must include a pay scale in every job posting for a role that may be filled in California, in person or remotely. Employers with 100 or more employees file an annual pay data report with the Civil Rights Department.
Deadlines
- Within 15 daysRegister with EDD after paying more than $100 in wages in a calendar quarterEmployer registration (DE 1)
- Within 20 days of the start-of-work dateNew and rehired employees to the New Employee RegistryReport of New Employee(s) (DE 34)
- Last day of the month after the quarterQuarterly contribution return and wage reportForm DE 9 / DE 9C
The federal baseline
This page covers what California adds. The federal rules underneath it apply here too.
Common questions
When is the final paycheck due in California?
On the spot. An employee who is let go must be paid all wages, including accrued vacation, immediately at the time of termination. One who quits with at least 72 hours’ notice is paid on their last day; without notice, within 72 hours. Paying late triggers “waiting time” penalties under Labor Code section 203, which accrue as a day’s wages for each day the pay is late, so final pay is usually cut as a manual check on the last day.
Is overtime really daily in California?
Yes, by the day. Non-exempt employees earn time and a half after 8 hours in a workday and on the seventh consecutive day, and double time after 12 hours in a day. Weekly overtime after 40 hours applies as well.
Do city minimum wages apply to our employees?
Many are. San Francisco ($19.61), Los Angeles ($18.42) and dozens of other cities and counties set their own rates, most adjusted each July 1. An employee working in the city is owed the city rate.
Payroll next door
- AZArizona payrollA flat 2.5% income tax withheld at the employee’s Form A-4 election, UI on the first $8,000 of wages, a $15.15 minimum wage and earned paid sick time from the first employee.
- NVNevada payrollNo wage tax, but a payroll tax: the Modified Business Tax at 1.17% on quarterly wages above $50,000, alongside ESD unemployment insurance on a $43,700 wage base.
- OROregon payrollOregon payroll layers state withholding, 2.4% new-employer UI on $56,700 and 1% Paid Leave Oregon with transit taxes and, around Portland, Metro and Multnomah County income taxes.
How California compares
- No tax on wagesStates with no state income tax on wagesCalifornia: withholds state income tax. 9 of 51 states are on the list.
- Paid leave payrollStates with a paid leave or disability payroll programCalifornia: state paid leave or disability program. 16 of 51 states are on the list.
- Local payroll taxStates with city, county or district payroll taxesCalifornia: state-level only. 14 of 51 states are on the list.
Founder guides on this
- PeopleContractor or employee? Classification for startupsContractor or employee depends on control, not the contract. The IRS test, state rules, 1099s, payroll registration and the cost of getting it wrong.
- EquityStock options, 409A valuations and vesting for startupsHow option strike prices are set by a 409A valuation, how vesting and the cliff work, and why ASC 718 makes every grant an expense on your P&L.
More of the California guide
- AccountingAccounting and state tax in CaliforniaCorporate tax, conformity to federal rules, apportionment and what it does to your books
- ReceivablesReceivables and sales tax in CaliforniaSales tax registration, economic nexus, whether SaaS is taxable, and collecting from customers
- PayablesPayables and contractors in CaliforniaPaying vendors and contractors: 1099 filing, use tax, contractor tests and withholding
- ComplianceCompliance and filings in CaliforniaRegistering to do business, annual reports, franchise tax and the filing calendar
- AdvisoryAdvisory: credits and decisions in CaliforniaCredits, incentives and the decisions that are cheaper to get right the first time
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
- DIR — Release 2025-118, minimum wage increases to $16.90 on January 1, 2026
- EDD — Tax rates, wage limits, and value of meals and lodging
- San Francisco OLSE — Historical minimum wage rates (2026)
- City of Los Angeles Office of Wage Standards — 2026 minimum wage increase memo
- IRS — FUTA credit reduction
- DIR Labor Commissioner — California paid sick leave FAQ
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.