Easily manage employment in California

Payroll management in California

California has one of the largest and most complex economies in the United States, driven by industries such as technology, entertainment, agriculture, and healthcare. With some of the most stringent labor laws in the country, employers in California must navigate unique payroll regulations, including high minimum wages, strict overtime laws, and extensive employee rights. Understanding these rules is crucial for maintaining compliance and avoiding costly penalties.

Payroll breakdown in California

Employers in California must comply with both federal and state payroll regulations when processing employee wages, taxes, and benefits. Below is an overview of the key payroll components:

Minimum wage and overtime

• Minimum Wage: As of 2024, California’s minimum wage is $16.00 per hour for all employers. Some cities and counties have even higher minimum wages.
• Overtime Rules:
• Employees must be paid 1.5 times their regular rate for hours worked beyond 8 hours in a workday or 40 hours in a workweek.
• Employees must be paid double time for hours worked beyond 12 hours in a single workday or more than 8 hours on the seventh consecutive workday in a workweek.

State income tax

• California has a progressive income tax system with rates ranging from 1% to 13.3%, one of the highest in the nation.
• Employers are responsible for withholding California state income tax from employee wages and remitting it to the California Franchise Tax Board (FTB).

Unemployment insurance (UI) tax

• Employers must contribute to California’s Unemployment Insurance (UI) program, managed by the Employment Development Department (EDD).
• The wage base for UI tax in California is $7,000.
• UI tax rates range from 1.5% to 6.2%, depending on the employer's experience rating.

Disability Insurance (SDI) and Paid Family Leave (PFL)

• Employees in California must contribute to the State Disability Insurance (SDI) program, which provides short-term disability and paid family leave benefits.
• The SDI withholding rate for 2024 is 1.1% on wages up to $153,164.

Workers’ compensation

• California law requires all employers to carryworkers’ compensation insurance to cover medical expenses and lost wages for employees injured on the job.

Payroll tax filing and payment deadlines

• Employers must register for a California Employer Payroll Tax Account Number with the EDD.
• State payroll tax returns are filed quarterly.
• UI tax reports must be submitted quarterly to the California EDD.
• Payroll tax payments can be made electronically through EDD’s e-Services for Business.

Quick facts: Important considerations for employers

• Local Minimum Wage Variations: Many cities, such as San Francisco and Los Angeles, have higher minimum wage rates than the state’s minimum wage.
• Final Paycheck Rules: Employers must provide the final paycheck immediately if an employee is terminated and by the next payday if the employee resigns with notice.
• New Hire Reporting: Employers must report new hires to the California New Employee Registry within 20 days of hire.
• Meal and Rest Break Requirements:
• Employees must receive a 30-minute unpaid meal break if they work more than 5 hours in a day.
• Employees must receive a 10-minute paid rest break for every 4 hours worked.
• Independent Contractor Classification: California’s AB 5 law imposes strict guidelines for classifying independent contractors, requiring most workers to be classified as employees unless they meet the ABC Test.
• Payroll Recordkeeping: Employers must maintain payroll records for at least three years to comply with state and federal laws.
• Paid Sick Leave: California requires employers to provide at least 24 hours (or 3 days) of paid sick leave per year.

Run payroll in California with Remote

Managing payroll in California requires careful attention to state-specific regulations, including minimum wage laws, overtime rules, and payroll tax requirements. Employers must stay informed about tax rates, wage laws, and reporting deadlines to ensure smooth payroll processing and avoid penalties.

For businesses looking to simplify payroll management, Remote’s payroll solutions provide automated payroll processing, tax filing, and compliance support tailored to California’s regulations. With Remote, employers can focus on business growth while ensuring accurate and hassle-free payroll operations.

To see just how easy global payroll can be, book a demo today.