How Much Are Employer Payroll Taxes in California?

Operating a business in California requires understanding employer payroll taxes. Employers must pay certain taxes and withhold others from employee wages, which are then remitted to the state. Proper management of these responsibilities is important for maintaining compliance and effective financial planning.

California Unemployment and Training Taxes

Employers in California pay specific payroll taxes that contribute to state-funded programs. One is the Unemployment Insurance (UI) tax, which funds benefits for individuals unemployed through no fault of their own. This employer-paid tax applies to a limited portion of each employee’s annual wages.

For 2025, the UI taxable wage limit is $7,000 per employee. New employers typically begin with a standard UI tax rate of 3.4% for their initial two to three years.

After this initial period, an experienced employer’s UI tax rate is determined by their “experience rating.” This rating considers the ratio of unemployment benefits paid to former employees against the employer’s contributions and their UI reserve account balance. Rates can fluctuate annually, ranging from 1.5% to 6.2% under Schedule F+ for 2025, reflecting the employer’s history of unemployment claims.

Another employer-paid tax is the Employment Training Tax (ETT). This tax supports job training programs and also applies to the first $7,000 of wages paid to each employee annually.

For 2025, the ETT rate is 0.1%. Both UI and ETT are direct costs to the employer and are not deducted from employee paychecks.

State Disability Insurance and Personal Income Tax Withholding

Businesses in California must withhold certain taxes from employee wages and remit them to the state. These include State Disability Insurance (SDI) and Personal Income Tax (PIT) withholding.

State Disability Insurance (SDI) is an employee-funded program providing temporary wage replacement benefits for eligible workers. These benefits cover periods when employees cannot work due to non-work-related illness, injury, pregnancy, or Paid Family Leave. Employers must deduct SDI contributions from gross wages.

Effective January 1, 2024, the SDI taxable wage limit was eliminated, meaning all employee wages are subject to SDI contributions. For 2025, the SDI withholding rate is 1.2% of all taxable wages. Employers collect and remit these funds.

Personal Income Tax (PIT) withholding is also collected and remitted by the employer. The amount withheld is determined by gross earnings, employee elections on federal Form W-4 and California Form DE 4, and state withholding tables.

California has a progressive income tax system. Employers must calculate and withhold these amounts to ensure compliance with state tax laws and remit them to the California Employment Development Department (EDD).

Finding Your Specific Tax Rates and Wage Bases

The California Employment Development Department (EDD) is the primary agency responsible for administering state payroll taxes. Employers receive official notifications and can access current information through the EDD’s resources.

For Unemployment Insurance (UI) tax rates, new employers are assigned a standard rate for their initial years of operation. Experienced employers’ UI rates are calculated annually based on their “experience rating,” which reflects the history of unemployment claims against their account. Employers can find their unique UI rate on the annual Notice of Contribution Rates and Statement of UI Reserve Account (DE 2088) mailed by the EDD in December, or by accessing their EDD e-Services for Business account.

The taxable wage bases for UI and Employment Training Tax (ETT) are generally uniform across all employers and are subject to annual review and potential adjustment. Similarly, the Employment Training Tax (ETT) rate is generally consistent for all employers with a positive UI reserve account balance.

State Disability Insurance (SDI) rates are also uniform across all employees. The most current SDI rate and any related information can be found on the EDD website or within official EDD publications, such as the annual California Employer’s Guide (DE 44).

For Personal Income Tax (PIT) withholding, employers need to consult the current California PIT withholding schedules and instructions. These resources, available on the EDD website and in publications like the DE 44, provide the necessary tables and methods to calculate the correct withholding amounts based on employee wages and their DE 4 elections.

Payroll Tax Reporting and Payment Obligations

Once payroll tax amounts are determined, employers must adhere to reporting and payment schedules. The California Employment Development Department (EDD) mandates electronic filing and payment for most employers. This ensures efficient processing and compliance with state regulations.

Employers are required to file quarterly reports to the EDD. This includes the Quarterly Contribution Return and Report of Wages (Form DE 9) and the Quarterly Contribution Return and Report of Wages (Continuation) (Form DE 9C). These forms reconcile payroll tax payments and detail employee wages for the quarter. Even if no wages were paid during a quarter, active employers must still file a DE 9.

Payment frequency for payroll taxes depends on the employer’s total tax liability. Larger employers have more frequent deposit requirements, such as monthly or semi-weekly, while smaller employers may pay quarterly. The EDD determines these payment schedules and notifies employers of their specific requirements.

The primary method for remitting payroll tax payments is through Electronic Funds Transfer (EFT). The EDD offers various EFT options, including ACH Debit through their e-Services for Business portal, which incurs no fees. Employers can also use ACH Credit by instructing their bank to transfer funds to the state. For quick, non-enrolled payments, Express Pay is available.

Adhering to strict deadlines is important to avoid penalties and interest charges. Employers are also responsible for annual reporting, including providing federal Wage and Tax Statements (Form W-2) to employees by January 31 of the following year, which must include California Personal Income Tax (PIT) wages and both PIT and SDI amounts withheld. Utilizing the EDD’s e-Services for Business platform is the recommended method for managing these reporting and payment responsibilities.