California employer payroll taxes
California employer payroll taxes in 2026
- A new employer owes the Employment Development Department (EDD) $245 on the first $7,000 of each employee's wages in 2026, before federal unemployment tax.
- For 2026, the EDD sets new-employer unemployment insurance (UI) at 3.4 percent, the employment training tax (ETT) at 0.1 percent and state disability insurance (SDI) at 1.3 percent.
- Employers register with the EDD within 15 days of paying more than $100 in wages in a calendar quarter.
EDD payroll tax rates for 2026
| Tax | Who pays | 2026 rate and base |
|---|---|---|
| UI | Employer | 3.4 percent new employer, 1.5 to 6.2 percent later, on the first $7,000 |
| ETT | Employer | 0.1 percent on the first $7,000 |
| SDI | Employee, withheld | 1.3 percent of all wages, no cap |
| Personal income tax (PIT) | Employee, withheld | Per Form DE 4 and the EDD tables |
The EDD keeps a new employer at 3.4 percent for two to three years. It then assigns a rate on the DE 2088 notice mailed December 31, with 60 days to protest.
The EDD's 2025 SDI rate was 1.2 percent. When an employee files no DE 4, the employer withholds state income tax as if the employee were single with zero allowances.
FUTA credit reduction for California employers
The federal unemployment tax (FUTA) is 6.0 percent of the first $7,000, less a 5.4 percent credit for state UI. Employers in states with the full credit pay 0.6 percent.
- 2025: the U.S. Department of Labor set California's credit reduction at 1.2 points, for a 1.8 percent FUTA rate, or $126 per employee.
- 2026: the Department of Labor lists a potential 1.5-point reduction plus a possible 3.8-point add-on, and sets the final figure on November 10, 2026.
Employer cost per employee for a $50,000 hire
A Kearny Mesa business with its first $50,000 hire in 2026, on the new employer UI rate and the potential 1.5-point FUTA reduction before any add-on, pays:
| Item | Amount |
|---|---|
| UI: 3.4 percent of $7,000 | $238 |
| ETT: 0.1 percent of $7,000 | $7 |
| FUTA: 2.1 percent of $7,000 | $147 |
| City minimum wage enforcement fee, since July 1, 2025 | $1.47 |
| Employer total | $393.47 |
The employer also withholds SDI of 1.3 percent, or $650, from the employee's pay.
If the Department of Labor applies the 3.8-point add-on, the employer pays $413 in FUTA and $659.47 in total.
Registering, depositing and filing with the EDD
- Register on the EDD's e-Services for Business. For California new hire reporting, report each new or rehired employee on the DE 34 within 20 days of the start date.
- Deposit SDI and PIT on the federal deposit schedule. A quarterly depositor that accumulates $350 or more in PIT in a pay period switches to monthly deposits. The EDD charges a 15 percent penalty plus interest on late payments.
- File the DE 9 quarterly contribution return and the DE 9C wage report each quarter, and pay UI and ETT by the same due dates.
The EDD requires employers to file and pay online. An employer that cannot file online can request a DE 1245W waiver, and the EDD sets the approval period.
When to hire a CPA for payroll
An owner who pays a spouse, a child or a Tijuana resident, or expects a higher UI rate after layoffs, can have a CPA review the payroll setup. Start with how to choose a CPA.