California Payroll Done Right — SDI, SUI, EDD & More

California Payroll at a Glance (2026)

Source: edd.ca.gov • Updated January 2026

California Payroll Requirements: What Employers Need to Know in 2026

California payroll is among the most regulated in the country, and new employers frequently underestimate just how many layers apply from day one. At the state level, you are responsible for withholding California personal income tax across nine brackets running from 1% to 13.3%, depositing State Unemployment Insurance at 3.4% for new employers on the first $7,000 of each employee's wages, collecting State Disability Insurance at 1.1% of gross wages with no wage base cap, and paying the Employment Training Tax at 0.1%—all in addition to federal FICA and FUTA obligations. Every one of these accounts is managed through the California Employment Development Department, which requires separate registration from your federal employer identification number.

The statewide minimum wage is $17.00 per hour in 2026, but that floor does not apply uniformly to every industry. Fast food workers covered under the FAST Recovery Act are entitled to $20.00 per hour, and workers at covered healthcare facilities must be paid at least $25.00 per hour. If your business operates in a city or county with a local minimum wage ordinance—Los Angeles, San Francisco, and several others have them—the local rate applies wherever it exceeds the state floor. Check the applicable rate for every work location, not just your registered headquarters.

Overtime in California is calculated daily, not just weekly, which surprises most employers coming from other states. Non-exempt employees earn 1.5 times their regular rate after eight hours in a single workday and after 40 hours in a workweek. The multiplier rises to 2.0 times after 12 hours in a day and for all hours on the seventh consecutive day of a workweek. California does not allow compensatory time in lieu of overtime pay for private-sector employees. The overtime rules for California employers go into more detail on calculating the regular rate when bonuses or commissions are involved.

Final paycheck timing is one of the most common compliance failures in California. When you terminate or lay off an employee, their final paycheck is due on the same day as separation—not the next business day, not the next regular payday. Employees who resign with at least 72 hours' notice are also owed their final check on their last day of work. Employees who resign without notice must be paid within 72 hours of giving notice. Missing these deadlines triggers waiting-time penalties equal to one day of the employee's daily wage for each day the payment is late, up to 30 days. For a full breakdown of timing rules by situation, see the guide on California payday laws.

New hire reporting must be filed within three days of the hire date—faster than the federal 20-day window and faster than nearly every other state. The report goes to the EDD's New Employee Registry. You will also need to provide each new employee with specific notices at the time of hire, including the Wage Theft Prevention Act notice, which must list pay rate, overtime status, EDD contact information, and the employer's workers' compensation carrier. SDI and Paid Family Leave are funded entirely through the 1.1% employee payroll deduction with no employer contribution, but you are responsible for withholding it correctly and remitting it on time. The California SDI and PFL guide for 2026 covers how benefits are calculated and when employees can access them.

2026 California payroll quick facts: State income tax 1%–13.3% (9 brackets) | SUI new employer rate 3.4% on $7,000 wage base | SDI 1.1% employee-paid, no wage base cap | ETT 0.1% employer-paid | Statewide minimum wage $17.00/hr | Fast food minimum $20.00/hr | Healthcare minimum $25.00/hr | Final paycheck: same day termination, 72 hours or last day resignation | New hire reporting: 3 days | Overtime: 1.5x after 8 hrs/day or 40 hrs/week, 2x after 12 hrs/day | Payroll registration: EDD (edd.ca.gov)