Key takeaways
- You must register with EDD within 15 days once you pay more than $100 in wages in a calendar quarter.
- In 2026, new employers pay 3.4% UI tax and 0.1% ETT on the first $7,000 of each employee's wages, and withhold 1.3% SDI with no wage cap.
- Report new hires within 20 days (DE 34) and file DE 9 and DE 9C every quarter, even with no payroll.
California payroll involves four state taxes managed by the Employment Development Department. Two are paid by you, the employer; two are withheld from employees' wages.
When you have to register
You become a subject employer when you pay more than $100 in wages in any calendar quarter. You must then register with EDD within 15 calendar days, through e-Services for Business. Household employers, such as those employing nannies or housekeepers, have a different threshold: $750 or more in cash wages in a quarter.
The four taxes at a glance (2026)
| Tax | Who pays | 2026 rate | Wage base |
|---|---|---|---|
| Unemployment Insurance (UI) | Employer | 3.4% for new employers (for 2–3 years); experienced employers range from 1.5% to 6.2% | First $7,000 per employee |
| Employment Training Tax (ETT) | Employer | 0.1% (at most $7 per employee) | First $7,000 per employee |
| State Disability Insurance (SDI) | Employee (withheld) | 1.3% | No cap since 2024 |
| Personal Income Tax (PIT) | Employee (withheld) | Based on the employee's DE 4 and wages | No cap |
The SDI cap was removed by SB 951 from January 1, 2024, so SDI is withheld on all wages.
Worked example: one employee in 2026
You're a new employer paying one employee $50,000 in 2026.
| Tax | Calculation | Amount | Who bears it |
|---|---|---|---|
| UI | 3.4% × $7,000 | $238 | You |
| ETT | 0.1% × $7,000 | $7 | You |
| SDI | 1.3% × $50,000 | $650 | Employee (you withhold it) |
| PIT | Based on the employee's DE 4 and wages | Varies | Employee (you withhold it) |
Your own state cost for UI and ETT is $245 for the year, and it stops growing once the employee passes $7,000 in wages. SDI keeps applying to every dollar, so an employee earning $200,000 would have $2,600 withheld.
Quarterly filing calendar
| Quarter | DE 9 and DE 9C due | Late after |
|---|---|---|
| January–March | April 1 | April 30 |
| April–June | July 1 | July 31 |
| July–September | October 1 | October 31 |
| October–December | January 1 | January 31 |
File for every quarter, including ones with no payroll.
Reports and deadlines
- New hires (DE 34): report each new or rehired employee within 20 calendar days of their start date. A rehire counts if they were gone at least 60 days.
- Independent contractors (DE 542): report within 20 days of paying or entering a contract for $600 or more in a year.
- Quarterly reports (DE 9 and DE 9C): due January 1, April 1, July 1 and October 1, and late after the last day of the following month. You must file even if you had no payroll that quarter.
- E-file and e-pay: all employers must file and pay electronically.
Common mistakes to avoid
- Misclassifying workers as independent contractors. California's ABC test presumes workers are employees.
- Missing a zero-payroll quarter filing.
- Not updating your SDI withholding for high earners now that there's no wage cap.
- Ignoring EDD claim notices when a former employee files for unemployment. Respond by the deadline on the notice.
Payroll software or a payroll provider can handle these calculations and filings automatically. Make sure whichever you use is set up for California's SDI and ETT.
Frequently asked questions
Do I pay SDI on all my wages?
Yes. Since January 1, 2024, there's no wage cap on SDI, so the 1.3% rate in 2026 applies to all of your wages. SDI funds disability and Paid Family Leave benefits.
Do employers pay SDI in California?
No, SDI is withheld from employees' wages, not paid by the employer. As the employer, you're responsible for withholding it and sending it to EDD with your other payroll taxes.
When do I need to register as an employer with EDD?
Within 15 calendar days after you pay more than $100 in wages in a calendar quarter. For household employees such as nannies, the threshold is $750 or more in cash wages in a quarter. You register through e-Services for Business.
What is the UI tax rate for new employers in California?
New employers pay 3.4% on the first $7,000 of each employee's wages in 2026, usually for two to three years. After that, experienced employers' rates range from 1.5% to 6.2%.
Do I have to file a DE 9 if I had no payroll?
Yes. You must file quarterly reports even for a quarter with no payroll. Missing a zero-payroll filing is a common mistake.
How soon do I have to report a new hire?
Within 20 calendar days of the start date, on form DE 34. A rehired employee counts if they were gone at least 60 days. Independent contractors paid $600 or more in a year go on form DE 542.
Do employers pay for unemployment benefits in California?
Yes. Employers fund unemployment insurance through the UI tax, and workers don't pay it from their paychecks. When a former employee files, respond to EDD's claim notice by the deadline on it. Our eligibility guide explains what EDD looks at.
Sources
We use primary sources: statutes, court rules, official forms and government pages. Read our editorial standards.