Navigating California’s payroll regulations requires careful attention to detail. This guide provides essential information on key aspects of California payroll law and practice.
**California State Income Tax Withholding**
The agency responsible for collecting and reporting state income taxes is the Employment Development Department (EDD), located at 800 Capitol Mall, Sacramento, CA 95814. You can reach them at 888-745-3886 or visit their website.
California mandates the use of form DE 4A-4, “Employee’s Withholding Allowance Certificate,” instead of the federal W-4 form for state income tax withholding.
Unlike some states, California treats salary reductions under Section 125 cafeteria plans as non-taxable for income tax calculation and unemployment insurance purposes. 401(k) plan deferrals are not taxable for income taxes but *are* taxable for unemployment purposes.
Supplemental wages in California are taxed at a flat rate of 6%, with stock options and bonuses taxed at 9.3%.
Employers are not required to file California State W-2s with the state.
**California State Unemployment Insurance (UI)**
The California State Unemployment Insurance Agency is also the Employment Development Department (EDD), P.O. Box 826880 – MIC 94, Sacramento, CA 94280-0001. The phone number is 888-745-3886, and their website is the same as above.
The taxable wage base for unemployment insurance is wages up to $7,000.00.
California requires magnetic media reporting of quarterly wage data if an employer reports for at least 250 employees in a quarter.
Unemployment records must be retained for a minimum of four years. Required information includes: name, social security number, dates of hire/rehire/termination, wages by period, payroll pay periods/dates, and termination circumstances.
**Wage and Hour Laws**
The Department of Industrial Relations, Division of Labor Standards Enforcement (P.O. Box 420603, San Francisco, CA 94142-3660) enforces California’s wage and hour laws. Their website provides detailed information.
California’s minimum wage is specified by law and subject to change. Consult official sources for the current rate.
For non-FLSA covered employees, overtime is generally paid at 1.5 times the regular rate for hours worked over 8 in a day or 40 in a week. Note that some industries and occupations have different overtime rules and exemptions.
**New Hire Reporting**
Employers must report all new hires, rehires, and contractors paid over $600.00. Required information includes:
* Employee’s name
* Employee’s address
* Employee’s social security number
* Employer’s name
* Employer’s address
* Employer’s Federal Employer Identification Number (EIN)
* Date of hire
* State EIN
* Contract date, dollar amount, and expiration date (if applicable)
This information must be reported within 20 days of hiring/rehiring or after the $600.00 threshold is met or the contract is signed, whichever is earlier.
Reports can be submitted via W4 or equivalent DE34 by mail, fax, or electronically.
Late reports are subject to penalties ranging from $24.00 to $490.00.
The California new hire reporting agency can be reached at 916-657-0529.
**Direct Deposit and Pay Stubs**
California allows compulsory direct deposit, provided the employee’s choice of financial institution meets federal Regulation E requirements.
Pay stubs must include:
* Employee’s Name
* Pay rate
* Gross and net earnings
* Amount and purpose of deductions
* Hours worked (or work done if piece work)
* Hours worked at each hourly rate for hourly workers
* Piece rate and number of pieces
* Deductions
* Pay period dates
* Employee’s name and social security number
* Employer’s name and address
**Pay Frequency and Final Pay**
Employees must be paid at least semi-monthly, except for FLSA-exempt employees, who may be paid monthly. Wages earned from the 1st-15th of the month must be paid by the 26th; wages earned from the 16th to the end of the month must be paid by the 10th of the following month. Exempt employees must be paid by the 26th of the month (safe harbor is payment within 7 days after the pay period.)
Involuntarily terminated employees must receive final pay immediately; seasonal employees within 72 hours; and certain motion picture/oil drilling employees per specific regulations. Voluntarily terminated employees must be paid within 72 hours or immediately if 72 hours’ notice is given. Strikers are paid on the next regular payday.
Wages of a deceased employee (up to $5,000.00) must be paid to the surviving spouse or conservator upon presentation of an affidavit and proof of identity.
Unclaimed wages escheat to the state after one year. Employers must maintain records of abandoned wages turned over to the state for seven years.
**Tip Credits, Breaks, and Record Retention**
California law does not allow tip credits against the state minimum wage.
Mandatory rest and meal breaks include a 30-minute meal break after five hours of work, another 30-minute break after 10 hours, and a 10-minute rest break after four hours.
Wage and hour records must be retained for two years.
**Child Support Orders**
The Department of Child Support Services (P.O. Box 944245, Sacramento, CA 95244-2440, 916-654-1532) enforces child support orders.
Key provisions for child support deductions:
* Start Withholding: 10 days after service
* Send Payment: Within 7 days of payday
* Send Termination Notice: When next payment is due
* Maximum Administrative Fee: $1 per payment
* Withholding Limits: 50% of disposable earnings
**Disclaimer:** This information is for general guidance only and may not reflect the most current changes in California payroll law. Consult with legal and payroll professionals for specific advice.