Navigating California’s payroll landscape requires careful attention to its unique regulations. This guide provides essential information on state income tax withholding, unemployment insurance, wage and hour laws, and child support withholding, ensuring compliance and accuracy.
**California State Income Tax Withholding**
The agency overseeing state income tax collection and reporting is the Employment Development Department (EDD), located at 800 Capitol Mall, Sacramento, CA 95814 (888-745-3886, www.edd.ca.gov).
California mandates the use of form DE 4, “Employee’s Withholding Allowance Certificate,” instead of the federal W-4 form for state income tax withholding.
Unlike some states, California provides tax advantages for Section 125 cafeteria plans. Contributions to cafeteria plans are not taxable for income tax or unemployment insurance purposes. 401(k) plan deferrals are not taxable for income taxes but are subject to unemployment insurance taxes.
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.
**California State Unemployment Insurance**
The California unemployment insurance agency is also the Employment Development Department (EDD), located at P.O. Box 826880 – MIC 94, Sacramento, CA 94280-0001 (888-745-3886, www.edd.ca.gov).
The taxable wage base for unemployment insurance is capped at $7,000.00 per employee.
Employers with 250 or more employees must report quarterly wages via magnetic media.
Unemployment records, including employee names, social security numbers, hire/rehire/termination dates, wages, pay periods, pay dates, and termination circumstances, must be retained for a minimum of four years.
**California Wage and Hour Laws**
The Department of Industrial Relations, Division of Labor Standards Enforcement (P.O. Box 420603, San Francisco, CA 94142-3660, www.dir.ca.gov/dlse/dlse.html) enforces California’s wage and hour laws.
The minimum wage in California is $6.75 per hour.
Non-exempt employees are entitled to overtime pay at one and a half times their regular rate for hours worked over 8 in a day or 40 in a week. Consult specific regulations for exceptions.
**California New Hire Reporting**
Employers must report all new hires, rehires, and contractors paid over $600 within 20 days of hiring, rehiring, meeting the $600 threshold, or signing a contract. Required information includes:
* Employee’s name, address, and social security number
* Employer’s name, address, and Federal Employer Identification Number (EIN)
* Date of hire
* State EIN
* Contract details (date, amount, expiration)
Reports can be submitted via W4 or 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 or www.edd.ca.gov/txner.htm.
**Direct Deposit and Pay Stub Requirements**
California permits mandatory direct deposit if the employee’s financial institution complies with federal Regulation E. Pay stubs must include:
* Employee’s name
* Pay rate
* Gross and net earnings
* Amount and purpose of deductions
* Hours worked (if applicable)
Detailed pay stub information requirements include gross and net earnings, hours worked at each hourly rate, piece rate and number of pieces (if applicable), deductions, pay period dates, and employee/employer identification.
**Pay Frequency and Final Pay**
Employees must be paid at least semimonthly, with exempt employees paid monthly. Wages earned between the 1st and 15th of the month must be paid by the 26th, and wages earned from the 16th to the end of the month must be paid by the 10th of the following month.
Involuntarily terminated employees must receive final pay immediately. Voluntarily terminated employees must be paid within 72 hours (or immediately if 72 hours’ notice is given).
Deceased employee’s wages (up to $5,000.00) must be paid to the surviving spouse or conservator upon presentation of an affidavit of right and proof of identity.
Unclaimed wages must be escheated to the state after one year, with records maintained for seven years.
**Other Regulations**
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 and 10-minute rest breaks after four hours.
Wage and hour records must be retained for two years.
**California Child Support Withholding**
The Department of Child Support Services (P.O. Box 944245, Sacramento, CA 95244-2440, 916-654-1532, www.childsup.ca.gov) enforces child support orders and laws.
Key provisions include:
* Withholding begins 10 days after service.
* Payments are sent within 7 days of payday.
* Termination notices are sent when the next payment is due.
* The maximum administrative fee is $1 per payment.
* Withholding limits are 50% of disposable earnings.
*Disclaimer: This information is for general guidance only and is not a substitute for professional legal or financial advice. Laws are subject to change.*