Employer of Record for California

In California, workers’ rights are protected by numerous employment and labor laws, at both the state and federal level.  As a result, employees enjoy protection from discrimination based on age, religion, sexual orientation, gender, and race.

Here are the key things you need to know about hiring in California:

Do I Need an EIN or Payroll Tax Number To Employ in California?

Employers in California are required to have both a Federal Employer Identification Number and a California payroll tax number to hire employees. These registrations are the foundation for running payroll compliantly and making sure wages and taxes are reported correctly from day one.

Working Hours in California 

Standard working hours are 8 hours per day and 40 hours per week. Anything beyond that typically counts as overtime and California’s overtime rules are strict, so it pays to get this right.

What Is Considered Full-Time Employment in California?

There’s no single legal definition of full-time. In practice, 30 hours or more per week is generally recognized as full-time and is often the threshold employers use when offering benefits like healthcare.

Probation Period in California

California law doesn’t require probation periods, but many employers use them as a way to set expectations and assess fit. If you do, make sure the terms are clear in your employment contracts so everyone’s aligned from the start.

Minimum Wage in California

As of January 1, 2025, California's minimum wage is:

• $16.50 per hour for all employers but is set to rise to $16.90 on January 1, 2026.
• Applies across all sectors in California.
• Subject to periodic review and adjustment based on inflation, with potential increases annually based on the U.S. Consumer Price Index (CPI).

Additionally:

• Some sectors, such as fast-food workers, have a higher wage of $20 per hour.
• Local cities and counties may have higher minimum wages (e.g., $19.65 in West Hollywood).

California Anti-Discrimination Laws

Employees may not be unfairly discriminated by against based on:

• Biological sex,
• Race and national origin,
• Age (applies to individuals between 40 and 70 years of age),
• Pregnancy, child, or spousal support withholding,
• Sexual orientation,
• Gender and gender identity,
• Religion,
• AIDS/HIV status, and
• Disability (mental, physical)
• Genetic information

Overtime in California

California has strict overtime laws. Employees in California must receive overtime pay at 1.5x their regular rate after 8 hours of work per day or 40 hours per week, and double time for hours exceeding 12 in a day.

Under California law, employees are generally not entitled to overtime if they:

• Earn more than the state or federal exemption threshold (which is based on a minimum salary requirement).
• Perform a role with duties that are considered executive, administrative, or professional.
• Work in a certified or licensed profession, such as law, accounting, architecture, or engineering.

California has specific regulations regarding payroll tax which can get complicated quickly.  Employers must follow these guidelines to avoid penalties and maintain compliance with both federal and state labor laws. Alternatively you can outsource your global payroll needs to a third-party provider who’ll do all the heavy lifting for you.

Payroll Cycle in California

Californian law mandates that employers pay employees at least twice a month. This requirement ensures employees are paid no less frequently than semimonthly.

• Employers must provide wages at least twice monthly, with no more than 16 days between pay periods.
• While twice-monthly is the minimum, employers may choose more frequent cycles, such as biweekly (every two weeks) or weekly.
• Overtime wages must be paid no later than the payday for the next regular payroll period following the payroll period in which the overtime wages were earned.
• Employers who fail to pay wages on time may be subject to penalties under Labor Code Section 210, including fines for each failure to pay each employee.

Types of Payroll Taxes in California  

California employers need to withhold and remit several payroll taxes. These taxes help fund state programs like unemployment insurance and disability benefits, and they vary based on employee earnings.

Here’s a quick look at the key payroll taxes you’ll need to manage:

California State Income Tax

• This is withheld from employee wages and is based on the allowances and filing status employees submit on Form DE 4.
• The amount varies based on income and filing preferences.

Unemployment Insurance (UI)

• Employers contribute 3.4% on the first $7,000 of each employee’s wages. This rate may fluctuate based on your experience rating, which considers past claims.

Employment Training Tax (ETT)

• This is a small 0.1% tax on the first $7,000 of employee wages.
• It’s applicable to all employers who pay into unemployment insurance.

State Disability Insurance (SDI)

• A 0.9% withholding from employees’ wages goes toward funding disability and paid family leave, capping at $153,164 in earnings per year.

Federal Payroll Taxes

• Federal Income Tax: This is withheld based on the employee’s IRS Form W-4. The amount changes depending on filing status and allowances.
• Social Security Tax: 6.2% of wages up to a certain limit is withheld for Social Security benefits.
• Medicare Tax: This is a 1.45% withholding on all wages, plus an additional 0.9% on wages exceeding $200,000.

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How to Comply with California Payroll Taxes

Complying with California payroll taxes is essential for businesses operating in the state, as failure to do so can result in significant penalties. Employers are responsible for accurately calculating, withholding, and remitting several payroll taxes.

Here's a breakdown of the key steps and requirements for payroll tax compliance in California:

• Determine Withholding Amounts: You’ll need to use Form DE 4 to figure out how much state income tax to withhold from your employees’ wages. This form helps ensure that you’re withholding the correct amount based on their income and filing status.
• Calculate and Remit Taxes: Once you’ve determined the withholding amounts, you’ll calculate the correct amount for each tax – state income tax, SDI, and federal taxes. Then, make sure to pay your UI and ETT taxes for every employee, on the first $7,000 of their earnings.
• Report Taxes: Submit your quarterly Forms DE 9 and DE 9C to the California Employment Development Department (EDD). Also, don’t forget to file IRS Form 941 to report federal payroll taxes. Keeping up with these filings will help you stay compliant.
• Maintain Records: It’s essential to keep detailed records of all your payroll transactions, including wages, tax withholdings, and payments. By law, you need to keep these records for at least four years.
• Stay Informed: California tax laws and rates can change, so it’s important to stay updated on any new regulations or rate adjustments. Regularly checking the EDD and IRS websites or working with a payroll professional can help you stay on track.

By following these steps and  making use of payroll software, like Playroll or tax professionals, employers can stay compliant with California’s payroll tax laws every step of the way.

Employment taxes and statutory fees affect both your payroll and your employees’ paychecks in California. Understanding the tax obligations for both employers and employees is crucial when operating in California's business landscape. This section explains how taxes and statutory fees affect payroll and individual earnings in California. Note that employees may be liable for additional local taxes in certain cities and jurisdictions.

Employer Tax Contributions

You and your employees are responsible for specific employment taxes that contribute to federal and state programs, supporting benefits such as unemployment insurance, disability, and healthcare. Here's a quick summary of employer-specific payroll contributions:

Employee Payroll Tax Contributions

Your company will be subject to several payroll taxes, contributing to state programs and federal benefits. Here's a snapshot of what employee payroll tax contributions you need to be aware of:

Tax Due Dates in California

In the United States, both federal and California state income tax returns are typically due on April 15 each year. If April 15 falls on a weekend or holiday, the deadline is extended to the next business day. California has, in certain years, provided automatic extensions for state tax filings, differing from the federal schedule.

Pension in California

In California, private-sector employers with five or more employees must offer a retirement plan (this is going to extend to employers with 1 -4 employees with a deadline for compliance being 31 December 2025).  If they don’t already have one, they’re required to enrol in the state-sponsored CalSavers program. This program is easy to set up and doesn’t require employer contributions – employers simply facilitate employee participation. Employees are automatically enrolled but have the choice to opt out, and they can adjust their contribution rates from the default setting. Employers who already offer a qualified retirement plan can certify their exemption from CalSavers.

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Check out our in-depth guide to payroll taxes in California.

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Employers are subject to specific requirements regarding employee benefits, which vary based on company size and employee status. These benefits include health insurance, retirement plans, and other forms of assistance. Meeting these requirements ensures compliance and enhances a company’s offerings to its workforce.

As part of our global employment services, Playroll can create a globally compliant and competitive compensation package that can help you attract and retain top talent in the US.

Employee Benefits For California

Competitive benefits are essential for attracting and retaining top talent in California. Offering the right package helps employees feel valued and motivated. Our benefits experts understand the local labor market's trends, requirements, and expectations, ensuring your employees feel valued and supported. Common benefits in our California packages include:

• Pension or 401(K)
• Vision Insurance
• Life Insurance
• Medical Insurance
• Dental Insurance
• Health Savings Plan (HSA)
• Flexible Spending Account (FSA)

Are Employers Required To Provide Health Insurance in California?

Employers with 50 or more full-time employees must offer health insurance under the federal Affordable Care Act. Smaller businesses are not required to provide health coverage, though many choose to offer it to attract and retain talent. State health insurance marketplaces, such as Covered California, provide affordable plan options for those without employer-provided coverage.

Do Part-Time Employees Get Benefits in California?

Part-time employees are not automatically entitled to the same benefits as full-time employees unless the employer’s policy includes them. However, employers may choose to extend health insurance, paid leave, or other benefits to part-time employees. Eligibility may depend on hours worked, with employees averaging 30 or more hours per week often qualifying for benefits similar to those provided to full-time employees.

Are Employers Required To Offer 401k in California?

In California, private-sector employers with five or more employees are required to provide a retirement plan, either by offering a traditional 401(k) or enrolling in the CalSavers program if no other plan is available.

California has some of the most employee-friendly leave policies in the country. Employers are required to provide various types of leave to ensure that employees can take time off for personal, family, and health reasons.

Here’s an overview of the key leave policies in the state:

Is Vacation Leave Mandatory in California?

There is no legal requirement for the employer to provide the employee with paid or unpaid vacation leave.  However, providing employees with 10-15 days of paid leave is common in California. 

Mandatory Leave Policies in California

Below are the mandatory leave entitlements for full-time employees in California.

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Paid Time Off in California

There is no requirement for employers to offer Paid Time Off (PTO) for personal use or vacation. However, if PTO is provided, it is treated as earned wages, meaning it cannot be forfeited. Employers must pay out unused PTO upon termination. Employers can set policies on accrual limits, caps, or usage terms, provided these comply with state regulations.

Maternity Leave In California

Maternity leave is supported through Pregnancy Disability Leave (PDL) and the Family Rights Act (CFRA). Under PDL, employees disabled by pregnancy or childbirth are entitled to up to four months of unpaid, job-protected leave for medical appointments, childbirth, and recovery. Following PDL, employees may take an additional 12 weeks of unpaid bonding leave under CFRA. While PDL and CFRA do not mandate paid leave, the Paid Family Leave (PFL) program offers partial wage replacement for up to 8 weeks, funded through employee payroll deductions.

Paternity Leave In California

Paternity leave is available under the Family Rights Act (CFRA), allowing new fathers up to 12 weeks of unpaid, job-protected bonding leave within the first year of a child’s birth, adoption, or foster care placement. The Paid Family Leave (PFL) program also provides partial wage replacement for up to 8 weeks to support bonding with a new child. PFL benefits are funded by employees and do not provide job protection, though CFRA can be used to secure job reinstatement.

Sick Leave In California

Paid sick leave is required, with a minimum accrual rate of one hour for every 30 hours worked. Employers may set a minimum entitlement of 24 hours or three days per year. Sick leave can be used for personal illness or to care for family members. Unused sick leave can carry over to the following year, with a maximum accrual cap of 48 hours or six days.

Military Leave in California

Employees who serve in the military are entitled to leave under both federal (USERRA) and state laws, which provide job reinstatement rights and protections for benefits and seniority. Additional provisions also apply to employees called to state military service or emergency duty, such as the National Guard.

Jury Duty in California

In California, employers are not legally obligated to pay employees for time spent on jury duty, but they must allow unpaid leave and cannot penalize anyone for serving. Some companies offer paid jury duty leave as part of their benefits, though it’s not required. Employees can often use vacation or paid time off if they choose, but employers may not force them to. Starting from the second day of service, California courts provide jurors with a $15 daily stipend and a mileage reimbursement.

Parental Leave In California

The Family Rights Act (CFRA) provides up to 12 weeks of unpaid, job-protected leave for new parents to bond within the first year after a birth, adoption, or foster placement. The Paid Family Leave (PFL) program offers up to 8 weeks of partial wage replacement for bonding time, though PFL does not guarantee job protection.

Bereavement Leave

In California, employers with five or more employees are required to provide employees with up to five days of bereavement leave following the death of a family member. This leave allows employees time to mourn and make necessary arrangements during a difficult time.

While the leave is mandated, it does not have to be paid unless the employer’s policy provides paid bereavement leave. Eligible family members typically include parents, children, siblings, spouses, and other close relatives.

Voting Leave

California law ensures that employees have the opportunity to vote in state elections. If an employee’s work schedule does not allow them sufficient time to vote outside of work hours, the employer must provide up to two hours of paid leave for voting.

The employee must request this time off in advance, and the leave must be provided during work hours to ensure the employee can get to the polls. The employer cannot penalize the employee for taking this time off to vote.

School Leave

Employers with 25 or more employees at the same location must provide up to 40 hours per year of unpaid leave for employees to participate in school activities for their children. This includes attending parent-teacher conferences, volunteering for school events, or participating in school governance.

The leave is unpaid, but employees can use accrued paid time off if the employer’s policy allows. Employees must give reasonable notice to their employer and may be asked to provide documentation from the school or childcare provider verifying the need for the leave.

When it comes to terminating employment in California, understanding the legal obligations regarding severance pay and contributions is essential. Below is a detailed overview of the key considerations for both employers and employees.

Termination Process in California

In California, employment is generally "at-will," meaning either the employer or employee can end the employment relationship at any time, with or without notice. However, employers must follow key requirements:

• Final Pay: If an employee is terminated, the final paycheck must be provided on their last day. For resignations, it’s due within 72 hours, or on the last day if the employee gave 72 hours’ notice.
• Unused Vacation: Any accrued vacation or PTO must be paid out with the final paycheck.
• Health Coverage: Employers must inform departing employees of their COBRA rights if applicable.

Notice Period in California

There is no general requirement for employers to provide advance notice before terminating an employee. However, under the Worker Adjustment and Retraining Notification (WARN) Act, employers with 75 or more employees must provide 60 days’ notice if conducting a mass layoff, plant closure, or significant downsizing affecting a substantial number of employees.

Severance in California

California law does not mandate that employers provide severance pay to employees who are terminated or laid off. However, some employers may choose to offer severance packages as part of their company policy, especially to employees who have been with the company for a long period or in industries where it is a common practice.

Severance pay, when provided, is typically offered at the employer's discretion and can vary depending on the terms outlined in the employment contract or company guidelines. Additionally, while severance is not required by law, any agreements regarding severance pay should be clearly outlined in writing to avoid confusion and potential legal issues.