California Payroll Compliance
Every rate, wage base, and threshold California employers need for 2026 — sourced from the EDD and FTB, with the local ordinances that override the state rate.
Minimum Wage & Hours
California’s statewide minimum wage is $16.50/hour for all employers in 2026, regardless of size. California does not allow a tip credit — tipped employees must receive the full minimum wage before tips. Many cities and counties set higher local minimums (see below).
| Item | 2026 Value | Notes |
|---|---|---|
| Statewide minimum wage | $16.50/hr | All employers; annual CPI adjustment |
| Tipped minimum wage | $16.50/hr | No tip credit permitted in California |
| Overtime threshold | 8 hrs/day | Daily OT — 1.5x after 8, 2x after 12 |
| Exempt salary minimum | $68,640/yr | 2x state minimum wage, full-time |
| Pay frequency | Semi-monthly | At minimum; specific paydays required |
Local Minimum Wage Exceptions
Over 30 California cities and counties set minimum wages above the state floor. These override the state rate for hours worked within that locality. A selection of the highest:
State Income Tax Withholding
California personal income tax (PIT) is withheld using one of two EDD-published methods: Method A, a manual table lookup, or Method B, a sequential formula that produces an exact figure. Every employee must complete both federal Form W-4 and California Form DE 4 — the two forms are not interchangeable, and DE 4 still uses an allowance-based system even though the federal W-4 dropped allowances in 2020.
| Item | 2026 Value | Notes |
|---|---|---|
| Withholding methods | A & B | Wage bracket table lookup, or exact sequential calculation |
| Supplemental wage rate | 6.6% | 10.23% for bonuses & stock options |
| Required certificate | DE 4 | In addition to federal W-4; no DE 4 on file defaults to single/zero allowances |
| Top marginal PIT rate | 13.3% | Plus 1% mental health surcharge over $1M |
| Standard deduction (Method B) | $5,706 single / $11,412 married or HOH | Built into the calculation; not the same as the much larger federal standard deduction |
| Exemption allowance credit | $168.30/year per allowance | Subtracted from computed tax at the final step of Method B |
| PIT deposit threshold | $400 | Down from $500 in 2025; triggers mandatory electronic deposit by the next deadline |
Method A — Wage Bracket Table Method
Method A is a straight lookup, not a calculation. An employer finds the correct EDD-published table for the payroll period (weekly, biweekly, semi-monthly, monthly, etc.) and marital status, locates the row matching the employee’s wage range, and reads off the withholding amount directly — no arithmetic required. The standard deduction and exemption allowance credit are already baked into the table values, so there’s nothing further to subtract.
| Step | What happens |
|---|---|
| 1. Check the low-income exemption | If gross wages fall at or below the Table 1 threshold for the payroll period, no withholding is required at all. |
| 2. Reduce for estimated deductions | If the employee claimed additional DE 4 allowances for estimated deductions, subtract the Table 2 amount from gross wages first. |
| 3. Look up the bracket | Match the payroll period, filing status, and total allowances claimed to the corresponding wage-bracket table (EDD Tables 16 and up). |
| 4. Read off the amount | The table cell at the intersection of wage range and allowances is the withholding amount — no further math. |
Because every wage within a bracket produces the identical withholding figure, Method A trades a small amount of precision for speed — it’s well suited to manual payroll processing. Critically, the EDD’s own instructions state Method A cannot be used with computer software; automated payroll systems are required to use Method B instead.
Method B — Exact Calculation Method
Method B is the formula-driven method EDD requires for computerized payroll systems, and it produces a precise dollar-and-cents withholding figure rather than a bracket-rounded one. It runs through four EDD tables in a fixed sequence — skipping or reordering a step produces an incorrect result.
| Step | What happens |
|---|---|
| 1. Start with taxable wages | Gross wages for the pay period, after pre-tax deductions like 401(k) contributions or employer health premiums. |
| 2. Check Table 1 (Low Income Exemption) | If wages fall at or below the threshold, stop — no withholding required. |
| 3. Subtract Table 2 (Estimated Deduction) | Only if the employee claimed additional DE 4 allowances for estimated deductions. |
| 4. Subtract Table 3 (Standard Deduction) | $5,706 single/separate or $11,412 married/head of household (annualized figures for 2026). |
| 5. Annualize and apply tax rates | Multiply by the number of pay periods per year, then apply the progressive rate schedule (Tables 5–28): Computed Tax = Marginal Tax Amount + (Rate × (Taxable Income − Bracket Floor)). |
| 6. Subtract the exemption credit | Table 4's per-allowance credit ($168.30/year for 2026) is subtracted from the computed tax, then the result is divided by the number of pay periods. |
Because Method B produces a genuinely exact figure rather than a bracket-rounded one, it’s the method virtually every payroll software platform uses under the hood — Method A survives mainly as a manual fallback and as the reference EDD uses to build its published wage-bracket tables in the first place.
State Disability Insurance (SDI) & Paid Family Leave
California’s SDI program funds both Disability Insurance and Paid Family Leave through a single employee payroll deduction. For 2026, the rate is 1.3% with no wage cap since SB 951 removed the ceiling, so high earners contribute on every dollar.
| Item | 2026 Value | Notes |
|---|---|---|
| SDI withholding rate | 1.3% | Up from 1.2% in 2025 |
| Wage cap | None | Removed by SB 951 (eff. 2024) |
| Who pays | Employee | Withheld; employer remits to EDD |
| Max weekly benefit | $1,765 | Funds DI + PFL |
| W-2 reporting | Box 14 | Label as CASDI |
Unemployment Insurance (SUI) & ETT
California’s UI taxable wage base remains $7,000 per employee. For 2026 the EDD moved to Schedule F+ (Schedule F plus a 15% emergency surcharge), with experience-rated employer rates from 1.5% to 6.2%.
| Item | 2026 Value | Notes |
|---|---|---|
| UI taxable wage base | $7,000 | Per employee, per year |
| Rate schedule | Schedule F+ | F plus 15% emergency surcharge |
| Experienced rate range | 1.5%–6.2% | Based on reserve account |
| New employer UI rate | 3.4% | First 2–3 years |
| ETT rate | 0.1% | On first $7,000; positive reserve only |
| Rate notice | DE 2088 | Mailed late December |
Official California .gov Resources
Verify every figure and register for accounts at the source. These are the agencies California employers interact with for payroll.