California payroll services and resources for employers

Q: What is California's payroll tax?

California has four state payroll taxes , which the EDD regulates. Two of these are employer contributions. The other two are taxes withheld from employee paychecks. Employer contributions include Unemployment Insurance and the Employment Training Tax. Employee payroll withholdings include State Disability Insurance and the Personal Income Tax.

Q: Can you calculate payroll yourself?

You can calculate payroll yourself, but California employers may find that the challenges outweigh the benefits. State-specific overtime laws and city-specific predictive scheduling laws with a “predictability pay” mandate demonstrate how California payroll can get complicated fast. If you decide to calculate payroll on your own, pay attention to those state labor laws and taxes.

Q: Why choose QuickBooks for your California-based business?

Over 97% of customers agree that QuickBooks Payroll increases confidence by ensuring payroll is accurate and compliant.1 QuickBooks Payroll features like Auto Payroll and tax penalty protection can give California business owners the peace of mind to focus on other priorities.

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Here’s what we’ll cover

Payroll
Compensation
Withholding
Benefits
Payroll services
Resources

Payroll in California

California has some of the most complex payroll and labor laws in the country. These laws apply to businesses registered in California or California employers who have at least one employee.

California employers have a lot to consider when paying their teams. From compensation to tax withholdings and employee benefits, here are a few things to consider along the way.

Compensation

The California Division of Labor Standards Enforcement (DLSE) enforces California’s wage orders. These wage orders include the minimum wage for hourly workers, which can be tricky for several reasons. Here are a few things you need to know:

As of January 2020, the minimum wage for employers with 25 employees or fewer is $12 per hour. The minimum wage for employers with 26 employees or more is $13 per hour.
California is in the process of increasing its minimum wage. By January 2023, California’s minimum wage will be $15 per hour for all businesses.
Some employees are exempt from the minimum wage, including outside salespeople, direct family members of business owners, and some apprentices or student employees.
The DLSE also makes an exception for employees with disabilities. Their employers may request a license from the DLSE authorizing employment at a lower wage than the minimum wage.
One notable non-exception is waitstaff. In California, restaurants must pay waitstaff the minimum wage. Tips may not apply as credits toward that amount.

Income tax withholding

All California employers must submit employment tax returns, wage reports, and payroll tax deposits to the Employment Development Department (EDD). They must also withhold state and federal personal income taxes (PIT) from employee wages. These withholding rules apply to all residential and non-residential employees. Though, for non-residents, California PIT only applies to the days they work in California. Otherwise, there are two exceptions:

Businesses need not withhold California PIT for independent contractors but must report certain information to the EDD.
Nonresident military spouses may not have to pay California PIT if they file a form DE4.

Employee benefits

California has a few required employee benefits and some notable exceptions.

Sick time: Most employees, including temporary or part-time employees, are entitled to paid sick leave. Sick leave laws include employees who live out of state but work in California at least 30 days out of the year.

Vacation time: California employers are not required to provide either paid or unpaid vacation time. However, if a business offers paid vacation time, any earned hours are considered wages and must be paid when an employee leaves.

Time off to vote: Employees must be allowed to vote in state elections. If their shift makes it difficult to vote, the employer must give them up to 2 hours of paid time off to vote.

Disability insurance: Pregnant employees can receive up to four weeks of disability insurance (DI) benefits for a normal pregnancy before the expected due date. They can also receive up to eight weeks of DI benefits after delivery to recover from childbirth.

Paid family leave: After DI benefits are complete, a parent may receive up to eight weeks of PTO, using California’s Paid Family Leave (PFL) bonding benefits. PFL benefits apply to a child’s birth, adoption, or foster care placement. Employees may also take it to care for a seriously ill family member.

Family and Medical Leave Act: The Family and Medical Leave Act (FMLA) and the California Family Rights Act (CFRA) grant employees unpaid time off to care for themselves or others. Employers may require employees to take FMLA or CFRA leave at the same time as PFL.

Workers’ compensation: All California employers must have workers’ comp insurance.

Full payroll packages

There are three QuickBooks Online Payroll products: Core, Premium, and Elite. There’s a solution for every small to mid-sized business. Check out a few of our favorite features within each product, designed to help make your payroll fully compliant with California state laws.

Core

Federal and state payroll taxes—including year-end filings—are calculated, filed, and paid automatically.**
Set up automatic payroll for salaried employees using direct deposit.**

Premium

Your time tracking data flows into your account automatically. You can approve timesheets, pay your team, and create invoices right from your phone.**
Free up your cash—automatically pay for workers’ comp when you run payroll. Our partner, AP Intego, can help you find the best policy for your business.**

Elite

We’ll pay up to $25,000 if you receive a payroll tax penalty. It doesn’t matter who made the error. We’ll make it right.
Pay your team when you want with same-day direct deposit.** Funds are withdrawn the day your employees get paid.

See plans & pricing

State resources

The California Department of Industrial Relations (DIR) has various resources for employers, from information about the minimum wage to business licenses, permits, and registrations. Here are some of the divisions or groups you can find on the DIR site and why they’re important.

The California Division of Labor Standards Enforcement, also known as the California Labor Commissioner’s Office, enforces California’s wage orders.
The Division of Occupational Safety and Health, also known as Cal/OSHA, protects and improves California workers’ health and safety.

The Employment Development Department is also a great hub of employer resources, with lots of information on payroll taxes, insurance claims, and withholdings. The EDD has several related programs that might also be helpful, including labor market information and state disability insurance.

Federal resources

The U.S. Department of Labor will be most applicable for employers looking for federal information and assistance. Notable resources include:

The Small Business Administration (SBA) also has resources for new and existing businesses. Small Business Development Centers are located around the country. In 2020, the SBA was well known for its coronavirus relief programs, which provided loans to struggling businesses.

QuickBooks Payroll resources

The QuickBooks Resource Center has several resources geared toward answering small business owners’ payroll questions. Additional resources include:

Frequently asked questions

What is California's payroll tax?

Can you calculate payroll yourself?

Why choose QuickBooks for your California-based business?

- Money movement services are provided by Intuit Payments Inc., licensed as a Money Transmitter by the New York State Department of Financial Services. For more information about Intuit Payments' money transmission licenses, please visit https://www.intuit.com/legal/licenses/payment-licenses/.
  
  Guarantee
  
  QuickBooks Online Payroll – tax penalty protection: Only QuickBooks Online Payroll Elite users are eligible to receive the tax penalty protection. If you receive a tax notice and send it to us within 15 days of the tax notice we will cover the payroll tax penalty, up to $25,000. Intuit cannot help resolve notices for customers in Collections with the IRS because IRS Collections will only work with businesses directly. Additional conditions and restrictions apply. Learn more about tax penalty protection.
  
  **Features
  
  Automated tax payments and filings: Automated tax payments and filing are available only for state and federal taxes. Enrollment in e-services is required. Local taxes require the user to print the forms and upload them to the necessary local sites. QuickBooks Online Payroll Core does not offer local tax payments and filings. Automatic filings for state new hire paperwork are available in QuickBooks Online Payroll Premium and Elite only.
  
  Auto Payroll: Available if the setup for employees and the company is complete, all employees are salaried employees, all employees are set up on direct deposit, bank verification and e-services are enabled, the account has not been on hold in the last 6 months, and the first payroll has been run successfully.
  
  QuickBooks Time tracking: Additional fees may apply. Time tracking included in the QuickBooks Online Payroll Premium and Elite subscription services. Features vary. The QuickBooks Time mobile app works with iPhones, iPads, and Android phones and tablets. Devices sold separately; data plan required. Not all features are available on the mobile app and mobile browser. QuickBooks Time mobile access is included with your QuickBooks Online Payroll Premium and Elite subscription at no additional cost. Data access is subject to cellular/internet provider network availability and occasional downtime due to system and server maintenance and events beyond your control. Product registration is required.
  
  Workers’ comp administration: Benefits are powered by NEXT Insurance and require acceptance of NEXT Insurance's Privacy Policy and Terms of Use. Additional fees will apply. There is a monthly fee (currently, $5 per month) for QuickBooks Online Payroll Core users for the QuickBooks Workers' Comp Payment Service. This non-refundable fee will be automatically added to each monthly Intuit invoice at the then-current price until you cancel. The fee is separate from any workers’ comp insurance policy premium by NEXT Insurance. Workers’ Compensation Service requires an active and paid QuickBooks payroll subscription. Eligibility criteria applies to transfer active insurance policy broker of record, including insurance carrier, policy renewal date, and payment method. Workers compensation insurance is not available in OH, ND, WA and WY.
  
  Same-day direct deposit: Available to QuickBooks Online Payroll Premium and Elite users. Payroll processed before 7 AM PT shall arrive the same business day (excluding weekends and holidays). Requires setup of direct deposit and bank verification. Same-day direct deposit may be subject to eligibility criteria. Deposit delays may vary because of third-party delays, risk reviews, or issues beyond Intuit’s control. Same-day direct deposit is available only for employees.
  
  Claims
  
  QuickBooks Payroll is the No. 1 payroll provider for small businesses: Based on the overall number of customers for QuickBooks Payroll products as of June 2020.
  
  Terms, conditions, pricing, special features, and service and support options are subject to change without notice.