California payroll compliance requirements
California employers must meet a range of ongoing payroll responsibilities to stay compliant. Here’s what you need to know to keep your business aligned with state law.
Register as an employer
In California, businesses and household employers must register with the Employment Development Department (EDD) when certain wage thresholds are met:
- Businesses: If you pay more than $100 in wages to one or more employees in a calendar quarter, you are required to register with the EDD within 15 days of becoming a subject employer.
- Household employers: If you pay a household worker $750 or more in cash wages in a calendar quarter, you must register with the EDD within 15 days of reaching this threshold.
Registration can be completed online through the EDD’s e-Services for Business portal.
Penalty: Failing to report a new or rehired employee on time may result in a $24 fine per violation or $490 per violation if the failure is part of a conspiracy. Refer to the EDD Penalty Reference Chart for specific penalties and consequences.
Provide itemized pay stubs
According to California Labor Code § 226, employers must provide workers with an itemized wage statement (pay stub) every payday or twice a month, showing details, such as:
- Total hours worked (for nonexempt employees)
- Net wages earned
- Deductions
- Pay period dates
- Employer information
- Employee information
The statement must be provided separately if employees are paid by check or cash. Records of these wage statements must be kept for at least three years.
Penalty: Failing to provide accurate or complete wage statements can result in penalties for each violation, plus possible legal fees. Not responding to an employee’s request to inspect or receive wage records within 21 days may result in a $750 fine.
Furnish required notices
Under the Wage Theft Prevention Act (Labor Code § 2810.5), employers must provide most private sector nonexempt employees with a written notice at the time of hiring. A notice template can be downloaded from the Department of Internal Relations website, or an employer can create their own. The notice must include the following required information:
- Rate of pay and basis (e.g., hourly, salary, commission)
- Overtime pay rate
- Designated payday
- Employer's name, address, and telephone number
- Any allowances claimed as part of the minimum wage (e.g., meals, lodging)
- Information about the employer's workers' compensation insurance carrier
Employers must notify employees in writing of any changes to this information within seven calendar days after the changes occur unless the changes are reflected on a timely wage statement or another writing required by law.
Offer direct deposit only with employee consent
In California, employers may pay wages through direct deposit, but only if the employee voluntarily agrees. Businesses can’t require employees to accept direct deposit. If an employee doesn’t consent, employers must provide payment by check or cash. Make sure employees choose the account where their wages will be deposited and that authorization is documented.
Adhere to timely wage payments
Employers must pay wages at least twice during each calendar month on designated paydays as outlined in the California Labor Code. Employers who fail to pay wages in accordance with the specified timeframes may be subject to civil penalties.
Penalty: The late payment penalty is $100 per unpaid employee for the first violation. For each additional or willful violation, the penalty increases to $200 per employee plus 25% of the unpaid wages.
Pay payroll taxes on time
Employers must remit payroll taxes—such as state income tax (PIT), State Disability Insurance (SDI), Unemployment Insurance (UI), and Employment Training Tax (ETT)—by their designated deadlines through the EDD’s e-Services for Business. Due dates vary depending on your payroll schedule and deposit frequency.
Penalty: Late payments may result in penalties, interest, and potential state audits. According to the EDD, penalties can include 15% of the unpaid amount plus daily interest until paid.
Comply with electronic filing and payment mandates
California employers are required to electronically file employment tax returns, wage reports, and payroll tax deposits using the Employment Development Department’s (EDD) e-Services for Business. This mandate applies to all employers, regardless of the number of employees.
Penalty: Non-compliance with the electronic filing and payment requirements can lead to significant penalties:
- A $50 penalty for each paper tax return filed.
- A $20 penalty per wage item for paper wage reports.
- A 15% penalty of the amount due for non-electronic payroll tax deposits
If you cannot file or pay payroll taxes electronically, you can request a waiver by submitting Form DE 1245W. To get the form, download it online, call the Taxpayer Assistance Center at 1-888-745-3886, or visit an Employment Tax Office.
Submit pay data reports
California law requires private employers of 100 or more employees and/or 100 or more workers hired through labor contractors to annually report pay, demographic, and other workforce data to the Civil Rights Department (CRD). This can be done online through the Pay Data Reporting Portal. The deadline for filing is the second Wednesday of May each year.
Penalty: Non-compliance can result in fines of $100 per employee—and $200 per employee for repeat violations—plus legal costs if the state takes enforcement action.
Can an employer withhold a paycheck for any reason?
No. Employers cannot withhold a paycheck for any reason not allowed by law. They are legally required to pay all earned wages on time. Deductions are only permitted if:
- Required by law (e.g., taxes, wage garnishments)
- Authorized in writing by the employee (e.g., benefits)
- Covered under a collective bargaining agreement
Employers may not withhold wages as punishment or for issues like property damage. Unlawful withholding can lead to legal action by the employee.
