California Hourly Paycheck and Payroll Calculator

Need help calculating paychecks? Use Gusto’s hourly paycheck calculator to determine withholdings and calculate take-home pay for your hourly employees in California.

Simply enter their federal and state W-4 information as well as their pay rate, deductions and benefits, and we’ll crunch the numbers for you.

California paychecks and taxes

If you’re a California-based employer new to the world of payroll, you’re probably learning very quickly that it’s about a lot more to California paychecks than simply giving your employees a check for their earnings. There’s also paying several employer taxes, withholding many different employee taxes, and keeping track of many state and federal laws.

An automated payroll system or an experienced accountant can help you navigate this process.

If you’re going at it alone, here’s what you need to know about both California state and federal taxes that should be calculated in your employee paychecks, plus some laws you should be aware of.

What state payroll taxes do I need to know about?

There are four state payroll taxes in California that you need to know. Two are employer contributions, meaning you pay them. The other two are withheld from your employees’ wages.

    The employer contribution ones are:

  • Unemployment insurance: Employers pay the unemployment insurance tax on the first $7,000 in wages paid to each employee each calendar year. The tax rate is subject to change every year and is specific to your business. The current annual per employee maximum is $434.
  • Employment training tax: Most employers have to pay this tax. It’s 0.1% (.001) on the first $7,000 in wages that you pay to each employee in a calendar year. That's an annual max of $7 per employee.

    The taxes that you have to withhold from employees’ wages are:

  • State disability insurance tax (SDI): You need to withhold a percentage of the first $118,371 of each employee’s wages each calendar year. In 2019, the SDI rate is 1%.
  • California personal income tax: This tax is withheld from employee wages and is based on each employee’s tax withholding selection on Form W-4 or DE 4. Check the withholding schedule or use a payroll service to determine how much tax to withhold based on your employee’s selection.

Keep in mind that not all types of employers or workers are subject to all four taxes. Use this table to determine which taxes apply to your business.

What federal payroll taxes do I need to include in each paycheck?

There are also a few federal taxes that all employers must pay or withhold.

    The tax that both employers and employees must pay is:

  • FICA, or Federal Insurance Contributions Act tax, which includes both Medicare tax and Social Security tax. For 2019, employers and employees each contribute 6.2% of wages up to $132,900 for Social Security tax. They each contribute 1.45% for Medicare tax. (There’s no wage limit on the Medicare tax.)

    The tax that employers have to pay for is:

  • FUTA, or federal unemployment tax: It’s only on the first $7,000 of each employee’s wages each year. The current tax rate is 6%, though most employers qualify for credits that can reduce their rate to 0.6%.

    The taxes that are withheld from employee wages are:

  • Federal income tax: You withhold it from their paychecks based on their withholding selection in their W-4 form. The amount of tax each employee owes varies based on their salary, household income, filing status, tax credits, and other factors.
  • Additional Medicare tax: Employees making more than a certain income amount (varies by filing status) are subject to this 0.9% tax. Employers must withhold this tax from employee wages that exceed $200,000 per year.

Anything else about California paychecks that I need to know?

Deductions to include on paychecks

If you choose to offer pre-tax contributions or deductions that are processed with your payroll, those will have to show up on paychecks as well. This includes things like health insurance, a flexible spending account, 401(k) contributions, and commuter benefits.

You may also have to show post-tax deductions for items like Roth 401(k)s or wage garnishments on your payroll.

Vacation time

In California, employers are not required to give their workers vacation time.

If you choose to offer paid vacation time though, keep in mind that it’s considered an earned wage. That means the vacation time your employee earns must be accrued and tracked as part of your payroll process.

You can put a cap on how much vacation time can be accrued, but in California, you can’t have a “use it or lose it” policy that requires employees to forfeit their earned vacation days.

And if an employee quits or is terminated, you must pay out accrued vacation days in their final paycheck since they’re considered earned wages.

Quick note: If you have an unlimited vacation policy, you don't need to pay out unused vacation time when an employee is terminated. That's because unlimited vacation time isn't accrued, so it's not considered an earned wage.

Sick time

While vacation time is optional, California’s Healthy Workplace, Healthy Family Law of 2014 does require employers to offer paid sick time. There are a few different options that employers can take, but generally, employees must earn at least one hour of paid sick leave for every 30 hours worked.

You must indicate the number of paid sick days an employee has on their paycheck or send the information in a separate document on the same day as their paycheck is issued.

Other California payroll rules to be aware of

    Here are a few other big requirements you should know:

  • You’re required to establish a regular payday and post a notice that indicates the day, time, and location your employees are paid. If your payroll falls on a holiday or a day when your business is closed, it’s OK to pay the following business day — you don’t have to pay in advance (though you can).
  • Save for a few exceptions (such as executive, administrative, and professional employees), California employers are required to pay their employees at least twice a month.
  • You have to pay your employees with good funds (i.e. no bounced checks) on the regularly designated paydays. Failing to do so is a misdemeanor.
  • The information on pay stubs must be accurate, including your company’s legal name and the dates for which the employee is being paid.
  • If an employee works overtime, their overtime wages can’t be paid any later than the next regular payroll period following the pay period when overtime was worked.
  • If you terminate an employee, you must pay them all of their wages, including their accrued vacation, immediately. California’s laws are strict here: immediately means on the day they’re terminated.