California Salary Paycheck Calculator
If you’re a small business owner in The Golden State, paying employees can get complicated. It’s not as simple as taking their annual salary and dividing it by a set number of pay periods. You have to withhold the appropriate state and federal taxes from employee paychecks, pay and file payroll taxes, and follow numerous paycheck rules. Don’t worry, we’ve got you covered. Below, we’ve answered the most frequently asked questions about California payroll taxes and paycheck rules.
California state payroll taxes
Which state payroll taxes are paid by employees?
California personal income tax: California state income tax rate ranges from 1% to 12.3%. The amount you withhold depends on information on each worker’s Form W-4 or DE 4. Your employees complete these forms when they are hired and update them whenever they need to change their tax withholding.
State disability insurance: For 2022, you’ll need to withhold 1.1% of the first $145,600 of each employee’s wages for state disability insurance.
Which state payroll taxes do employers pay?
Depending on your type of business, you may need to pay the following state payroll taxes:
California unemployment insurance tax: You’ll pay this state unemployment insurance tax on the first $7,000 of each employee’s wages per year—up to $450 per employee in 2022. The tax rate can change each year and is specific to your company. Check out the 2022 employer’s guide for more information.Employment training tax: As with the unemployment insurance tax, you’ll also pay this tax on the first $7,000 of each employee’s wages each year. Here, the tax rate is 0.1% for all employers. That means the 2022 maximum you’ll pay per employee is $7.
What is the salary threshold?
In California, the salary threshold is $62,400 annually for employers with 26 or more employees and $58,240 annually for employers with 25 or less employees.
Am I required to obtain Workers’ Compensation?
Requirements to obtain Workers’ Compensation vary by state; this table outlines some of the key requirements. If you determine that your company is required to purchase Workers’ Compensation, learn how to sign up for this insurance with Gusto. Sometimes, companies get a request for a workers’ comp audit—head to this article and click the workers’ comp audit reports dropdown for more information.
Federal payroll taxes
What are the federal payroll taxes employees and employers need to pay?
Both you and your employees will pay a variety of federal payroll taxes. You’ll need to pay FICA and FUTA, and your employees will need to pay FICA, federal income tax, and possibly the Additional Medicare tax. Check out the breakdown below.
Both you and your employees pay:
Federal Insurance Contributions Act (FICA) tax: FICA tax is made up of the Medicare tax and the Social Security tax. In 2022, the Social Security tax requires employers and employees to each contribute 6.2% of wages up to $147,000. The Medicare tax requires each to contribute 1.45% of all wages. See the IRS webpage for details, like maximum thresholds.
You pay:
Federal unemployment tax (FUTA): Like the state, the federal government also has an unemployment tax. It’s called FUTA and it’s an annual tax employers pay on the first $7,000 of each employee’s wages. The FUTA rate for 2022 is 6%, but many employers only have to pay 0.6% each year.
Your employees pay:
Federal income tax: You’ll need to withhold this tax from your employees’ paychecks based on information from Form W-4. Things such as marital status, withholding allowances, and salary determine how much tax to withhold. You can use the IRS withholding tables or a payroll service to calculate the correct tax withholding amount. Additional Medicare tax: The Additional Medicare tax applies to any employee earning more than $200,000 per year. In 2022, you’ll need to take out 0.9% of any wages over $200,000.
Other California payroll check rules
How often do I need to pay my employees?
Generally, California requires you to pay employees at least twice a month. However, there are exceptions for executive, administrative, and professional employees. The date, time, and location that employees are paid must be posted for all employees to see. If a regularly scheduled pay date falls on a holiday or any day when your business is closed (e.g., the weekend), you can either move the payday to the next business day or pay your employees in advance.
What information must be included on pay stubs?
The pay stubs you give your employees should include the following information:
- Company’s legal name and address
- Employee’s name and last four digits of Social Security number
- Pay period beginning and ending date
- Gross wages
- Total hours worked (for salaried nonexempt employees)
- All deductions
- Net wage
Am I required to provide paid vacation time?
Paid vacation time is not required in California, but if you provide it, there are special rules you must follow. California considers paid vacation time to be an earned wage. This means that it must be accrued and tracked in your payroll process. You can limit the amount of vacation time each employee can accrue, but you can’t have a “use it or lose it” policy that requires employees to forfeit unused earned vacation time.
Am I required to provide paid sick time?
While offering paid vacation time is optional, offering paid sick time is not.
California’s Healthy Workplace, Healthy Family Law of 2014 requires you to offer paid sick time to your employees. You can offer sick time in a few different ways, but generally, you must provide at least one hour of paid sick leave for every 30 hours worked.
As part of your payroll process, you’ll need to inform your employees of the number of sick time hours they have available. You can include this on their pay stub or provide a separate document on payday.
Are employers required to report new hires?
In California, when you hire a new employee or rehire a former employee, you must report that new worker to the New Hire Registry within 20 days of their first day of work.
When are final paychecks due to departing employees?
If you terminate a person’s employment, you must provide their final paycheck the same day you terminate them. And since California considers accrued vacation time to be an earned wage, you must also pay out any unused accrued time on their final paycheck. One exception: If you have an unlimited vacation policy, you don’t need to pay out unused vacation time when an employee leaves. Since unlimited vacation time isn’t accrued, California doesn’t consider it an earned wage.
Am I required to provide time off to vote?
California requires employers to provide employees with up to two hours of paid leave to vote, either at the beginning or end of a shift, in statewide elections. Additional time off to vote can be taken if needed, but only two hours is required to be paid.
Does California have domestic violence victim’s leave?
Yes, California law requires employers with at least 25 employees to provide unpaid domestic violence leave. This law allows all employees in the state to take time off of work if they are victim to domestic violence, sexual harassment, or stalking. This time off can be spent seeking medical or counseling services, putting together a safety plan, or seeking services from a shelter. You should be all set to start paying employees! If you have more questions you can always look to a local payroll specialist for answers.
Disclaimer
The information provided by the Employer Tax Calculator is for general information and estimation. All of the taxes or fees that apply to your business may not be accounted for, or fully up to date. Gusto, Inc. (dba “Gusto”) does not promise or guarantee that the information in the Employer Tax Calculator is accurate or complete, and Gusto expressly disclaims all liability, loss or risk incurred by employers or employees as a direct result or an indirect consequence of its use. By using the Employer Tax Calculator, you waive any rights or claims you may have against Gusto in connection with its use.