Payroll California, Unique Aspects of California Payroll Law and Practice

The California State Agency that oversees theemployee's choice of financial institution must meet
collection and reporting of State income taxesfederal Regulation E regarding choice of financial
deducted from payroll checks is:institutions.
Employment Development DepartmentCalifornia does not allow compulsory direct deposit
800 Capitol MallCalifornia State Wage and Hour Law provisions
Sacramento, CA 95814concerning pay stub information detail the following
888-745-3886information must be on the paystub.
California requires that you use California form "DE 4,- Gross and net earnings
Employee's Withholding Allowance Certificate" instead- Hours worked at each hourly rate for hourly workers
of a Federal W-4 Form for California State Income- Piece rate and number of pieces
Tax Withholding.- Deductions
Not all states allow salary reductions made under- Pay period dates
Section 125 cafeteria plans or 401(k) to be treated in- Employee's name and social security number
the same manner as the IRS code allows. In California- Employer's name and address
cafeteria plans: are not taxable for income taxIn California employees must be paid at least
calculation; are not taxable for unemploymentsemimonthly, monthly for FLSA exempt employees.
insurance purposes. 401(k) plan deferrals are: notThe lag time between earned and paid is governed by
taxable for income taxes; are taxable forstatute in California. Wages earned from the 1st
unemployment purposes.through the 15th of the month must be paid by the
In California supplemental wages are taxed at a 6%26th. Wages earned from the 16th through the end of
flat rate, 9.3% for stock options and bonuses.the month must be paid by the 10th of the following
You are not required to file California State W-2s.month. Exempt employees by the 26th of the month
The California State Unemployment Insurance Agencyfor the entire month (a safe harbor is payment within 7
is:days after the pay period.)
Employment Development DepartmentCalifornia payroll law requires that involuntarily
P.O. Box 826880 - MIC 94terminated employees must be paid their final pay
Sacramento, CA 94280-0001immediately; within 72 hours for seasonal employees;
888-745-3886within 24 hours for certain motion picture (by next
The State of California taxable wage base forpayday if laid off) and certain oil drilling employees.
unemployment purposes is wages up to $7000.00.Voluntarily terminated employees must be paid their
California requires Magnetic media reporting offinal pay within 72 hours; immediately if 72 hours' notice
quarterly wage reporting if the employer has at leastof quit is given; strikers on next regular payday.
250 employees that they are reporting that quarter.Deceased employee's wages to a maximum of
Unemployment records must be retained in California$5,000.00 must be paid to the surviving spouse or
for a minimum period of four years. This informationconservator when an Affidavit of right and proof of
generally includes: name; social security number; datesidentity are presented.
of hire, rehire and termination; wages by period; payrollEscheat laws in California require that unclaimed
pay periods and pay dates; date and circumstances ofwages be paid over to the state after one year.
termination.The employer is further required in California to keep a
The California State Agency charged with enforcingrecord of the wages abandoned and turned over to
the state wage and hour laws is:the state for a period of seven years.
The Department of Industrial RelationsThere is no provision in California law concerning tip
Division of Labor Standards Enforcementcredits against State minimum wage.
P.O. Box 420603In California the payroll laws covering mandatory rest
San Francisco, CA 94142-3660or meal breaks are a 30-minute meal break after five
The provision in the law for minimum wage in thehours; 30 minutes after 10 hours; 10-minute rest after
State of California is $6.75 per hour.four hours.
The general provision in California State Law coveringCalifornia law concerning record retention of wage and
paying overtime in a non-FLSA covered employer ishour records is two years.
one and 1/2 times regular rate after an 8 hour day, 40The California agency charged with enforcing Child
hour week in most industries. Check for other overtimeSupport Orders and laws is:
rules and exemptions.Department of Child Support Services
California State new hire reporting requirements areP.O. Box 944245
that every employer must report every new hire,Sacramento, CA 95244-2440
rehire and contractor who is paid over $600.00. The916-654-1532www,childsup,cahwnet.gov/default.htm
employer must report the federally required elementsCalifornia has the following provisions for child support
of:deductions:
- Employee's name- When to start Withholding? 10 days after service
- Employee's address- When to send Payment? Within 7 days of Payday.
- Employee's social security number- When to send Termination Notice? When next
- Employer's namepayment is due
- Employers address- Maximum Administrative Fee? $1 per payment.
- Employer's Federal Employer Identification Number- Withholding Limits? 50% of disposable earnings.
(EIN)Please note that this article is not updated for changes
Plus date of hire; state EIN; date, dollar amount,that can and will happen from time to time.
expiration date of contract.Charles J. Read, CPA has been in the payroll,
This information must be reported within 20 days ofaccounting and tax business for 30 years,the last
the hiring or rehiring; or after $600.00 minimum is met orfifteen in private practice. Mr. Read is the author of
contract is signed whichever is earlier."Tax and Accounting Issuesin Forming a New
.Business."
The information can be sent as a W4 or equivalentTo find professional payroll services at a budget price
DE34 by mail, fax or electronically.go to paperless payroll company.
There is a $24.00 to $490.00 penalty for a late reportFor a full service payroll bureau with CPA's on staff
in California.visit .
The California new hire-reporting agency can beSee an excerpt of Mr. Read's interviews from William
reached at 916-657-0529 or on the web atShatner's "Heartbeat of America"television show on
California does allow compulsory direct deposit but thethe web sites linked above.