California employers face significant payroll tax changes in 2026. Staying informed about these updates is essential for maintaining compliance and avoiding costly penalties. Here's what you need to know to prepare for the new year.
2026 California Minimum Wage Update
California continues to lead the nation in minimum wage requirements. As of January 1, 2026:
- State Minimum Wage:$16.50 per hour for all employers
- Local Ordinances:Several cities exceed the state minimum (San Francisco: $18.50, Berkeley: $18.75, Emeryville: $19.40)
- Exempt Employees:Minimum salary threshold increased to $68,640 annually
Action Item: Review all employee pay rates and ensure compliance with both state and local minimum wage requirements. Update payroll systems accordingly.
State Disability Insurance (SDI) Rate Changes
The California SDI program continues to evolve. For 2026:
- SDI Employee Contribution Rate: 0.9% of wages (capped at $1,378.86 annually)
- VDI (Voluntary Plan) Rate: Employers using voluntary plans must file updated rates
- PFL (Paid Family Leave) Expansion: Extended coverage now includes bonding with adopted children
Unemployment Insurance (UI) Updates
The UI program saw several adjustments for 2026:
- UI Tax Rate Schedule: Schedule B remains in effect for 2026
- New Employer Rate: 2.8% for new employers in non-construction industries
- Wage Base Increase: Subject wages increased to $7,000 per employee
- Experience Rate: Rates range from 1.5% to 6.2% for experienced employers
Paid Sick Leave Requirements
California's Healthy Workplaces, Healthy Families Act continues to expand:
- Accrual Rate: Minimum 1 hour per 30 hours worked
- Annual Cap: Employees can accrue up to 80 hours
- Usage: Can be used for expanded reasons including domestic violence, sexual assault, and stalking
- Documentation: Employer may not require documentation until 4th day of absence
Payroll Reporting Changes
New reporting requirements for 2026:
- e-HARASSMENT Training: All California employers must provide updated harassment prevention training
- Pay Data Reporting: Employers with 100+ employees must submit pay data to CRD annually
- CalSavers: Expanded employer registration requirements
- DE 9/DE 9C: Updated forms for quarterly wage reporting
AB 5 Contractor Classification Changes
The ABC test for independent contractor classification continues to be enforced:
- Motor Carrier Carriers: New exemption requirements
- Music Industry: Modified test for session musicians
- General Contractors: Expanded presumption of employee status
Employers should review all contractor relationships to ensure compliance with the latest court decisions and regulatory guidance.
Action Items for California Employers
Your 2026 Compliance Checklist:
- ☐Update payroll systems with new minimum wage rates
- ☐Verify SDI withholding rates with payroll provider
- ☐Review and update employee pay rates
- ☐Audit contractor classifications
- ☐Schedule annual harassment prevention training
- ☐Prepare for annual pay data reporting
Stay Compliant in 2026
Navigating California's complex payroll tax landscape can be challenging. Glendale Payroll stays current on all regulatory changes so you don't have to. Our team handles compliance while you focus on growing your business.
Schedule a Compliance Review