CA · Payroll tax 2026
The true cost of hiring in California
Estimate what a W-2 employee costs in California and compare it with a 1099 contract using sourced 2026 payroll-tax defaults that you can adjust to your assigned rate.
Estimate a California hire
Pre-filled with a 3.4% base new-employer rate. Adjust SUI, salary, benefits, and the 1099 rate to fit your hire.
Results update instantly. Your values stay in this browser.
A W-2 hire in California costs more than salary. Employers pay federal FICA and FUTA plus state unemployment insurance. For 2026, HiringMath uses a 3.4% base new-employer rate on the first $7,000 of wages, producing up to about $238 of state UI tax per worker before experience-rating or account-specific adjustments. California taxes wage income, which creates a withholding obligation but is not an employer-paid tax. Employment Training Tax (ETT) 0.1% on first $7,000. The calculator below combines those statutory items with editable benefits, workers' compensation, and overhead, then compares the result with a 1099 contract.
California employer tax facts
| Item | CA |
|---|---|
| Base new-employer SUI rate | 3.4% |
| SUI taxable wage base | $7,000 |
| Federal FICA (employer) | 7.65% |
| FUTA | 0.6% |
| State income tax on wages | Yes |
| Worker classification test | Strict ABC test (AB5) |
Extra employer taxes: Employment Training Tax (ETT) 0.1% on first $7,000.
- Employment Training Tax (ETT) — 0.1% on the first $7,000 of wages per employee.
Example: a $75,000 hire in California
At a $75,000 base salary with typical benefits, a W-2 employee in California costs an employer $99,325 per year — $24,325 above base pay. An equivalent 1099 contract at $75,000 would cost $24,325 less; the breakeven contract rate is $99,325.
Misclassification risk in California
Test: Strict ABC test (AB5)
AB5 uses a strict ABC framework for many workers; exceptions and claim-specific rules apply.
Penalties by stateCompare nearby rates
California's 3.4% new-employer SUI rate sits near Colorado (3.05%), Pennsylvania (3.82%), Nevada (2.95%), Illinois (2.8%). See the full 51-state comparison or the 2026 employer payroll tax reference.
Common questions
California hiring-cost FAQ
What SUI rate does HiringMath use for California?
The calculator starts with a 3.4% base new-employer rate, applied to the first $7,000 of each employee's 2026 wages. Your assigned rate can differ because of industry, surcharges, and claims history, so replace the default with the rate on your state notice when available.
Does California have a state income tax?
Yes. California taxes wage income. Employers withhold it from employee pay, but it does not directly increase the employer's payroll-tax cost.
What should employers know about worker classification in California?
AB5 uses a strict ABC framework for many workers; exceptions and claim-specific rules apply. This is a planning summary, not legal advice; confirm classification decisions with the relevant agency or counsel.