California Payroll Laws & Requirements

In California, one 13-hour shift puts three pay rates on a single timecard: straight time for the first 8 hours, time and a half for the next 4, and double time for the last one. That daily math is where California payroll starts. Add city wage rates, uncapped SDI and a final paycheck due the moment someone is let go, and six of our seven risk factors apply: 5 out of 5 on the Payroll Complexity Score. PAGA gives California payroll laws their teeth, since one employee can sue on behalf of every coworker an error touched.

Minimum Wage in California

The California minimum wage is $16.90 an hour for every employer, whatever its size. It rises to $17.40 on January 1, 2027, a rate DIR confirmed in August 2026.

Plenty of workers sit above that floor:

• Fast food employees covered by Labor Code 1474 to 1476 earn at least $20.00 an hour.
• Covered healthcare workers get a rate set by facility type, and those tiers step up on a fixed schedule. Check the current tier each July 1.
• City and county rates go higher. The City of Los Angeles moved to $18.42 on July 1, 2026, and San Francisco and Berkeley to $19.61. The rate follows where the work is done, not where the company is based.
• Exempt staff need a salary of at least twice the state minimum: $70,304 a year now, $72,384 from January 2027.

Overtime Rules in California

California sets overtime under state law and counts it by the day as well as the week:

• Time and a half for hours over 8 in a workday or 40 in a workweek.
• Time and a half for the first 8 hours on the seventh consecutive day worked in a workweek.
• Double time for hours over 12 in a workday, and for hours over 8 on that seventh day.

A construction crew member on four 10-hour days hits 40 hours, so a federal-only setup pays no overtime. California owes 8 hours of it. More in overtime compliance software that flags violations before payday.

Pay Frequency and Payday Rules in California

Most private employers must pay at least twice a month. Under Labor Code 204, wages earned from the 1st to the 15th are due by the 26th, and wages from the 16th to month-end by the 10th of the next month. Labor Code 207 requires paydays to be posted.

Weekly and biweekly payrolls work if pay goes out within 7 days of the period closing. Exempt staff can be paid monthly, and overtime can wait for the next regular payday.

Final Paycheck Deadlines in California

The California final paycheck law leaves almost no gap between the last shift and the last check:

• Termination or layoff: all wages are due immediately, at the time of separation, including unused vacation.
• Resignation without notice: due within 72 hours.
• Resignation with at least 72 hours' notice: due on the last day of work.

Miss it and Labor Code 203 adds waiting time penalties of one day's wages for each day late, up to 30 days. For a retail associate on 8 hours a day at $25.00, that's up to $6,000 on top of the wages owed.

California Income Tax and Local Withholding

California taxes wages on a progressive scale with a top rate of 13.30%. That figure includes the 1% Mental Health Services Tax on income over $1 million. Withholding follows EDD's schedules and each employee's DE 4.

California payroll taxes go beyond income tax:

• SDI is withheld from employees at 1.3% of all wages in 2026, up from 1.2% in 2025. There has been no wage ceiling since 2024.
• UI is employer-paid on the first $7,000 per employee. New employers start at 3.4%.
• ETT is employer-paid at 0.1% on the same $7,000.

No California city or county withholds a local income tax from wages. For where tax setups usually break, read what operators get wrong in payroll tax management.

Payroll Record Retention in California

Labor Code 1174 sets 3 years for records of hours, pay rates and wages at each work location, and Labor Code 226 sets the same for wage statements. EDD wants payroll tax records kept for 4 years, so most employers keep everything for 4.

Where California Payroll Goes Wrong

Most errors here come from settings built for federal rules, or copied from another state, then run against California hours.

• Daily overtime: Overtime only triggers past 40 hours a week. What it costs: Unpaid overtime on every shift over 8 hours.
• Double time: Hours past 12 paid at 1.5x. What it costs: Half an hour's pay short for every hour over 12.
• Seventh day: The consecutive-day count resets when a schedule changes. What it costs: Missed premium pay for the whole seventh day.
• Local minimum wage: Staff at a city location paid the state rate. What it costs: Back wages at the local rate, per hour, per employee.
• Exempt salary: Salaries not raised on January 1 with the state minimum. What it costs: Exempt status lost, with overtime owed back to the start of the year.
• Meal and rest breaks: Late or missed breaks not paid as a premium. What it costs: One extra hour of pay per day, per type of break missed.
• Final paycheck: Termination pay sent on the next regular payday. What it costs: Up to 30 days of wages in waiting time penalties.

PAGA is why these errors rarely stay small here. One employee can claim penalties for every affected coworker, usually per pay period. Since the 2024 reforms, the cap drops to 15% for employers that took reasonable steps to comply before a claim. See our full guide to PAGA compliance and how to catch underpayment before it becomes wage theft.

What Changes in California in 2027

• Jan 1, 2027 (confirmed): State minimum wage rises to $17.40. DIR confirmed it in August 2026. Update every location paid the state rate before the first pay period that includes January 1.
• Jan 1, 2027 (confirmed): Exempt salary floor rises to $72,384. Anyone salaried below it needs a raise or a move to hourly pay.
• Jan 1, 2027 (check before payroll): New SDI and UI rates. EDD sets both every year. Load the 2027 figures before the first January run.
• Jan 1 and Jul 1 (check before payroll): Local minimum wage updates. Many cities adjust on one or both dates.

Running Payroll in California Without Errors

Before each payday:

• Match every location's pay rates against the state rate, the local rate and any sector rate that applies.
• Test timecards for daily overtime, double time and seventh-day hours, not only the weekly total.
• Pay a premium hour for each late or missed meal or rest break.
• Confirm SDI is withheld at 1.3% on all wages, with no cap.
• Flag every termination in the period and confirm the final check went out the same day.
• Check each wage statement for every required item, sick leave balance included.
• Keep a record of these checks. Under PAGA, proof of reasonable steps is what earns the 15% cap.