Employer Payroll State Taxes
Whether you are starting a new business, an existing employer or a household employer, California employers--both within and outside of the state--must know, understand, and abide by countess legal obligations imposed by both the U.S. Federal government and California State government. These legal obligations include, but are not limited to, California's four state payroll taxes which are administered by the Employment Development Department (EDD):
(1) Employment Training Tax (ETT) and (2) Unemployment Insurance (UI), an employer's contributions;
(3) Personal Income Tax (PIT) and (4) State Disability Insurance, both of which are withheld from employees’ wages.
If you run a company with employees, you are legally required to have unemployment insurance.
State Unemployment Insurance (SUI) is an employer-funded program required by both state and federal law. The insurance pays unemployed workers benefits while they are looking for work. SUI is required by law, and every state that you have an employee in will require you to have a SUI number and pay for state unemployment insurance.
You need SUI to protect your employees should you ever have to terminate their employment. SUI subsidizes the individual’s income while he or she finds another job. The federal government regulates the insurance, but the individual states determine the unemployment benefits your employee may receive. Both federal and state income taxes fund the program, but they do so under different names. Federal unemployment insurance benefits are withheld under FUTA (the Federal Unemployment Tax Act). State withheld insurance is typically referred to as SUI, and it’s required at both levels as your company grows.