Employer of Record For CaliforniaGuide to Hiring Employees in California
Your guide to hiring employees in California, covering employment and labor laws, payroll, benefits, onboarding and taxes. You can also manage and pay your contractors in California through PamGro.
Capital CitySacramento
TimezonePST (GMT-8)
Paid LeaveNo Legal Requirement
Income Tax1% - 13.3%
Employer Tax7.65%
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Employer Of Record In California
How to Hire Employees In California?
Hiring in California for the first time can be challenging, especially with the state’s complex employment laws. Whether you’re hiring independent contractors, setting up a legal entity, partnering with a PEO, or using an Employer of Record (EOR), it’s essential to understand the local employment landscape. PamGro’s comprehensive guide is here to help, whether you’re onboarding local talent or relocating team members.
Here are four primary ways companies can hire employees in California:
- Establishing a local entity: Creating a legal entity in California allows for direct hiring, but it can be costly and time-consuming. However, it gives you full control over employment and reduces risk exposure.
- Partnering with an Employer of Record (EOR): An EOR, like PamGro, takes on the legal responsibilities of employment, acting as the employer on your behalf. This option streamlines hiring, payroll, and compliance with California’s labor laws, helping you hire in California without navigating the complex legal landscape yourself.
- Working with a Professional Employer Organization (PEO): A PEO, such as PamGro, co-employs your team, managing essential HR functions like payroll, benefits, and compliance. Partnering with a PEO ensures you meet California’s labor regulations while offering competitive employee benefits.
- Hiring independent contractors: Hiring independent contractors can be more cost-effective, but California has strict contractor classification rules. Proper classification is essential to avoid penalties for misclassification when hiring in California.
Complying with California specific employment regulations and federal laws is critical to avoiding legal risks and costly fines. Our guide focuses on hiring in California, employment compliance, and how PamGro’s services can support your business as you navigate the complexities of hiring in the state.
How does an EOR work in Mexico?
The employment relationship involves three parties:
Your Company: Manages the employee’s workload, performance, and deliverables.
The EOR: Acts as the legal employer, handling compliance, payroll, and HR administration.
The Employee: Works directly with your team but is officially employed by the EOR.
Example Workflow:
You identify the talent you want to hire in Mexico.
The EOR drafts a compliant employment contract.
The employee signs the contract and is onboarded.
You manage the employee’s tasks and performance.
The EOR processes payroll, pays taxes, and handles all compliance.
Key Things to Know About Hiring in California
Do I Need an EIN or Payroll Tax Number To Employ in California?
Do I Need an EIN or Payroll Tax Number To Employ in California?
Employers in California are required to have both a Federal Employer Identification Number and a California payroll tax number to hire employees.
Working Hours in California
Standard working hours are 8 hours per day and 40 hours per week.
What Is Considered Full-Time Employment in California?
There is no mandated amount of hours. However, 35 to 40 hours per week is generally considered full-time.
Probation Period in California
Probation periods are not legally mandated, either federally or by state laws.
| Number of Employees | Length of Employment |
|---|---|
| Statutory Working Hours | 44 Hours per Week or 8 hours per day for a full-time workweek. |
| Overtime | Overtime is restricted to three hours a day, no more than three times a week. Overtime is to be paid at a rate of 100% for the first nine hours of the week and 200% if the employee has worked overtime for more than nine hours. |
| Rest Period | For every six working days of the week, there must be one rest day. There must be a break of at least 30 minutes on a typical working day of eight hours. |
Labor Laws in California
Minimum Wage in California
As of January 1, 2024, California’s statewide minimum wage is $16.00 per hour for all employers.
- However, several cities and counties in California have established local minimum wages that exceed the state rate.
- For instance, as of 2024, San Francisco’s minimum wage is $18.07 per hour, and West Hollywood’s is $19.08 per hour.
California Anti-Discrimination Laws
Employees may not be unfairly discriminated by against:
- Biological sex,
- Race and national origin,
- Age (applies to individuals between 40 and 70 years of age),
- Pregnancy, child, or spousal support withholding,
- Sexual orientation,
- Gender and gender identity,
- Religion,
- AIDS/HIV status, and
- Disability (mental, physical)
- Genetic information.
Employee Cost CalculatorGet an instant breakdown of the true costs of hiring in California.
Onboarding New Hires in California
We can help you get your new employee started in California fast, with a minimum onboarding time from just 1-2 working days. Note that the timeline is dependent upon registration with the local authorities, and begins after the employee has submitted all the required information on the Playroll platform.
For non-citizens of the US, a work eligibility assessment may be required, and can add three extra days to the onboarding time. If a follow-up is needed, there may be additional delays.
Please note that payroll cut-off dates can impact the actual first day of employment. Playroll’s payroll cut-off date is the 10th of the month, unless otherwise specified.
Payroll Taxes For California
Californian law mandates that employers pay employees at least twice a month. This requirement ensures employees are paid no less frequently than semimonthly.
- Employers must provide wages at least twice monthly, with no more than 16 days between pay periods.
- While twice-monthly is the minimum, employers may choose more frequent cycles, such as biweekly (every two weeks) or weekly.
| Number of Employees | Length of Employment |
|---|---|
| Corporate Tax |
|
| Payroll Tax |
|
| Withholding Tax (for Non-Residents) | For non-resident employees or foreign income flows, additional withholding taxes may apply:
|
| Employer Social Security Contributions |
|
Employee Taxation
1. Income Tax (ISR – Impuesto Sobre la Renta)
Mexico applies a progressive, slab-based income tax structure for residents. As employee salaries increase, so does the marginal tax rate.
Resident Income Tax Brackets (MXN)
| Annual Income Range (MXN) | Tax Rate |
|---|---|
| $1 – $8,952.49 | 1.92% |
| $8,952.49 – $75,984.55 | 6.40% |
| $75,984.55 – $133,536.07 | 10.88% |
| $133,536.07 – $155,229.80 | 16.00% |
| $155,229.80 – $185,852.57 | 17.92% |
| $185,852.57 – $374,837.88 | 21.36% |
| $374,837.88 – $590,795.99 | 23.52% |
| $590,795.99 – $1,127,926.84 | 30.00% |
| $1,127,926.84 – $1,503,902.46 | 32.00% |
| $1,503,902.46 – $4,511,707.37 | 34.00% |
| $4,511,707.37+ | 35.00% |
California Employment Taxes
Employer Tax Contributions
Employee Payroll Tax Contributions
| Employee Payroll Tax Contribution | Tax Rate |
|---|---|
| State Disability Insurance (SDI) | 1.1% of gross wages |
| Personal Income Tax | Up to 12.3% of gross wages |
| Social Security | As per federal legislation |
| Medicare | As per federal legislation |
Tax Due Dates in California
In the United States, both federal and California state income tax returns are typically due on April 15 each year. If April 15 falls on a weekend or holiday, the deadline is extended to the next business day. California has, in certain years, provided automatic extensions for state tax filings, differing from the federal schedule.
Pension in California
In California, private-sector employers with five or more employees must offer a retirement plan (this is going to extend to employers with 1 -4 employees with deadline for compliance being 31 December 2025). If they don’t already have one, they’re required to enrol in the state-sponsored CalSavers program. This program is easy to set up and doesn’t require employer contributions—employers simply facilitate employee participation. Employees are automatically enrolled but have the choice to opt out, and they can adjust their contribution rates from the default setting. Employers who already offer a qualified retirement plan can certify their exemption from CalSavers.
Employment Termination Protocols in California
Termination Process in California
In California, employment is generally “at-will,” meaning either the employer or employee can end the employment relationship at any time, with or without notice. However, employers must follow key requirements:
- Final Pay: If an employee is terminated, the final paycheck must be provided on their last day. For resignations, it’s due within 72 hours, or on the last day if the employee gave 72 hours’ notice.
- Unused Vacation: Any accrued vacation or PTO must be paid out with the final paycheck.
- Health Coverage: Employers must inform departing employees of their COBRA rights if applicable.
Notice Period in California
There is no general requirement for employers to provide advance notice before terminating an employee. However, under the Worker Adjustment and Retraining Notification (WARN) Act, employers with 75 or more employees must provide 60 days’ notice if conducting a mass layoff, plant closure, or significant downsizing affecting a substantial number of employees.
Severance in California
California law does not require severance pay, though it may be offered at the employer’s discretion.
Hiring Employees in California with an employer of record
Discuss how an EOR handles onboarding, including setting up compliant employment contracts, registering for taxes, and managing benefits like California’s superannuation system (if applicable).
The employer of record is responsible for:
- Employment Compliance: Ensure all employment contracts comply with California’s labor laws and regulations, including proper classification of employees.
- Payroll Management: Calculate, process, and distribute employee salaries in accordance with California’s payroll laws, including deductions for taxes and social security contributions.
- Tax Filing and Contributions: Handle the registration, filing, and payment of employer taxes and social security contributions to the relevant authorities.
- Employment Contracts: Draft and maintain compliant employment agreements, detailing salary, benefits, working hours, and termination terms in line with California’s legal requirements.
- Benefits Administration: Provide mandatory employee benefits as required by California’s labor laws, such as health insurance, pension contributions, and statutory leave.
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