California SDI and Paid Family Leave 2026: Employer Guide

California's State Disability Insurance (SDI) program is one of the state's most important employee protections — and one of the most commonly misunderstood payroll obligations for employers. SDI, along with its companion program Paid Family Leave (PFL), provides wage replacement benefits to workers who need time off for medical reasons or family caregiving. As an employer, you do not pay for SDI out of pocket, but you are responsible for withholding the correct amount from every employee's paycheck and remitting it to the EDD. Getting it wrong means penalties, interest, and audit risk. This guide covers everything California employers need to know about SDI and PFL for 2026.

What Is California SDI?

California's State Disability Insurance program provides short-term, partial wage replacement to workers who cannot work due to a non-work-related illness, injury, or pregnancy. The program is administered by the California Employment Development Department (EDD) and has been in place since 1946, making it one of the oldest state disability programs in the country.

SDI is distinct from workers' compensation, which covers work-related injuries and illnesses. If an employee is hurt on the job, that claim goes through your workers' comp policy. If they are hurt outside of work — a car accident, a surgery, pregnancy-related disability — SDI is what provides their income while they recover.

The critical point for employers: SDI is 100% employee-funded. The money comes from employee wages through payroll withholding. You do not contribute any employer dollars to SDI. However, you have the legal obligation to withhold the correct amount and remit it to the EDD on time. Failing to do so makes you personally liable for the tax, plus penalties and interest.

2025 SDI Withholding Rate and Wage Base

For 2025, the SDI withholding rate is 1.1% of each employee's taxable wages. This rate is set annually by the EDD based on the projected needs of the SDI fund.

Here is what the SDI withholding looks like at various salary levels under the current rate:

• $50,000 annual salary: $550 per year in SDI ($21.15 per biweekly paycheck)
• $75,000 annual salary: $825 per year in SDI ($31.73 per biweekly paycheck)
• $100,000 annual salary: $1,100 per year in SDI ($42.31 per biweekly paycheck)
• $200,000 annual salary: $2,200 per year in SDI ($84.62 per biweekly paycheck)
• $500,000 annual salary: $5,500 per year in SDI ($211.54 per biweekly paycheck)

The rate can change from year to year. In recent history, the SDI rate was 1.1% for 2024 and 2025. The EDD typically announces the next year's rate in the fall. Always check the EDD's published rate schedule before the start of each calendar year to ensure your payroll system is using the correct percentage.

SDI Benefit Amounts and Duration

When an employee files a successful SDI claim, they receive partial wage replacement — not their full salary. The benefit amount depends on the employee's earnings during a specific base period:

• Wage replacement rate: Approximately 60% to 70% of the employee's weekly wages, depending on income level. Lower-wage workers receive a higher percentage (closer to 70%), while higher-wage workers receive closer to 60%.
• Maximum benefit duration: Up to 52 weeks of benefits per disability claim.
• Waiting period: There is a 7-day waiting period before benefits begin. The first day of the disability is considered Day 1 of the waiting period, and benefits are payable starting on Day 8.

Employees file their SDI claims directly with the EDD. As an employer, you may be asked to complete the employer portion of the claim form (typically within 2 business days of receiving the form). You cannot deny or interfere with an employee's SDI claim — it is a state-administered benefit, and eligibility is determined by the EDD.

Paid Family Leave (PFL) Explained

Paid Family Leave is not a separate tax — it is a benefit program funded entirely by SDI contributions. When employees pay SDI, they are also funding their PFL benefits. There is no additional withholding or separate line item on the paycheck for PFL.

PFL provides wage replacement benefits to employees who need time off to:

• Bond with a new child (birth, adoption, or foster care placement)
• Care for a seriously ill family member (spouse, registered domestic partner, parent, parent-in-law, child, grandparent, grandchild, or sibling)
• Participate in a qualifying military event when a spouse, registered domestic partner, parent, or child is on active duty in the U.S. Armed Forces

PFL is a wage replacement program, not a job protection program. On its own, PFL does not guarantee that an employee's job will be held for them. However, employees taking PFL may also be protected by other laws — including the California Family Rights Act (CFRA) and the federal Family and Medical Leave Act (FMLA) — which do provide job protection. In practice, most employees who qualify for PFL also have job protection under CFRA.

PFL Benefit Amounts and Duration

• Wage replacement rate: Same as SDI — approximately 60% to 70% of weekly wages, depending on income.
• Maximum benefit duration: Up to 8 weeks within any 12-month period.
• Waiting period: Unlike SDI, there is no waiting period for PFL benefits. Benefits begin from the first day of the qualifying leave.

PFL benefits can be taken all at once or intermittently. For example, a new parent might take 4 weeks immediately after a child's birth and then take the remaining 4 weeks later in the year. Bonding claims must be filed within the first year of the child's birth, adoption, or foster placement.

Employer Withholding and Filing Obligations

Your responsibilities as a California employer regarding SDI are straightforward but must be handled correctly:

Step 1: Withhold SDI from Every Paycheck

Calculate 1.1% (2025 rate) of each employee's gross taxable wages and withhold that amount. There is no wage base cap — withhold on all wages. SDI applies to most forms of compensation, including regular wages, commissions, bonuses, and overtime pay.

Step 2: Remit to the EDD Quarterly

SDI withholdings are reported and remitted to the EDD as part of your quarterly payroll tax filing. You file two forms:

• DE 9 (Quarterly Contribution Return and Report of Wages): Summary of total wages, total contributions, and tax due for the quarter.
• DE 9C (Quarterly Contribution Return and Report of Wages — Continuation): Employee-level detail showing each employee's wages and withholdings for the quarter.

Quarterly filing deadlines are:

• Q1 (January-March): Due April 30
• Q2 (April-June): Due July 31
• Q3 (July-September): Due October 31
• Q4 (October-December): Due January 31 of the following year

Step 3: Provide Required Notices

California law requires employers to provide employees with information about SDI and PFL benefits. You must give each new hire the DE 2515 brochure ("State Disability Insurance Provisions") and the PFL brochure at the time of hire. You must also provide SDI/PFL information when an employee takes a leave of absence for a qualifying reason.

Step 4: Respond to Claim Notices

When an employee files an SDI or PFL claim, the EDD may send you a notice requesting wage and employment information. You are required to respond within 2 business days. Failure to respond can result in penalties and delays in the employee's benefits.

Voluntary Plan for Disability Insurance (VPDI)

California law allows employers to establish a Voluntary Plan for Disability Insurance (VPDI) as an alternative to the state SDI program. A VPDI must provide benefits that are at least as favorable as the state plan in every respect — including benefit amount, duration, and eligibility. Many large employers choose VPDI to offer enhanced benefits or to gain more administrative control.

Key facts about VPDI:

• The plan must be approved by the EDD before it takes effect.
• At least a majority of employees must consent to the plan (through a vote or implied consent).
• The employee contribution rate under VPDI cannot exceed the state SDI rate (currently 1.1%).
• The employer must post a surety bond or provide a security deposit to guarantee benefit payments.
• Employees under a VPDI still receive the same PFL benefits — VPDI can also cover PFL, or the employer can use the state PFL program alongside the voluntary disability plan.
• Employers with VPDI submit quarterly reports (DE 9 and DE 9C) similarly to the state plan but indicate the voluntary plan status.

VPDI is most common among large employers, universities, and companies that want to provide richer disability benefits (for example, 100% wage replacement for a certain period). For most small businesses, the state SDI program is simpler to administer, and the employer's only role is proper withholding and remittance.

Common Employer Mistakes with SDI and PFL

Based on EDD audit findings and common payroll errors, here are the mistakes California employers make most often with SDI:

• Applying the old wage base cap. Since 2024, there is no SDI wage cap. If your payroll system still stops withholding at a certain threshold, you are under-withholding — and you will owe the difference plus penalties.
• Using the wrong rate. The SDI rate changes periodically. Always verify the current rate on the EDD website before the start of each calendar year.
• Confusing SDI with workers' compensation. SDI covers non-work-related disability. Workers' comp covers work-related injuries. They are completely separate programs with separate funding.
• Denying leave or retaliating against employees who file claims. You cannot terminate, demote, or retaliate against an employee for filing an SDI or PFL claim. Doing so exposes you to wrongful termination liability.
• Failing to respond to EDD claim notices on time. You have 2 business days to respond. Late responses can result in penalties.
• Not providing required brochures. Failure to provide the DE 2515 and PFL brochures to new hires and employees taking leave is a compliance violation.

Frequently Asked Questions

Does SDI apply to all employees?

SDI applies to most W-2 employees in California. Certain employees are exempt, including some government employees, employees covered by railroad unemployment insurance, and employees of nonprofit organizations that have elected to be exempt. Independent contractors (1099 workers) are not covered by SDI. If you have questions about specific exemptions, consult the EDD or a payroll professional.

Can an employee collect SDI and PFL at the same time?

No. An employee cannot receive SDI disability benefits and PFL benefits simultaneously. However, an employee can transition from SDI to PFL — for example, a new mother might receive SDI for her recovery period and then transition to PFL for bonding time with her baby.

Is PFL job-protected?

PFL itself is a wage replacement benefit, not a job protection law. However, most employees who qualify for PFL are also protected under CFRA (California Family Rights Act) or FMLA (Family and Medical Leave Act), which do require employers to hold the employee's position. Employers with 5 or more employees are covered by CFRA. Consult an employment attorney if you have questions about job protection obligations.

Do I need to track SDI withholding separately from other California taxes?

Yes. SDI must be reported as a separate line item on the DE 9 quarterly return. It should also be reflected separately on the employee's W-2 (Box 14 or the state/local section, depending on your payroll system). Most payroll software handles this automatically.

What if an employee works in California but lives in another state?

SDI withholding is based on where the work is performed, not where the employee lives. If an employee works in California, you must withhold SDI regardless of their state of residence. Remote workers can create complications — consult a payroll professional for multi-state situations.