California SUI Rates 2026: What Employers Pay for Unemployment Insurance

State Unemployment Insurance (SUI) is one of the four payroll taxes California employers must pay. Unlike SDI and PIT, which are employee-paid taxes you withhold, SUI is a direct employer expense — it comes out of your pocket, not your employees' paychecks.

Understanding how SUI rates work, how they are calculated, and what drives them up or down can save your business hundreds or even thousands of dollars per year. This guide covers everything California employers need to know about SUI rates in 2026.

SUI at a Glance

New Employer Rate: 3.4%

When you first register with California EDD as an employer, you are assigned a new employer SUI rate of 3.4%. This rate applies for your first two to three years of operation — essentially until EDD has enough data about your claims history to calculate an experience-based rate.

At 3.4% on a $7,000 wage base, your SUI cost per employee is:

$7,000 x 3.4% = $238 per employee per year

For a business with 5 employees, that is $1,190 per year in SUI taxes. For 20 employees, it is $4,760 per year.

Experienced Employer Rates: 1.5%–6.2%

After you have been an employer long enough to build a claims history (typically 2–3 years), EDD transitions you to an experience-rated SUI rate. This rate is recalculated annually and mailed to you each December on Form DE 2088 (Tax Rate Notice).

The experienced employer rate range in California is:

• Minimum rate: 1.5%
• Maximum rate: 6.2%

At the extremes, here is what the annual cost per employee looks like:

The difference between the minimum and maximum rate is $329 per employee per year. For a business with 50 employees, that is a difference of $16,450 annually — a meaningful amount for any small business.

The $7,000 Wage Base

SUI applies only to the first $7,000 in wages paid to each employee during the calendar year. Once an employee's year-to-date wages exceed $7,000, you stop paying SUI for that employee for the remainder of the year.

This means:

• For employees earning $7,000 or more annually (which is almost everyone working even part-time), your SUI obligation is fixed at your rate times $7,000.
• Whether an employee earns $30,000 or $300,000, the maximum SUI cost is the same: your rate multiplied by $7,000.
• Most employers will have paid all their SUI for the year within the first quarter or two, depending on employee wages.

Employment Training Tax (ETT)

Closely related to SUI is the Employment Training Tax (ETT), another employer-paid tax that funds workforce training programs in California. ETT is simple:

• Rate: 0.1% (one-tenth of one percent)
• Wage base: $7,000 per employee per year (same as SUI)
• Maximum annual cost per employee: $7.00
• Who pays: Employer (no employee contribution)

Every employer subject to SUI also pays ETT. There is no experience rating for ETT — all employers pay the same flat 0.1% rate. At $7 per employee per year, ETT is a minimal expense, but it is still a required tax that must be reported on your quarterly DE 9 filing.

Total Annual Cost Per Employee

Combining SUI and ETT, here is the full picture of California's employer-paid unemployment taxes:

So the total California state unemployment tax cost ranges from $112 to $441 per employee per year. For most employers, the actual cost will fall somewhere in between based on their experience rating.

How Experience Rating Works

Your SUI rate is determined by California's experience rating system. This system is designed to assign higher rates to employers who generate more unemployment claims and lower rates to those who maintain stable employment. Here is how it works:

The Reserve Account Ratio

EDD maintains a UI reserve account for every California employer. Your SUI contributions are credited to this account, and unemployment benefits paid to your former employees are charged against it. The key calculation is:

Reserve Account Ratio = Reserve Account Balance / Average Base Period Wages

Where "average base period wages" refers to the average annual taxable wages you have paid to employees over the prior three years (approximately). A higher ratio means your account is well-funded relative to your payroll size, which earns you a lower rate.

Rate Schedule

EDD publishes a rate schedule each year that maps reserve account ratios to specific SUI rates. The schedule has multiple columns (called "schedules"), and the specific schedule in effect depends on the overall health of the state UI fund. When the state fund balance is healthy, a more favorable schedule is used (lower rates overall). When the fund is depleted, a less favorable schedule applies (higher rates).

Your specific rate on the schedule is determined by your individual reserve account ratio. The better your ratio, the lower your rate within whichever schedule is in effect.

Your UI Reserve Account

Understanding your reserve account is key to managing your SUI costs:

Positive Balance

A positive reserve account balance means your cumulative SUI contributions exceed the cumulative unemployment benefits charged to your account. This is the ideal situation. Employers with strong positive balances receive the lowest SUI rates. A positive balance builds over time when you have stable employment and few (or no) unemployment claims.

Negative Balance

A negative reserve account balance means more has been paid out in unemployment benefits to your former employees than you have contributed in SUI taxes. This results in a higher SUI rate — potentially up to the 6.2% maximum. A negative balance can occur after layoffs, seasonal workforce reductions, or high employee turnover.

How Unemployment Claims Affect Your Rate

When a former employee files for and receives unemployment benefits, those benefit payments are charged to your reserve account. The more claims you have, the faster your reserve is depleted, and the higher your SUI rate climbs.

What Gets Charged to Your Account

• Layoffs and reductions in force: Benefits paid to employees you laid off are charged to your account.
• Terminations for non-misconduct reasons: If you terminate an employee for performance issues (not willful misconduct), they may qualify for UI benefits, and those are charged to your account.
• Voluntary quits for good cause: In some cases, employees who quit for valid reasons (unsafe working conditions, significant changes to job duties) can receive UI benefits charged to your account.

What Is NOT Charged to Your Account

• Termination for willful misconduct: If an employee is fired for documented misconduct (theft, insubordination, policy violations), they are generally disqualified from UI benefits, and no charge hits your account.
• Voluntary quits without good cause: Employees who resign voluntarily without a qualifying reason typically do not receive UI benefits.
• Charges that are successfully protested: You have the right to respond to EDD's notice when a former employee files a claim. If you successfully demonstrate that the separation was due to misconduct or that the claimant is not eligible, the charge may be reversed.

Strategies to Keep Your SUI Rate Low

While you cannot directly control your SUI rate, you can take actions that influence it over time:

1. Maintain stable employment: Avoid unnecessary layoffs and terminations. Every successful unemployment claim depletes your reserve account.
2. Document performance issues: If you do need to terminate an employee, thorough documentation of performance problems or misconduct gives you a stronger case to protest the UI claim.
3. Respond to every claim notice: Never ignore the DE 1101CZ. Your timely, documented response is your primary tool for preventing unwarranted charges to your account.
4. Hire carefully: A strong hiring process reduces early turnover, which is one of the biggest drivers of unemployment claims for small businesses.
5. Review your DE 2088 annually: Each December, check your rate notice for accuracy. Errors happen, and if your rate seems incorrect, you have the right to request a review.
6. Consider the cost of seasonal workers: If your business is seasonal, the regular hiring and laying off of workers will increase your SUI rate. Factor this into your cost planning.

Frequently Asked Questions

When does my rate change from the new employer rate to an experience rate?

EDD typically transitions you to an experience-based rate after you have been registered for approximately two to three full fiscal years (California's fiscal year runs July 1 through June 30). Your first experience-rated rate will appear on the DE 2088 notice mailed in December following your qualifying period.

Can my SUI rate change mid-year?

No. Your SUI rate is set annually and remains fixed for the entire calendar year. The rate effective January 1 applies through December 31, regardless of any claims filed during the year. Changes are reflected in the following year's rate assignment.

What if I think my rate is wrong?

You can request a review of your rate by contacting EDD or filing a written protest within 60 days of receiving your DE 2088 rate notice. Common reasons for protests include benefit charges that were incorrectly assigned to your account or errors in the wage data used to calculate your reserve ratio.

Do part-time employees count the same as full-time for SUI purposes?

Yes. SUI is based on wages paid, not hours worked. Every employee who earns wages in California is subject to SUI on their first $7,000 of annual earnings, whether they are full-time, part-time, or temporary.

Is SUI the same as workers' compensation insurance?

No. SUI (State Unemployment Insurance) provides benefits to employees who lose their job through no fault of their own. Workers' compensation insurance covers employees who are injured or become ill on the job. They are separate programs with separate requirements. California requires employers to carry both.