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California Employment Development Department (EDD)
Payroll tax, SDI, family leave· Agency
Law or rule (2026)Set by statute, regulation or the agency; numbers change yearly.
California's agency for unemployment, disability and paid family leave benefits, and the collector of state payroll taxes.
See it on the Personal Finance & Estate map →How it works
The Employment Development Department runs unemployment insurance, State Disability Insurance (SDI) and Paid Family Leave, and collects state payroll taxes, including income-tax withholding that is credited on your Franchise Tax Board return. Employees fund SDI and family leave through a deduction of 1.3% of all wages in 2026, uncapped since 2024. SDI replaces about 70–90% of wages for up to 52 weeks; family leave covers up to eight weeks to care for a relative or new child.
Why it matters for you
Its programs are a first layer of income protection for workers. Families paying a parent's caregiver $750 or more in a quarter must register with EDD as household employers; ask a CPA how.
Rules, limits and sources (2026)
EDD's yearly rate notices and California's Unemployment Insurance Code set the figures; SB 951 (2022) removed the SDI wage cap starting in 2024 and raised benefit rates from 2025.
Watch out for
EDD's pandemic-era fraud, with improper unemployment payments estimated at $20 billion or more, raised lasting questions about its systems and modernization.
Connections (2)
▸California Employment Development Department (EDD) collects payroll taxes alongside California Franchise Tax Board (FTB)Law or rule (2026)
How they connect
California splits collection: the FTB handles income-tax returns, while EDD collects payroll taxes, including state income-tax withholding from paychecks, which shows up as a credit on your Form 540. Quarterly wage data employers report to EDD also lets the FTB check returns and find people who didn't file.
When it applies
California began income-tax withholding in 1972 and assigned its collection to the state employment department now called EDD.
The rule
Employers file quarterly DE 9 and DE 9C reports with EDD listing wages and withholding; the FTB's non-filer program uses that wage data.
Watch out for
Whether a family paying a caregiver has a household employee or an independent contractor is a common gray area, and misclassification disputes are frequent.
▸California Employment Development Department (EDD) runs a state version of Disability income insuranceLaw or rule (2026)
How they connect
California is one of a handful of states with mandatory short-term disability insurance. EDD's SDI, funded by employee payroll deductions, replaces part of wages for up to 52 weeks of non-work illness, injury or pregnancy. Private disability policies fill the gaps: high earners, longer disabilities, and the self-employed, who can join SDI only through voluntary Elective Coverage.
When it applies
California created SDI in 1946, the second state after Rhode Island (1942); Paid Family Leave was added in 2004, the first in the nation.
The rule
The California Unemployment Insurance Code (Sec. 2601 and following) establishes SDI; EDD reports paying billions in benefits yearly.
Watch out for
Whether SDI's uncapped payroll tax since 2024, which raised costs for high earners while benefits stay capped, is fair is debated.