Payroll Glossary
Plain-English definitions of 15 key payroll terms — from FICA, SDI, and SUI to gross pay, net pay, Form 941, W-2, and California's DE 4.
EDD (Employment Development Department)
California's state agency that administers unemployment insurance, state disability insurance, employment training tax, and payroll tax withholding for California employees. Employers register with the EDD, file quarterly payroll returns (DE 9 and DE 9C), and remit California payroll taxes through the EDD's e-Services portal.
Form DE 9 (Quarterly Contribution Return and Report of Wages)
The California employer's quarterly payroll tax return, filed with the EDD. Reports total wages paid and the California payroll taxes owed (SUI, ETT, SDI withheld, and PIT withheld) for the quarter. Due April 30, July 31, October 31, and January 31.
Form DE 4 (Employee's Withholding Allowance Certificate)
California's state equivalent of the federal W-4. Employees complete this form to tell their employer how much California state income tax to withhold from each paycheck. Both a W-4 and a DE 4 are required for California employees.
SDI (State Disability Insurance)
A California employee-paid payroll deduction that funds short-term disability benefits for employees who are unable to work due to non-work-related illness, injury, or pregnancy. The rate is 1.1% of wages in 2024, with no wage cap. Withheld from the employee's paycheck, the employer does not pay the employer's share of SDI.
SUI (State Unemployment Insurance)
California's unemployment insurance tax, paid by the employer only. The rate varies by employer based on their claims history (experience rating), ranging from 1.5% to 6.2% in 2024. Applied to the first $7,000 of each employee's wages per calendar year.
ETT (Employment Training Tax)
A California employer-only tax of 0.1% on the first $7,000 of wages per employee per year. Funds job training programs in California. Paid alongside SUI to the EDD on the quarterly DE 9 filing.
FICA (Federal Insurance Contributions Act)
The federal law that requires the collection of Social Security and Medicare taxes from employees and employers. When people refer to FICA taxes, they mean the combined Social Security and Medicare withholdings on a paycheck.
Social Security Tax
A federal payroll tax of 6.2% paid by both the employee and the employer, applied to wages up to the annual Social Security wage base ($168,600 in 2024). Above that threshold, no further Social Security tax is owed for that employee for the rest of the year.
Medicare Tax
A federal payroll tax of 1.45% paid by both the employee and the employer on all wages, with no wage cap. Employees earning over $200,000 in a calendar year also pay an Additional Medicare Tax of 0.9% on wages above that threshold, the employer does not pay this additional amount.
Federal Tax Deposit
The payment of federal payroll taxes (federal income tax withheld, employee and employer Social Security, employee and employer Medicare) to the IRS. Deposits must be made through the EFTPS (Electronic Federal Tax Payment System). The deposit schedule, monthly or semi-weekly, depends on the employer's total payroll tax liability in the prior lookback period.
Form 941 (Employer's Quarterly Federal Tax Return)
The quarterly federal return filed with the IRS that reconciles total wages paid, taxes withheld, and tax deposits made during the quarter. Due April 30, July 31, October 31, and January 31. If deposits were made on time and in full, no payment is due with the 941, it's a reconciliation filing.
W-4 (Employee's Withholding Certificate)
The federal form employees complete to tell their employer how much federal income tax to withhold from each paycheck. Based on the employee's filing status, number of dependents, and any additional withholding they request. California employees also complete a DE 4 for state withholding.
W-2 (Wage and Tax Statement)
The annual form issued to every employee summarizing their total wages and all taxes withheld during the calendar year. Filed with the Social Security Administration and provided to the employee by January 31. Employees use their W-2 to file their federal and California income tax returns.
1099-NEC (Nonemployee Compensation)
The annual form issued to independent contractors paid $600 or more during the calendar year. Reports total payments made, no withholdings, since contractors are responsible for their own taxes. Filed with the IRS and provided to the contractor by January 31. Requires a completed W-9 from the contractor.
Gross Pay
The total amount an employee earns before any deductions, base salary or hourly wages plus overtime, commissions, bonuses, and taxable benefits.
Net Pay
What the employee actually receives after all deductions: federal income tax, Social Security, Medicare, California PIT, SDI, and any voluntary deductions (health insurance premiums, retirement contributions, etc.). Gross pay minus total deductions.
Pay Period
The recurring time frame for which wages are calculated and paid. Common options: weekly (52 periods/year), bi-weekly (26 periods/year), semi-monthly (24 periods/year), or monthly (12 periods/year). California law requires wages be paid at least twice per month for most employees.
Overtime
Additional pay owed to non-exempt employees for hours worked beyond standard thresholds. Under California law, stricter than federal, overtime is time-and-a-half after 8 hours in a single workday and after 40 hours in a workweek, and double-time after 12 hours in a single workday. Federal overtime only kicks in after 40 hours per week; California's daily overtime rule applies first.