Wages are compensation for an employee’s personal services, whether paid by check, cash, electronic debit, payment apps, or the fair cash value of noncash payments such as meals and lodging. Payments are considered wages even if the employee is a casual worker, a day or contract laborer, a part-time or temporary worker, or paid by the day, hour, or any other method or measurement.
Wages include, but are not limited to:
- Salaries, hourly pay, piece rate, or payments by the job.
- Commissions and bonuses.
- Overtime and vacation pay.
- The reasonable cash value of compensation other than cash.
Wages are subject to all employment (payroll) taxes and reportable as Personal Income Tax (PIT) wages unless otherwise stated. Please refer to Information Sheet: Types of Payments (DE 231TP), which identifies special types of payments and whether the type of payment is subject to California payroll taxes.
Wages paid to employees are taxable, regardless of the method of payment, whether by private agreement, consent, or mandate.
Important:If you pay your employee’s share ofSocial Security,Medicare, andState Disability Insurance (SDI)without deducting the amounts from their wages, these payments may also be considered wages. Refer toInformation Sheet: Social Security/Medicare/SDI Taxes Paid by an Employer (DE 231Q) (PDF)for more information.
Subject Wages
Wages must be reported and used to determine the amount ofUnemployment Insurance (UI),SDI, andPaid Family Leave (PFL) benefits a claimant should receive. Subject wages are the full amount of wages, regardless of the UI taxable wage limits.
Note: Effective January 1, 2024, Senate Bill 951 removes the taxable wage limit and maximum withholdings for each employee subject to SDI contributions.
Some types of employment and payments are not considered subject wages.
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PIT Wages
PIT wages are cash and noncash payments subject to state income tax. Most payments for employees’ services are reportable as PIT wages. An employee’s calendar year total for PIT wages should match with the amount reported on the employee’s federal Wage and Tax Statement (Form W-2) in Box 16 (state wages, tips, etc.).
Note: Some wages which are excluded from PIT withholding are still considered PIT wages. These exceptions must be reported to us (for example, wages paid to agricultural workers).
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Are Subject Wages and PIT Wages the Same?
In most cases, when wages are subject to UI, Employment Training Tax (ETT), SDI, and PIT withholding, subject wages and PIT wages are the same. Some examples of when subject wages and PIT wages are different when:
- Employee salary reduction contributions to a qualified retirement or pension plan are included as subject wages but are not reportable as PIT wages.
- Wages paid to family employees (minor child under 18, registered domestic partner, spouse, and parent) may not be reported as subject wages, but are reportable as PIT wages.
- Payments made to employees of churches are not reported as subject wages but are reportable as PIT wages.
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Meals and Lodging
Meals and lodging that are provided free of charge or at a reduced rate to an employee are wages. Meals and lodging furnished for the employer’s convenience and on the employer’s premises are not subject to PIT.
- If your employees are covered under a contract of employment or union agreement, the taxable value of meals and lodging cannot be less than the estimated value stated in the contract or agreement.
- If the cash value is not stated in an employment contract or union agreement, refer to the current year’smeals and lodging values.
To determine the value of lodging, multiply the amount you could rent the property for (ordinary rental value) by 66 2/3 percent (0.6667). Ordinary rental value may be calculated on a monthly or weekly basis.
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Call the Taxpayer Assistance Center at 1-888-745-3886 or visit your localEmployment Tax Office.
