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Is SDI Paid by Employer or Employee?

There are many questions regarding employment law, paychecks, and HR. One of the most common is this: Is SDI paid by employer or employee?

Before understanding who pays SDI, is it vital that employees and employers understand what type of tax SDI is, how taxes & SDI are separate, and precisely what an SDI tax is?

What are SDI taxes?

SDI tax is a payroll tax that is enacted by some states. The money goes into a disability program. Once placed in a broad-based disability program, the funding individuals who become disabled due to something separate from work - like a car accident or mental health issue - to receive disability pay while they recover from their industry.

According to the EDD website, all employees must pay this tax under current California law. This website also has an array of information, including online forms and publications and information about other SDI benefits that California workers may be able to access if they become injured, including direct benefit payments.

Paying into the program does ensure that all California workers have access to SDI benefits if they are injured. SDI covers many potential illnesses & injuries. Among the array of illnesses, injuries, or life events included are:

  • Any leaves caused by a non-work-related injury or pregnancy.

  • Injuries caused by a car accident, traumatic accident outside of work, or anything that can cause a loss of wages.

  • Emotional distress that is sufficient to cause a person to be incapable of working.

  • Paid family leave caused by pregnancy or illness of a family member.

A part of SDI is the paid family leave (PFL) program, funded based on different tax rates levied on California employers and employees.

Other requirements are necessary to be eligible for the SDI program. These requirements include:

  • Missing at least seven days of work caused by the injury, pregnancy, or illness of a family member.

  • Individuals who are sick or injured must be under the care of a medical provider. This does not mean that you must be under supervised care or the constant watch of medical professionals. Still, it does mean that you have to be actively cared for by a doctor and have one managing the treatment of whatever illness is causing you to miss work.

  • You must have made at least $300 during your base wage period.

You can be unemployed and still qualify for SDI. However, you must have been actively looking for work during this period, and you must be able to demonstrate that you are looking for work.

The SDI program has become more widely used in the aftermath of COVID-19. Suffering from COVID, disabilities caused by long-COVID, or caring for a family member who has COVID have all covered illnesses under the program.

Keep Reading: How to calculate employee absenteeism

How much are SDI Taxes?

  • All paychecks are taxed at a rate of 1.1%. This information should be made clear to employees during their new hire orientation to eliminate any confusion.

  • Employers can also choose to offer voluntary plans that cover more than what is covered by the California state plan. However, there is no obligation to do so.

  • SDI taxes very similarly to other state and federally run benefit programs, including California state payroll taxes, unemployment insurance, workers compensation, and other PTI benefits.

  • State disability insurance and SDI tax work hand in hand together.

Keep Reading: What does annualized salary mean?

Which states have SDI taxes?

California, Hawaii, New Jersey, New York, and Rhode Island have SDI taxes.

If you've been wondering, "What is CA SDI on my paycheck?" and live in California, this is your answer. SDI is the CA private disability employee tax. SDI essentially funds CA private disability employee insurance. This funding allows employees to gain access to critical benefits and wages for SDI if they are injured.

The federal government does not mandate this program. As you can see, only a handful of states levy an SDI tax and manage an SDI program as broad as California's.

Keep Reading: What is a floating day off?

Is SDI paid by employer or employee?

These taxes come from an employee's paycheck and go towards the Employee Development Department (EDD), which administers the SDI fund. The maximum for this program is $145,600 an employee makes annually, meaning that anything an employee makes above that amount is not taxed. Employers can certainly choose to pay their employees more to offset the loss of 1.1%, but the money does come directly from an employee's paycheck.

Keep Reading: What does being fired for gross misconduct mean?

Need help with SDI taxes?

As you can see, SDI is a broad program designed to help employees who become temporarily sick or ill, pregnant, or have to care for someone who becomes ill themselves. It is not a cheap program and requires billions to administer properly. However, because of SDI, thousands of individuals can avoid poverty and keep themselves financially afloat while recovering from injury or nursing others back to health.

If you need more help with SDI taxes or are looking for guidance with HR in general, reach out today to the Teamworks group. We can provide you with all the support you need to manage your HR functions and simplify your business.

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