As California’s entrepreneurial scene continues to flourish, it’s important for small business owners to stay ahead of the curve, especially when it comes to compliance with state legislation. One area often causing concern among employers is the California State Disability Insurance (SDI). A lack of clarity on how to accurately navigate these mandatory policies could have significant consequences for both the business and its employees. Fortunately, there’s help at hand, particularly for those companies collaborating with a professional employer organization (PEO).
But before jumping right into the solution a PEO can provide, let’s first understand the specifics of the SDI and the changes in 2024.
The California SDI In 2024
The California SDI program divides short-term disability insurance (DI) and paid family leave (PFL) wage replacement benefits to eligible employees who need time off work. To qualify for DI, you’re unable to work due to a non-work-related illness or injury, pregnancy, or childbirth. You may be eligible for PFL to:
- Care for a seriously ill family member
- Participate in a qualifying life event (QLE) because of a family member's military deployment to a foreign country
On January 1st, 2024, California SDI implemented an employee contribution rate of 1.1% with no taxable wage base limit. Simply put, this indicates no cap on the maximum amount withheld from employees’ paychecks for contributions to the SDI. It’s a considerable change from the 2023 terms, where the SDI wage base was fixed at $153,164, with an employee contribution rate of 0.9% of annual earnings up to this wage base. For 2023, the highest possible contribution from an employee would have been $1,378.48, including the PFL surcharge.
Although these changes can be overwhelming, they aim to ensure sufficient protection for workers during times of disability. In addition, the absence of a taxable wage base limit after 2023 signals a stronger SDI program, meaning greater security for the workforce. However, what does that mean for you as a business owner, and how does this affect your obligations?
Understanding The Power Of A PEO
A PEO provides comprehensive HR solutions for small businesses. Their expert knowledge of constantly evolving labor laws can significantly relieve the compliance burden on small business owners. A partnership with a PEO like GMS ensures your business remains in sync with legal changes and boosts your operational efficiencies. This allows you to concentrate on growing your business instead of being weighed down by legislative complications.
For the upcoming changes in SDI contributions, a PEO would effectively manage the process, ensuring every cent withheld aligns with the revised employee contribution rate, and will diligently report and pay these amounts on your behalf. From determining correct withholdings to accurately processing payrolls and providing detailed, transparent reports for your records, a PEO ensures you’re up to speed and fully compliant.
California small business owners need a steady hand to navigate these often tricky waters in a rapidly changing business landscape. By partnering with a PEO, you receive the HR support and expertise you need and peace of mind, knowing you’re adhering to all regulations. It’s time to free up your resources for what truly matters: running your business. Contact us today to learn more.