What Are Wages?
Wages are all compensation for an employee’s personal services, whether paid by check or cash, or the reasonable 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, 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 PIT wages unless otherwise stated. For more information, view Information Sheet: Wages (DE 231A). See Required Filings and Due Dates on how to report and pay payroll taxes.
The method of payment, whether by private agreement, consent, or mandate, does not change the taxability of wages paid to employees.
Important: If you pay your employee’s share of Social Security, Medicare, and/or State Disability Insurance (SDI) without deducting the amounts from their wages, these payments may also be wages. For more information refer to Information Sheet: Social Security/Medicare/SDI Taxes Paid by an Employer (DE 231Q).
Generally, all wages are considered subject and are to be reported and used to determine the amount of Unemployment Insurance (UI), SDI, and Paid Family Leave (PFL) benefits a claimant should receive. Subject wages are the full amount of wages, regardless of the UI and SDI taxable wage limits. Enter the Total Subject Wages in “Item F” for each employee on the Quarterly Contribution Return and Report of Wages (Continuation) (DE 9C). Enter the Total Subject Wages paid for the quarter on “Item C” of the Quarterly Contribution Return and Report of Wages (DE 9).
Personal Income Tax (PIT) wages are cash and noncash payments subject to state income tax. Wages that must be reported on an individual’s California income tax return are PIT wages. Most payments for employees’ services are reportable as PIT wages. An employee’s calendar year total for PIT wages should agree with the amount reported on the employee’s federal Wage and Tax Statement (Form W-2) in Box 16 (state wages, tips, etc.). The PIT wages for each employee must be reported quarterly in “Item G” on the Quarterly Contribution Return and Report of Wages (Continuation) (DE 9C).
Note: Some wages excluded from PIT withholding are still considered PIT wages and must be reported to the EDD (for example, wages paid to agricultural workers).
In most situations, when wages are subject to UI, Employment Training Tax (ETT), SDI, and PIT withholding, subject wages and PIT wages are the same. Examples of when subject wages and PIT wages are different are:
- Employee salary reduction contributions to a qualified retirement or pension plan are included as subject wages, but are not reportable as PIT wages.
- Under certain situations, 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.
Meals and lodging that are provided free of charge or at a reduced rate to an employee are wages. 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, please refer to the current year’s meals 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.