Cost to Hire a Remote Employee in California From Out of State

Short answer: a remote employee working from California costs an out-of-state employer 10.3% to 11.5% of salary in statutory charges in the first year, before benefits. On a $95,000 salary that is $10,205.50. The same hire in a median-cost state comes to about $8,615, so California adds roughly $1,600, and most of that difference is workers comp, the FUTA credit reduction and the $800 franchise tax rather than state payroll tax.

If you are deciding whether to open a remote role to California candidates, those are the numbers that belong in the budget before you post. The duties behind them, and a checker that runs them for your own company, are on our page for out-of-state employers with remote employees in California. This article is the money.

The line-by-line cost at three salaries

Every figure below was computed from rates read at source on 16 September 2026: the EDD 2026 rate page for UI, ETT and SDI, the Social Security wage base of $184,500, the Department of Labor's FUTA credit reduction list for 2025, and the Oregon DCBS workers comp premium index, which puts California at $1.86 per $100 of payroll. The franchise tax line assumes the hire makes a corporation or LLC doing business in California, which the next section explains.

The median-state row uses the same federal lines, FUTA at the standard 0.6%, a modelled $270 of state unemployment tax and the national median workers comp index of $1.09. It leaves out any franchise or entity-level tax, because whether one employee triggers one varies too much from state to state to model as a median.

Read across the percentages and a pattern shows up that is easy to miss: California costs proportionally more on cheaper hires. The FUTA, UI, ETT and franchise tax lines are flat per employee, so together they are 2.0% of a $60,000 salary and 0.8% of a $150,000 one. If you are hiring a single mid-level California role, the fixed lines are what move the percentage.

Two lines are withheld from the employee and are not in the totals: State Disability Insurance at 1.3% with no wage cap, which is $1,235 on $95,000, and California personal income tax. They cost you administration rather than money, but a candidate comparing offers will see them on the paystub.

The $800 line, and why small companies pay it at lower salaries

The Franchise Tax Board treats a business as doing business in California when its California payroll exceeds $75,707 for 2025, or exceeds 25% of its total payroll. Either one is enough. A corporation or LLC that is doing business in California files there and owes at least the $800 annual minimum.

The 25% test is the one that surprises small employers. A California employee who is your only payroll in the state crosses it whenever their salary is more than one third of everything else you pay. So a company paying $150,000 elsewhere crosses at a $50,000 California salary, well under the dollar threshold, and any company with less than $227,121 of other payroll hits the percentage before the dollar figure. That is why the $60,000 column above carries the $800: at $150,000 of other payroll the hire is 28.6% of the total.

For a larger company the dollar threshold binds instead, and a California salary under $75,707 does not trigger it on payroll alone. California sales or property can still cross the other two thresholds, which is a question for whoever prepares your returns.

The two costs that are not taxes

Overtime on the $60,000 role. California's exempt salary floor is $70,304 in 2026, twice the $16.90 minimum wage for 2,080 hours. A $60,000 remote role is non-exempt in California whatever it is called, so its overtime rate is $43.27 an hour after 8 hours in a day and $57.69 for double time after 12. The same title at the same salary in most other states is exempt with no hours tracked. If the role will run long days, either set the salary above the floor or budget the hours.

Paid sick leave and reimbursement. Every California employee gets at least 40 hours or five days of paid sick leave a year. For a company that already offers generous PTO this may cost nothing extra, but priced as time it is $1,153.85 on a $60,000 salary and $2,884.62 on $150,000. Labor Code 2802 separately requires reimbursing necessary work expenses, which for a fully-remote role means a share of home internet and phone. There is no statutory amount, so this is a policy decision, and the cheapest way to deliver it is covered in our work from home stipend guide.

There is also a small compliance cost at five or more employees, counted in every state: harassment prevention training within six months of hire, 2 hours for supervisors and 1 hour for everyone else in California. Once you have people in several states with different training clocks, a corporate training platform that tracks completion dates per employee saves the spreadsheet.

How much of this is new money for your company?

Not all of it. Social Security and Medicare are the same wherever the employee lives, so the honest comparison is the California premium row, $1,321 to $2,014 a year, plus the administrative setup of a new state: an EDD account, a workers comp policy naming California, and possibly a franchise tax filing. The first California employee carries most of that setup, and the second one adds only the per-employee lines.

Watch one number for 2026. The FUTA credit reduction grows by 0.3 points for each additional year California's federal loan remains unpaid, so if it is still outstanding on 10 November 2026, budget 2.1%, or $147 per employee, for 2026 wages.

The broader question of what any remote hire costs, including recruiting and onboarding, is worked through in the cost to hire a remote employee, and the workers comp spread across all 51 jurisdictions is in workers comp cost for remote employees.

Is opening the role to California worth it?

For most roles, yes, and the arithmetic above is why. A premium of about $1,600 on a $95,000 hire is under 2% of salary, which is a small price for access to the largest state labor market in the country. What makes California expensive is not the tax bill. It is getting the classification wrong on a role under $70,304, or discovering the franchise tax filing a year late.

Both are decided before the first interview. Set the pay scale above the exempt floor if the role is meant to be salaried and exempt, put the range in the listing, which California requires at 15 or more employees anyway, and say plainly which states the role is open to. A LatestRemote listing is $199 a month with the salary range on the post and applicants sent straight to your inbox, and our page on pay transparency laws by state covers what the range has to look like.