Your first employee California payroll setup has four parts. First, register with the EDD within 15 days of paying more than $100 in wages in a quarter. Second, carry workers’ compensation insurance from day one. Third, report the hire to the New Employee Registry within 20 days. Then set up the books so wages, employer taxes, and withheld money each land in the right account. The payroll provider does the math. But the registration, the insurance, and the bookkeeping are still yours.
This guide is for Los Angeles owners making their first hire who want the setup in one list. What to register, what to collect, what to pay, and how the first payroll should look in QuickBooks Online or Xero. It covers the transactional-tax side, which is the lane Books LA works in. Worker classification and the income tax treatment of a new hire belong with your CPA or an employment attorney. We say so where it matters. Every figure below was checked against the EDD and the Department of Industrial Relations in October 2026.
First employee California payroll setup: the seven registrations and forms
| Step | What | When |
|---|---|---|
| Federal EIN | Employer Identification Number from the IRS, if the business does not have one. | Before the first payroll |
| EDD employer account | Register through e-Services for Business. Per the EDD, you register within 15 days once wages pass $100 in a calendar quarter. | Within 15 days of crossing $100 |
| Workers’ compensation | Required for every California employer with one or more employees, per the Department of Industrial Relations. Bought from an insurer or State Fund. | Before the first day of work |
| Form I-9 | Employment eligibility. The employee completes Section 1 on day one; you complete Section 2 within three business days. | First three days |
| W-4 and DE 4 | Federal and California withholding certificates. Without a DE 4, California withholding defaults to single with zero allowances. | Before the first payroll |
| New Employee Registry (DE 34) | Report every new or rehired employee to the EDD within 20 days of the start date. | Within 20 days |
| Required notices | Wage Theft Prevention Act notice, paid sick leave notice, workers’ comp pamphlet, SDI and PFL pamphlet. Posted workplace notices. | At hire and on the wall |
Sources: the EDD’s register as an employer page and required filings, and the DIR’s workers’ compensation FAQ. A payroll provider such as Gusto or QuickBooks Payroll will file the DE 34 and the quarterly returns for you, but the EDD account and the insurance policy are opened in your name, by you.
What you will pay, and what you only pass through
The first employee California payroll bill has four state parts, and only two cost the employer money. Unemployment Insurance is 3.4 percent for new employers and the Employment Training Tax is 0.1 percent, both on the first $7,000 of each employee’s wages. State Disability Insurance (1.3 percent of all wages in 2026) and state income tax withholding come out of the employee’s pay and sit with you until the deposit is due. Federal Social Security, Medicare, and unemployment are separate and larger. Our California payroll taxes guide has the full table and the deposit schedules.
Two wage floors apply before any of that. The California minimum wage is $16.90 per hour from January 1, 2026, per the DIR’s minimum wage FAQ. The City of Los Angeles minimum wage is $18.42 per hour from July 1, 2026, per the city’s Office of Wage Standards. Whichever is higher applies where the employee works. Santa Monica, West Hollywood, and other Westside cities set their own. California also requires at least 40 hours or five days of paid sick leave per year, per the DIR’s paid sick leave page.
Employee or contractor: decide before payroll starts
California’s worker classification rules are strict. A contractor who should have been an employee creates back taxes, penalties, and a workers’ comp problem at once. The question is not which is cheaper. It is which the law allows for this role. Confirm anything close with your CPA or an employment attorney before the first payment, not after. Genuine contractors get a W-9 at intake and a 1099-NEC in January if payments reach the $2,000 threshold for 2026. Our 1099 filing guide covers the forms.
How the first payroll should look in the books
This is where most first-time employers go wrong. The payroll provider posts entries automatically and nobody checks them. The correct picture has four parts.
- Gross wages are the expense. The full salary or hourly total goes to a wages expense account, not the net paycheck.
- Employer taxes are a second expense. UI, ETT, and the federal employer share post to payroll tax expense. Workers’ comp premiums are an insurance expense.
- Withheld amounts are liabilities. SDI, state and federal income tax withholding, and the employee’s Social Security and Medicare sit in payroll liabilities from payday until the deposit clears. They are never an expense.
- Deposits clear the liabilities. When the EDD or IRS payment leaves the bank, it reduces the liability. If the liability account grows every month, a deposit was coded as an expense.
Tie it out every quarter: the DE 9 totals and the Form 941 should equal the quarter’s wages and liabilities in the books, to the dollar. The DIY bookkeeping checklist has this as check number eight.
The first-month calendar
- Before day one: EIN, workers’ comp policy bound, payroll provider set up with the EDD account number. Pay schedule chosen, offer letter with the wage rate, required notices ready.
- Day one to three: I-9, W-4, DE 4, direct deposit form, sick leave and workers’ comp notices delivered.
- Within 20 days: DE 34 filed, usually by the provider. Confirm it.
- First payday: check the posting against the four-part picture above. Fix the mapping now, while there is one paycheck to fix.
- After the quarter: DE 9, DE 9C, and 941 filed by the end of the following month. Tie them to the books before the next quarter starts. The Q4 bookkeeping checklist has the current dates.
The Los Angeles layer
Local minimum wages change each July 1 and differ by city. A business with staff in Santa Monica and Los Angeles tracks two rates. Local paid sick leave ordinances can exceed the state floor. A new employee working in a second city can also create a business license requirement there. Our Westside business license guide explains the multi-city trap.
How Books LA handles this
We coordinate the first payroll with the client’s provider. We map the accounts so gross wages, employer taxes, and withheld liabilities land correctly from the first run. Then we tie the DE 9 and 941 to the books every quarter. Registration, insurance, and classification decisions stay with the owner, the CPA, and the attorney. Our monthly packages include payroll coordination at the levels that need it.
Frequently asked questions
When do I have to register with the EDD?
Within 15 days of paying more than $100 in wages in a calendar quarter, per the EDD. Register through e-Services for Business. The account number is what your payroll provider needs to file on your behalf. Household employers have a different threshold.
Do I need workers’ compensation insurance for one employee?
Yes. Per the Department of Industrial Relations, every California employer with one or more employees must provide workers’ compensation benefits. Buy the policy from a licensed insurer or State Fund before the first day of work. Give new hires the required pamphlet.
What is the minimum wage for my first employee?
$16.90 per hour statewide from January 1, 2026. The City of Los Angeles rate is $18.42 from July 1, 2026, and other cities set their own. The highest rate that applies where the employee works is the one you pay.
What does my first employee actually cost beyond wages?
On the state side, about $245 a year per employee in UI and ETT for a new employer, plus workers’ comp premiums. The federal employer share of Social Security and Medicare (7.65 percent of wages) and federal unemployment are larger. Withheld taxes cost you nothing, but they must go out on time.
Can I pay my first hire as a contractor to keep it simple?
Only if the role genuinely qualifies under California’s classification rules, which are strict. Misclassification creates back payroll taxes, penalties, and workers’ comp exposure. Ask your CPA or an employment attorney before the first payment.
Does my payroll provider handle all of this?
The provider calculates, pays, and files using your accounts. It does not register you with the EDD, buy your workers’ comp policy, or decide classification. It also does not check that the entries in your books are mapped correctly. Those stay with you or your bookkeeper.
How should payroll show up in QuickBooks or Xero?
Gross wages as an expense, employer taxes as a second expense, withheld amounts as liabilities, and the tax deposits reducing those liabilities. If payroll liabilities keep growing month after month, a deposit was coded to the wrong place.
If you are about to run your first payroll and want the account mapping checked before it posts, book a short call and we will set it up with you.
This post is general information, checked against EDD and DIR pages in October 2026. Rates and rules change, so confirm yours with the agency. Books LA provides bookkeeping and payroll coordination and does not advise on income tax, worker classification, or employment law; we work with clients’ CPAs and attorneys on those matters.
