---
title: Are You Paying More Than You Have to for Paid Family Leave in California? | Baron Payroll
description: Did you know that California employers aren’t responsible for funding Paid Family Leave (PFL) out of pocket?
---

[Learning Center - Blog | Baron Payroll ](https://www.baronpayroll.com/blog)

# [Are You Paying More Than You Have to for Paid Family Leave in California? | Baron Payroll](https://www.baronpayroll.com/blog/are-you-paying-more-than-you-have-to-for-paid-family-leave-in-california)

 Written by [Baron Payroll](https://www.baronpayroll.com/blog/author/baron-payroll) | Jul 24, 2025 3:03:36 PM

**Did you know that California employers aren’t responsible for funding Paid Family Leave (PFL) out of pocket?**

California’s PFL program is 100% funded by employee contributions through the state’s **State Disability Insurance (SDI) tax**. But here’s the surprising part: **some payroll providers still don’t explain this to business owners**—and worse, they may set up your payroll incorrectly.

Let’s break it down.

## **What is Paid Family Leave (PFL) in California?**

California PFL provides **up to 8 weeks** of paid, job-protected leave for employees who need to:

- Care for a seriously ill family member
- Bond with a new child
- Support a family member during military deployment

It’s an important benefit—but **you don’t have to pay for it**.

## **Here’s the Catch: It’s Funded by Your Employees**

In 2025, California’s PFL is funded through the **SDI tax**, which is:

- **1.2% of each employee’s wages**
- With a **maximum contribution cap**, adjusted annually by the state

This means **you’re legally allowed to withhold 100% of the cost** from your employees’ wages. If you’re not doing that?

You may be covering thousands of dollars in PFL costs that **your payroll provider should’ve explained you don’t have to pay.**

## **The Problem with Some Payroll Companies**

Too many payroll companies either:

- Skip the proper SDI setup
- Bundle PFL without breaking it out clearly
- Fail to explain what’s legally your responsibility (and what isn’t)

That means you could be **unknowingly absorbing employee-paid taxes**, reducing your profitability with every payroll run.

## **Why This Matters (Especially in California)**

California is one of the most regulation-heavy states in the country. And the rules around SDI and PFL are no exception.

If your payroll isn’t set up correctly:

- You could be overpaying for benefits you’re not obligated to cover
- You might face compliance issues down the line
- Your employees may not see the correct breakdown on their pay stubs

## **Baron Payroll Makes It Easy**

At Baron Payroll, we do things the right way:

- We correctly separate SDI and PFL deductions
- We clearly show contributions on employee pay stubs
- We ensure every deduction is compliant, accurate, and transparent

And most importantly? **We give you the facts—so you can make informed decisions for your business.**

## **Should You Be Withholding PFL in California?**

If your payroll company didn’t explain California’s SDI funding rules—or just made the decision without telling you—you could be overpaying.

**That’s money that should be staying in your business.**

### **Want to see how much you could be saving?**

👉 [Use our instant price calculator](https://www.baronpayroll.com/instant-price?hsLang=en) — no sales call required.

Or visit [https://www.baronpayroll.com/itin-service](https://www.baronpayroll.com/itin-service?hsLang=en) to learn more.

If you found this article helpful, here are some others you might like:

- [How Much Do Payroll Services Cost?](https://www.baronpayroll.com/blog/how-much-do-payroll-services-cost?hsLang=en)
- [1099 vs W2 Employee - An Honest Cost Comparison for Business Owners](https://www.baronpayroll.com/blog/1099-vs-w2-employee?hsLang=en)
- [Why are my W2 Wages Lower Than my Salary?](https://www.baronpayroll.com/blog/why-are-my-w2-wages-lower-than-my-salary?hsLang=en)
- [How to Choose the Best Payroll Company for Your Small Business](https://www.baronpayroll.com/blog/how-to-choose-the-best-payroll-company-for-your-business?hsLang=en)
- [The Pros and Cons of Paying Employees with Payroll Paycards](https://www.baronpayroll.com/blog/the-pros-and-cons-of-paying-employees-with-payroll-paycards?hsLang=en)

[View full post](https://www.baronpayroll.com/blog/are-you-paying-more-than-you-have-to-for-paid-family-leave-in-california)

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