Learn how California Employment Training Tax works, who pays ETT, the 2026 rate and wage base, exceptions, reporting, and payroll examples.
California Employment Training Tax (ETT) is an employer-paid payroll tax used to fund worker training programs. For 2026, the standard ETT rate is 0.1% on the first $7,000 of taxable wages paid to each employee during the calendar year. It is reported to EDD with California payroll taxes and is not ordinarily withheld from employee pay.
ETT is much smaller than most payroll costs, but it still needs the correct rate, wage base, account mapping, and quarterly reconciliation. It should not be combined conceptually with UI merely because the two taxes usually use the same wage base.
The basic calculation is:
ETT taxable wages, limited to $7,000 per employee × ETT rate = ETT
Assume a California employer pays one employee $50,000 in 2026 and is subject to the standard 0.1% rate:
$7,000 × 0.1% = $7
If the employer has 20 employees who each earn at least $7,000, ETT taxable wages are $140,000:
$140,000 × 0.1% = $140
An employee earning only $3,000 produces $3 of ETT at the standard rate. Once that employee reaches $7,000 of ETT-taxable wages for the year, additional wages generally do not create more ETT.
ETT is generally paid by the employer. It should be recorded as an employer payroll-tax expense and corresponding liability until remitted. It is not taken from net pay and should not be confused with employee SDI or PIT withholding.
Not every employer pays ETT. EDD states that ETT is not required when an employer has a negative UI reserve-account balance for the year or is subject to the maximum UI rate plus the 2% penalty under California Unemployment Insurance Code section 977(c). The employer should check its annual DE 2088 notice for the ETT rate rather than assuming 0.1% always applies.
ETT funds the Employment Training Panel and supports training intended to improve the skills and competitiveness of California workers and employers. The tax is not a personal training account for each employer, and paying ETT does not automatically entitle a business to reimbursement for any course it selects.
Employers interested in training assistance should review current Employment Training Panel programs and eligibility separately. The payroll tax calculation does not change simply because a particular employee does or does not participate in training.
ETT and California UI are both employer-paid and generally apply to the first $7,000 of taxable wages per employee. However, UI finances unemployment benefits and uses an experience-based employer rate. ETT finances training and normally uses the much smaller 0.1% rate, subject to the exceptions above.
SDI is generally withheld from covered employees at a statewide annual rate and has no wage ceiling in 2026. PIT is employee income-tax withholding based on DE 4 and California schedules. FUTA is a separate federal unemployment tax. Workers' compensation premiums are separate insurance costs.
The shared $7,000 base does not mean "subject wages" and "taxable wages" are always identical. EDD may treat a payment as reportable subject wages while excluding some or all of it from a particular tax base. Payroll setup should follow the payment and worker rules.
ETT is reported with other employer payroll taxes on Form DE 9, supported by employee wage detail on Form DE 9C, and paid through EDD's required deposit process. Employers should rely on their assigned filing and deposit obligations.
In the general ledger, keep ETT separate from UI even when immaterial. A clear payroll-tax expense account and ETT payable account make reconciliation easier. At quarter-end, compare employee year-to-date ETT-taxable wages with the $7,000 ceiling, multiply by the assigned rate, and reconcile the result to payroll registers, DE 9, deposits, and notices.
If payroll software applied 0.1% even though the DE 2088 shows no ETT, correct the system and returns under current procedures. If ETT was withheld from employees, investigate promptly because it is generally an employer obligation.
Keep DE 2088 notices, employee wage-base reports, payroll registers, DE 9 and DE 9C filings, deposits, account transcripts, and correction support. Review ETT at the first payroll of each calendar year, after a rate notice, when changing payroll providers, hiring the first employee, acquiring a business, or correcting worker classification.
The small maximum at the standard rate—generally $7 per employee per year—makes automation practical, but not optional. A payroll setting error across many workers or years can still create notices and reconciliation work.
Heath Income Tax helps California employers keep UI, ETT, SDI, and PIT accounts distinct and reconcile payroll filings to books and payment records.
What is the California ETT rate for 2026?
The standard rate is 0.1%, but the DE 2088 rate notice controls and some employers are not subject to ETT.
What is the ETT wage base?
Generally the first $7,000 of taxable wages per employee, per calendar year.
Is ETT deducted from employees?
No. ETT is generally an employer-paid tax.
Is ETT the same as UI?
No. They share a wage base in many cases but fund different programs and have separate rates.
The definitions and examples on this page are for informational purposes only and do not constitute tax advice. Tax laws change frequently and individual circumstances vary. Consult a qualified tax professional before making decisions based on this content.
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