California State Disability Insurance (CASDI) is a mandatory benefits program that is directly related to employee welfare and organizational compliance. While the benefits of disability insurance are well known, keeping up with CASDI requirements and updates can be a lot to tackle, especially for smaller operations.
What you’ll learn
What you’ll learn
Key takeaways
- CASDI is a mandatory California program providing wage replacement for employees unable to work due to non-work-related disabilities
- Employers in California are responsible for withholding CASDI contributions from employee wages and ensuring program compliance
- Understanding CASDI eligibility, employer responsibilities, and common challenges is crucial for California businesses to remain compliant and support their employees
This guide discusses the program, its benefits and eligibility requirements, and covers employer responsibilities. It also provides solutions for common challenges with implementing and managing the program.
What is CASDI?
CASDI is an acronym for the California State Disability Insurance program, which provides financial support to employees who temporarily cannot work due to a non-work-related injury or condition. The program allows workers to receive a portion of their wages, usually 70% to 90%, with a maximum weekly benefit of $1,681. Eligible employees can receive benefits for up to 52 weeks.
The program is mandatory for all businesses, and the state automatically enrolls eligible employees. Furthermore, legal compliance in California requires employers to be responsible for accurate payroll deductions, clear communications, and proper recordkeeping. Employers who fail to follow regulations can face penalties, including fines.
Moving on, let’s compare this disability insurance to other required coverage for most California employers.
Difference between CASDI and workers’ compensation
It’s common to hear comparisons between CASDI and workers’ compensation. However, while both programs provide financial assistance to injured or ill workers, the eligibility requirements and extent of assistance differ.
The primary difference between each disability program is who qualifies. CASDI provides financial assistance to those with unrelated workplace disabilities, while workers’ compensation only offers assistance for workplace injuries or illnesses. In fact, CASDI specifically provides wage replacement for issues like chronic illnesses or pregnancy related conditions.
Workers’ compensation benefit payments extend beyond wages. The program may also cover medical expenses related to work injuries. The amount and duration of compensation depend on the severity of the injury in combination with employee wages and other state-specific regulations.
Since CASDI comes with a mix of payroll rules, eligibility requirements, and compliance steps, the table below breaks down the essentials.
| Topic | What to know | Why it matters for employers |
| What CASDI covers | Wage replacement for employees who cannot work due to non-work-related illness, injury, or pregnancy. | Helps employees stay financially stable while out and keeps employers compliant with state law. |
| Who funds CASDI | Employees fund the program through payroll deductions (currently 1.2% of taxable wages). | Employers must correctly withhold and remit contributions, though they don’t directly pay into the fund. |
| Benefit amount | Employees typically receive 70%–90% of wages, up to a maximum weekly benefit of $1,681. | Employees often ask payroll questions when benefits start — accuracy matters. |
| Benefit duration | Benefits may be paid for up to 52 weeks, depending on eligibility and claim approval. | Longer absences require careful payroll and record-keeping coordination. |
| Eligibility basics | Employee must have earned at least $300 in base wages with SDI deductions and be unable to work for 8+ days. | Misunderstanding eligibility can lead to employee confusion or delayed claims. |
| Employer responsibilities | Withhold CASDI, submit payments to California’s Employment Development Department (EDD), post required notices, and respond to requests. | Errors or missed steps can result in penalties and compliance issues. |
| What CASDI is not | Does not cover work-related injuries or illnesses. | Work injuries fall under workers’ compensation, not CASDI |
Now that you understand CASDI and how it differs from other benefits programs, let’s review its funding and how that might affect your business.
How CASDI is funded
Employees are primarily responsible for funding CASDI, which comes from wage payroll taxes. Currently, the CASDI tax is slightly above 1%. Employees may notice a line for CASDI on their W-2 Form.
Employers are responsible for withholding the amount from employee checks and submitting it to the EDD. The tax rate is flexible and may increase depending on the fund’s health balance and demand.
As with employer participation in the program, the contribution is mandatory for all eligible employees. The funds collected are allocated to a state fund to solely pay for disability benefits.
Annual changes in contribution rate
Let’s examine what affects the annual changes to the contribution rate. In general, economic conditions, such as changes in unemployment rates or the cost of living, influence the projected CASDI tax rate. The basic costs of managing the fund, such as its administrative costs, can also impact fluctuations from year to year.
More specifically, the state may adjust the rate based on program solvency and available reserves. A rise in claim frequency over prior projections can lead to concerns about possible insufficiencies. This can result in a higher contribution rate.
The 2025 rate is 1.2%, slightly higher than 2024 (it was 1.1%). A benefit over previous years is the elimination of the maximum contribution rule, which ended January 1, 2024. For 2026, the rate rises to 1.3%.
Coverage and eligibility
Eligibility for benefits depends on an employee’s contributions, status, and claim. To qualify for CASDI benefits, the employee must have earned at least $300 in base pay with SDI deductions. The individual must also be employed or actively seeking employment before the disability occurs and unable to work for at least eight days because of a non-work-related injury. Other eligibility requirements include:
- A valid disability claim: CASDI benefits only cover non-work-related injuries or conditions that lead to wage loss. Workplace injuries may qualify for workers’ compensation.
- Certification of disabilities related to the claim: Every claim requires certification from a medical professional, physician, or religious practitioner. Qualified employees must remain under the care and treatment of this professional within eight days of the disability and remain under care for the duration of their benefits.
- Wage loss: To receive benefits, an employee must demonstrate wage loss. That loss must stem from an inability to work due to a qualifying disability or condition.
Employees must file their claims no earlier than nine days after the disability begins and no later than 49 days after it starts. Failing to report the claim on time may result in a denial of assistance.
Employer’s responsibilities
As an employer, you are not responsible for paying directly into CASDI. But as with other benefits programs, such as unemployment benefits, you have an administrative role. Let’s review some of your responsibilities.
Compliance with CASDI regulations
As an employer, your primary responsibility as an employer is to withhold contributions from employee wages. It’s crucial to ensure accurate deductions. The current contribution rate is 1.2% of an employee’s taxable wages and will rise to 1.3% in 2026. Beyond collecting and sending contributions, you must also:
- Provide information: Employers must display CASDI posters and notices in the workplace. These materials inform employees about their rights and disability benefits through the program and teach them how to file claims. You can order free posters and brochures from the EDD’s online forms and publications page
- Communicate program details with employees: It’s important to maintain open communication about the program. You should understand it and be able to answer any workers’ questions. This involves more than handing out brochures. You should also respond to the EDD as required
Understanding your role in the CASDI program helps ensure compliance and avoid some challenges. Read on to learn about potential difficulties with implementing the program and how you can prevent or resolve them.
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Common challenges and solutions
The short-term disability program can present several issues for small business owners.
Compliance issues
The most challenging administrative aspect is ensuring compliance with regulations. Legislation doesn’t stagnate; it evolves and changes from year to year. To avoid penalties, employers must keep up with changes and updates.
The solution to this problem includes training and resources. HR staff should receive CASDI-specific training and have access to updated resources from the EDD. Your business should also conduct regular audits of payroll processes, checking for proper deductions and timely submissions.
Employee awareness
Another common problem is maintaining awareness. Many employees may not understand their rights or access to the CASDI program. They may not know how to file a claim or request the proper information.
The solution is to regularly provide all employees with clear and accessible documentation. You can host routine informational sessions and workshops to teach employees about the CASDI program and how to file a claim.
Claims management
Managing claims can also present challenges. Every claim involves time-consuming documentation and procedures that may be prone to errors.
Centralized information and streamlined processes can resolve these challenges. For example, one solution is to incorporate HR software into your process. To reduce manual errors and improve accuracy, the software should automate claim tracking and documentation management.
California businesses should keep up with CASDI
CASDI is a disability benefits program mandated in California. It’s up to business owners to handle administrative tasks, such as collecting contributions and sending them to the appropriate agency. These administrative and payroll tasks are challenging, especially for smaller businesses. OnPay HR software is one solution to the redundancy and manual errors that can occur when managing a complex program like this. Check out how our HR services can improve workflows and save your business time and money.
Take a tour to see how easy payroll can be.
Jon Davis is the Sr. Content Marketing Manager at OnPay. He has over 15 years of experience writing for small and growing businesses. Jon lives and works in Atlanta.