The SDI tax is levied on employees in the form of payroll deductions in order to fund the disability insurance program. California is one of six states to operate a publicly funded disability insurance program. Almost 11 million employees contribute to the SDI program. Coverage is mandatory for most Californians, with some limited exceptions. The UI tax is levied on employers.
Tax revenues provide partial wage replacement to unemployed workers looking for new work.
The actual tax rate depends on the employer and the amount of benefits paid to former employees. The UI program was created by the federal Social Security Act of 1935 and it is administered by states. All states have similar federal-state programs, but rates and provisions vary.