state disability insurance
Definition
State disability insurance is a program run by certain states that provides partial wage replacement to employees who cannot work due to a non-work-related illness, injury, or pregnancy. The program is funded through small payroll deductions taken from employee paychecks, and in some states employers also contribute. Only a handful of states currently mandate this coverage, including California, New York, New Jersey, Hawaii, and Rhode Island.
Example
If one of your employees in California breaks their leg and cannot work for six weeks, state disability insurance would pay them a portion of their regular wages during that recovery period. You as the employer are responsible for withholding the correct amount from their paychecks and remitting it to the state.
Watch Out
If your business operates in a state that mandates this coverage, failing to withhold and submit these payments correctly can result in penalties from the state tax authority.
See which terms appear in your contract?
This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.