CSLB Contractor's Law & Business Practice Exam

Which of the following may NOT be deducted from an employee's paycheck?

1. SDI

2. FICA

3. Medicare Tax

4. Workers' compensation insurance premiums

The correct answer is: Workers' compensation insurance premiums

The reason why workers' compensation insurance premiums may not be deducted from an employee's paycheck lies in the nature of this type of insurance. Payments for workers' compensation insurance are typically the responsibility of the employer, not the employee. Employers are legally required to carry workers' compensation insurance to cover medical expenses and lost wages for employees injured on the job. In contrast, SDI (State Disability Insurance), FICA (Federal Insurance Contributions Act), and Medicare tax are all mandatory deductions that are legally required to be taken from an employee's paycheck. These deductions contribute to social security and disability insurance programs, and they are standard components of payroll calculations. Therefore, it is correct to state that workers' compensation insurance premiums would not be deducted from an employee's paycheck, as the financial responsibility lies with the employer.