Employer Payroll Taxes: What a New Hire Really Costs

Employer payroll taxes are the taxes a business pays on wages out of its own pocket, on top of anything withheld from the worker. They are a 6.2% Social Security match, a 1.45% Medicare match, federal unemployment tax (FUTA) and state unemployment tax (SUTA).

Together they add about 8% to the cost of a salary. On a $60,000 hire that is roughly $4,700 to $5,100 a year above the wages, before a single benefit.

Employee withholding versus employer cost

Take the standard example: a single filer earning $60,000 a year in California, paid every two weeks, standard W-4, no pre-tax deductions. Gross pay is $2,307.69 a check. Federal income tax withholding is $193.08, and FICA is $176.54, split into $143.08 for Social Security and $33.46 for Medicare.

All of that comes out of the employee’s $2,307.69. The employer holds it back and sends it in, but does not fund it.

Then the employer pays its own $176.54 on the same check. That amount never shows on the pay stub, which is why payroll tax looks like 7.65% from the employee’s side when the full charge on wages is 15.3%.

Tax	Employee, per check	Employer, per check
Federal income tax	$193.08	none
Social Security	$143.08	$143.08
Medicare	$33.46	$33.46
FUTA	none	0.6% of the first $7,000 of yearly pay
SUTA	none in most states	varies by state and rate

The employer payroll taxes glossary entry has the short version of that split.

The employer share of Social Security and Medicare

The employer share of FICA matches the employee share exactly: 6.2% for Social Security and 1.45% for Medicare. On $60,000 of wages that is $3,720 plus $870, or $4,590 for the year.

The match also stops where the employee’s Social Security tax stops. Social Security applies to pay up to the yearly wage base, $184,500 in 2026, so a $300,000 salary does not cost twice the Social Security of a $150,000 one. Medicare has no cap and runs on every dollar.

One line has no match at all. The 0.9% Additional Medicare tax on wages over $200,000 is withheld from the employee only, and the employer pays nothing extra. IRS Publication 15 is the rulebook employers work from here.

FUTA and SUTA explained

These two fund unemployment benefits, and employees usually pay neither.

FUTA, the tax under the Federal Unemployment Tax Act, is 6.0% of the first $7,000 of each employee’s wages for the year. Employers who pay their state unemployment tax on time get a credit of up to 5.4%, which drops the real rate to 0.6%. That works out to $42 per employee per year, and it ends once that worker passes $7,000 of pay. Wikipedia’s FUTA article covers how the credit came about.

SUTA is the state half, and it is the one that moves. Each state sets its own taxable wage base and its own rate schedule. Bases run from $7,000 in several states to the tens of thousands in others, and most states adjust theirs most years.

California uses a $7,000 unemployment wage base, so the yearly state cost per worker there stays modest even at a high assigned rate. The California payroll calculator handles the employee side of that same check.

Three states take an employee contribution for state unemployment: Alaska, New Jersey and Pennsylvania. Everywhere else, it is an employer-only tax.

What an experience rating does to your rate

Your SUTA rate is not fixed. States give each employer an experience rating based on what it has paid in and what has been paid out in benefits to its former workers.

Lay people off, the claims get charged to your account, and your rate rises at the next annual recalculation. Keep steady staff and it drifts toward the bottom of the state’s schedule. Established employer rates commonly sit anywhere from under 1% to over 6% of the state wage base, depending on that schedule and your own claims history. New employers get a standard starting rate for the first few years instead.

Credit reduction states

If a state borrows from the federal unemployment fund during a downturn and does not repay in time, employers there lose part of the 5.4% FUTA credit. A credit reduction state lifts the effective FUTA rate in 0.3% steps for every employer in it, however clean their own claims record is. The list changes from year to year, and the IRS publishes it with the annual FUTA form.

The forms behind the numbers

Four filings carry most of the reporting:

• Form 941, quarterly, reports wages, withheld income tax and both halves of FICA, then squares them against deposits already made.
• Form 940, once a year, reports FUTA and applies the state credit.
• Form W-2 to each employee and Form W-3 to the Social Security Administration, once a year.
• A state withholding return plus a quarterly state unemployment wage report, filed with each state agency.

Deposits are separate from filing. Most employers send withheld tax and the FICA match to the IRS monthly or semiweekly, and a missed deposit deadline carries its own penalty.

Budgeting the true cost of a new hire

Start with the salary, add the taxes, then add what is not tax.

Cost on a $60,000 hire	Amount
Salary	$60,000
Social Security and Medicare match	$4,590
FUTA, 0.6% of $7,000	$42
SUTA	$70 to $420, from a $7,000 base at 1% to 6%
Payroll taxes as a share of salary	about 7.8% to 8.4%

Workers’ compensation insurance comes next, and its rate depends on the state and the job class, so get a quote rather than use a rule of thumb. Health insurance, a retirement match, paid leave, equipment and any recruiting fee sit on top of that.

Payroll tax is the floor of the cost, not the ceiling. For a $60,000 role, planning on $65,000 before benefits is a fair starting point.

Check a paycheck against the employer cost

The paycheck calculator on the PayCalculatorUSA home page shows the employee side of any salary: gross pay, federal withholding, Social Security, Medicare and the state lines. Double the Social Security and Medicare figures it gives you, add $42 of FUTA and your own state unemployment rate, and you have the employer cost for that hire.