Employer Payroll Tax Calculator

Employer payroll tax is the cost a business owes on top of gross wages, separate from anything withheld from the worker's own check. It has four pieces, each with its own base. The employer share of Social Security is 6.2 percent of wages up to the annual contribution and benefit base, taken here as 168,600 dollars, capping the employer's liability at about 10,453 dollars per worker. Medicare is 1.45 percent with no ceiling; note that the extra 0.9 percent surtax on high earners is employee-only, so it is absent from this employer-side model. Federal unemployment tax (FUTA) is statutorily 6.0 percent on the first 7,000 dollars of wages, but employers current on state unemployment contributions claim a 5.4 percent credit, leaving 0.6 percent or 42 dollars per employee per year. State unemployment tax (SUTA) uses a state-set wage base, from 7,000 dollars in California and Florida to well over 50,000 dollars in Washington, times an experience rating that commonly runs from about 0.3 percent to more than 6 percent. Because three of the four components are capped, the effective employer rate falls as salary rises. A 55,000 dollar worker often costs about 8 to 9 percent in payroll tax, while a 200,000 dollar worker costs closer to 6.8 percent. This calculator applies annual wages in one pass, so it does not model mid-year hires, multi-state work, or FUTA credit reductions imposed on states with outstanding federal unemployment loans, all of which raise real cost.

The employer side of payroll taxation began with the Social Security Act of 1935, signed by Franklin D. Roosevelt, which paired a tax on employees with a matching excise on employers and created the federal-state unemployment insurance system in the same statute. Title IX of that act imposed the federal unemployment tax while granting a credit for contributions to a certified state program, a deliberate design by drafters including Edwin Witte and the Committee on Economic Security to induce every state to build its own unemployment fund. Wisconsin, which had enacted the first state unemployment law in 1932, supplied much of the model. The original combined old-age rate was 1 percent on each side on the first 3,000 dollars of wages. The rates and bases climbed over the following decades. Disability insurance was added in 1956, and hospital insurance under Medicare arrived with the 1965 amendments at 0.35 percent per side. The Social Security Amendments of 1977 and the 1983 amendments that followed the Greenspan Commission set the schedule that produced today's 6.2 percent old-age and survivors rate and indexed the wage base to the national average wage index, which is why it climbs nearly every year. The Omnibus Budget Reconciliation Act of 1993 removed the Medicare wage cap entirely. Experience rating for state unemployment tax, in which an employer's rate reflects its own layoff history, has been part of the system since the earliest state plans.