Employers pay a combined federal payroll tax rate of at least 7.65% on employee wages — 6.2% for Social Security and 1.45% for Medicare — plus federal and state unemployment taxes that vary by state and by your claims history. So when people ask what employers pay in payroll taxes, the working answer for most businesses is 8% to 12% of gross payroll once state unemployment insurance and any local assessments are added in.
Social Security and Medicare (FICA)
The two biggest employer payroll taxes fund Social Security and Medicare through the Federal Insurance Contributions Act. Your share as the employer mirrors what gets withheld from the employee’s paycheck, but you pay it separately, on top of wages.
For Social Security, you owe 6.2% of each employee’s wages up to the annual wage base.1Office of the Law Revision Counsel. 26 USC 3111 Rate of Tax In 2026, that wage base is $184,500, making the maximum Social Security tax per employee $11,439 for the year.2Social Security Administration. Contribution and Benefit Base Once an employee’s earnings pass $184,500, you stop owing Social Security tax on the excess for that calendar year.
For Medicare, you owe 1.45% of all wages with no cap.1Office of the Law Revision Counsel. 26 USC 3111 Rate of Tax The Additional Medicare Tax of 0.9% at higher income levels applies only to the employee, never the employer.3Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates
Combined, your FICA obligation is 7.65% on wages up to $184,500 and 1.45% on anything above.4Social Security Administration. Social Security and Medicare Tax Rates For an employee earning $60,000, that is $4,590. For an employee earning $200,000, it is $14,339 ($11,439 Social Security plus $2,900 Medicare).
Federal Unemployment Tax (FUTA)
The federal unemployment tax funds the administrative side of unemployment insurance and job-placement programs. FUTA is paid entirely by the employer; you cannot deduct any of it from an employee’s pay.5Office of the Law Revision Counsel. 26 USC 3301 Rate of Tax
The statutory rate is 6.0% on the first $7,000 each employee earns during the year.6Office of the Law Revision Counsel. 26 USC Subtitle C Chapter 23 Almost no employer actually pays 6.0%. If you pay your state unemployment taxes on time, you receive a credit of up to 5.4%, bringing the effective rate down to 0.6%, or $42 per employee who earns at least $7,000.7Office of the Law Revision Counsel. 26 USC 3302 Credits Against Tax
The full credit is not guaranteed. When a state borrows from the federal government to cover unemployment shortfalls and does not repay within two years, employers in that state face an automatic credit reduction starting at 0.3% and growing 0.3% for each additional unpaid year.7Office of the Law Revision Counsel. 26 USC 3302 Credits Against Tax For the 2025 tax year, California employers faced a 1.2% credit reduction (raising their effective FUTA rate to 1.8%), and U.S. Virgin Islands employers faced a 4.5% reduction.8Federal Register. Notice of the Federal Unemployment Tax Act (FUTA) Credit Reductions Applicable for 2025 Check the Department of Labor’s annual announcement before you file Form 940.
State Unemployment Tax (SUTA)
Every state runs its own unemployment insurance system with its own rates and wage bases. The taxable wage base ranges from the federal minimum of $7,000 in states like California and Florida to over $70,000 in states like Washington.9U.S. Department of Labor, Employment & Training Administration. Unemployment Insurance Tax Topic A higher wage base means you pay unemployment tax on a larger share of each employee’s earnings.
Your specific SUTA rate depends on your experience rating, a score based on how many former employees have successfully claimed benefits against your account. Businesses with frequent layoffs pay more. Experienced-employer rates run from near 0.0% for clean claims histories up to 10% or more for heavy claims activity.
New businesses that have not built a claims history get a default rate that varies by state and sometimes by industry. Construction companies often face higher default rates than office-based businesses. New employer rates generally fall between 1% and 5%. After a few years, your rate shifts to reflect your actual experience.
Some states also add small surcharges for workforce training programs, administrative costs, or trust fund solvency. The amounts are usually a fraction of a percent, but they are employer-only and add to your total state bill.
Other State and Local Payroll Taxes
Beyond unemployment insurance, some states and localities impose additional payroll taxes on employers. These can include transit district levies, payroll expense taxes in major cities, and contributions to paid family leave or temporary disability insurance. Some programs are funded partly or entirely by employee withholdings, but in several states the employer also owes a percentage.
If your employees work remotely from a state other than your business’s home state, you may owe payroll taxes in the employee’s state as well. Even a single person working in another state generally triggers registration and withholding obligations there, whether full-time or part-time. Check with each relevant state’s labor or revenue department for what applies.
Fringe Benefits That Increase Your Tax Bill
Payroll taxes do not apply only to cash wages. Many non-cash fringe benefits count as taxable compensation unless the tax code specifically excludes them, and when a benefit is taxable, you owe FICA on its value just as you would on cash wages.10Internal Revenue Service. Publication 15-B Employer’s Tax Guide to Fringe Benefits
Common fringe benefits with partial or full tax exposure include group-term life insurance coverage above $50,000 (calculated using IRS age-based rates), qualified parking and transit benefits over $340 per month in 2026, achievement awards over $1,600 for qualified plans or $400 for nonqualified, and employee discounts above the allowed thresholds.10Internal Revenue Service. Publication 15-B Employer’s Tax Guide to Fringe Benefits Personal use of a company car is treated as taxable wages that increase both your and the employee’s FICA obligation. Meals and lodging provided on business premises for the employer’s convenience are generally excluded.
Total Employer Cost for One Employee
To estimate your total employer-side payroll tax cost for one worker, stack the layers:
- Social Security: 6.2% of wages up to $184,500 (maximum $11,439)
- Medicare: 1.45% of all wages, no cap
- FUTA: 0.6% of the first $7,000 ($42 per employee), assuming full credit
- SUTA: your state-assigned rate applied to the state’s taxable wage base
- Any local transit, disability, or paid leave contributions required in your jurisdiction
For an employee earning $50,000 in a state with a 3% SUTA rate on a $10,000 wage base and no local taxes, total employer payroll taxes come to roughly $4,167, about 8.3% of wages. For a $150,000 earner in the same state, the total is around $12,117, or roughly 8.1%, because Social Security and SUTA stop accruing once the respective wage bases are reached.
Track wage base limits carefully throughout the year. Once an employee’s cumulative earnings pass $184,500, stop contributing Social Security tax for that employee. The same principle applies to FUTA at $7,000 and to your state’s SUTA wage base. Overpaying creates a cash flow burden you have to claw back through amended filings.
Filing Forms and Deposit Deadlines
Employers report payroll taxes on several IRS forms:11Internal Revenue Service. Employment Tax Due Dates
- Form 941 reports Social Security, Medicare, and withheld income taxes quarterly, due April 30, July 31, October 31, and January 31. Depositing all taxes on time earns 10 extra calendar days to file.
- Form 940 reports FUTA tax for the prior year, due January 31 with the same 10-day extension for on-time depositors.12Internal Revenue Service. Publication 509 (2026), Tax Calendars
- Form 944 is an annual alternative to Form 941 for very small employers the IRS has specifically notified. Due January 31.
- Forms W-2 and W-3 report employee wages and withholdings, filed with the Social Security Administration and furnished to employees by January 31.
Most states also require quarterly wage reports, often on similar dates. Check your state labor department for exact deadlines.
The IRS assigns you either a monthly or semiweekly deposit schedule based on your lookback-period liability. Monthly depositors deposit by the 15th of the following month. Semiweekly depositors deposit taxes on Wednesday–Friday wages by the following Wednesday, and taxes on Saturday–Tuesday wages by the following Friday. If your liability reaches $100,000 on any single day, you must deposit by the next business day regardless of your normal schedule.11Internal Revenue Service. Employment Tax Due Dates
What Late Payment Costs
Late deposits trigger escalating penalties based on how late the payment arrives:13Internal Revenue Service. Failure to Deposit Penalty
- 1 to 5 days late: 2% of the unpaid deposit
- 6 to 15 days late: 5%
- More than 15 days late: 10%
- More than 10 days after an IRS notice demanding payment: 15%
The penalties do not stack. A deposit more than 15 days late costs 10%, not 2% plus 5% plus 10%.
Trust Fund Recovery Penalty
The most severe consequence falls on employers who withhold Social Security, Medicare, and income taxes from employees but fail to send that money to the IRS. Because those withheld amounts are held in trust for the government, the IRS can impose a penalty equal to 100% of the unpaid trust fund taxes.14Internal Revenue Service. Trust Fund Recovery Penalty The penalty applies personally, not just to the business. Officers, partners, sole proprietors, and anyone else with authority over the business’s finances can be held individually liable.15Office of the Law Revision Counsel. 26 USC 6672 Failure to Collect and Pay Over Tax, or Attempt to Evade or Defeat Tax If multiple people share responsibility, each can be assessed the full penalty; those who pay can seek reimbursement from the others, but the IRS does not divide the penalty on its own.
A Note on Worker Classification
Classifying a worker as an independent contractor rather than an employee eliminates your payroll tax obligations on their earnings, but if the IRS disagrees you can be held liable for the unpaid employment taxes plus penalties and interest, and the reduced-rate relief under 26 USC 3509 depends on whether you filed 1099s.16Internal Revenue Service. Independent Contractor (Self-Employed) or Employee?17Office of the Law Revision Counsel. 26 USC 3509 Determination of Employer’s Liability Getting classification right up front is cheaper than defending it later.