Employer payroll taxes

What are Employer Payroll Taxes?

Employer payroll taxes refer to the taxes that employers are obligated to withhold from their employee's paychecks and pay on their own behalf. These taxes cover various government programs like Social Security, Medicare, and unemployment insurance. For example, if an employee earns $50,000 per year, the employer is responsible for withholding the appropriate amount for these taxes and remitting them to the respective government agencies.

Employer payroll taxes are a fundamental aspect of responsible business management. They encompass a range of contributions made by employers to federal, state, and local governments. These funds are crucial as they finance various social benefit programs.

Employer Payroll Taxes Calculation:

Employer payroll taxes are calculated based on a percentage of an employee's wages. The specific rates vary by country and often include contributions to social security, Medicare, and other government programs.

Types of Employer Payroll Taxes:

The main types of employer payroll taxes include:

  • Federal Income Tax
  • State Income Tax
  • Social Security Tax
  • Medical Tax Act
  • Federal Unemployment Tax Act (FUTA) taxes
  • State Unemployment Taxes

How Often Do Employers Need to Pay Payroll Taxes?

The frequency of payroll tax payments depends on the jurisdiction and the size of the business. In the United States, for example, small businesses often make quarterly payments, while larger businesses may make monthly payments.

Can Employers Deduct Payroll Taxes from Employees' Wages?

Employers are legally required to deduct payroll taxes from their employee's wages and remit them to the appropriate government agencies.

Employer Payroll Taxes in the UAE and Saudi Arabia:

In the UAE and Saudi Arabia, the concept of employer payroll taxes is somewhat different as these countries do not have traditional income tax systems.  

In the UAE, employers are required to make contributions to social security and pension funds for their employees. This includes the General Pension and Social Security Authority (GPSSA) in Abu Dhabi and the Pension Fund Commission in Dubai. These contributions are calculated based on a percentage of the employee's wages, with the employer responsible for remitting the appropriate amounts.

Additionally, employers in the UAE must allocate funds for the End of Service Gratuity (ESG), a statutory benefit mandated by UAE labor law. This gratuity is calculated based on the length of service and final salary of an employee.

In Saudi Arabia, the General Organization for Social Insurance (GOSI) oversees the social insurance system. Employers are required to contribute to GOSI, which covers benefits such as pensions, disability, and workplace injury compensation. The contributions are determined by a percentage of the employee's wages, with the employer facilitating the payments.

Both countries also have specific regulations governing expatriate labor, including mandatory medical insurance and sponsorship fees. Employers must account for these additional costs in their payroll calculations for expatriate staff.

It is imperative for businesses operating in the UAE and Saudi Arabia to stay informed about the latest tax and labor regulations. Seeking professional advice or partnering with a knowledgeable HR and payroll service provider can help ensure compliance with local laws and streamline the payroll process.


Understanding and correctly managing employer payroll taxes is crucial for businesses to remain compliant with government regulations and ensure the well-being of their employees. It involves accurate calculations, timely payments, and adherence to legal requirements. Employers must stay informed about tax laws and seek professional advice when needed to avoid potential pitfalls.

Also read: What is a defined benefit plan?
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