Compensation

Employer payroll taxes

Definition

What is Employer payroll taxes?

Employer Payroll Taxes are taxes that employers are legally required to pay based on their employees' wages, including contributions to social security, Medicare, and unemployment insurance funds.

Featured snippet

Taxes employers must legally pay based on their employees' wages and earnings.

In Practice

How Employer payroll taxes works?

Employer payroll taxes are mandatory contributions calculated as a percentage of employee wages that the employer pays directly to government — distinct from the employee's payroll taxes that are withheld from wages and remitted on the employee's behalf. In the United States, the primary employer payroll tax obligations are the employer share of FICA (6.2 percent Social Security and 1.45 percent Medicare on eligible wages), Federal Unemployment Tax (FUTA at 6 percent on the first $7,000 of wages, reduced to 0.6 percent after state unemployment tax credits), and state unemployment insurance (SUI, with rates varying by state and employer experience rating). These taxes are a significant component of total employment cost that is often invisible in compensation budgeting discussions that focus only on salary and benefits.

By the numbers

Key Statistics

What the research says about employee engagement.

$160,200

Employer payroll taxes add approximately 7.65 percent to the cost of every dollar of employee wages below the Social Security wage base ($160,200 in 2023), making total employment cost 15 to 20 percent higher than salary alone when all tax and benefit costs are included.

0.1%

State unemployment insurance (SUI) rates vary from 0.1 percent to over 10 percent of wages depending on state, industry, and employer claims experience — making workforce stability directly financially valuable through its effect on the employer's experience rating.

Misclassifying employees as independent contractors reduces employer payroll tax obligations to zero but creates back-tax liability of the full employer and employee FICA amounts plus penalties and interest when discovered during IRS or state audits.

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Also known as

Synonyms and Translations

Other ways this term appears across industries and languages.

Synonyms

Payroll Taxes

Employer Contributions

FICA Taxes

Social Security Contributions

Translations

🇸🇦

Arabic

ضرائب رواتب صاحب العمل

🇫🇷

French

Charges patronales

🇮🇳

Hindi

नियोक्ता वेतन कर

🇵🇰

Urdu

آجر کے پے رول ٹیکس

🇵🇭

Tagalog

Buwis ng Employer sa Sahod

People may ask

People May Ask

Common questions about employee engagement.

What are employer payroll taxes?

They are mandatory taxes employers pay on behalf of or in addition to employee wages, funding programs like Social Security, Medicare, and unemployment insurance.

What payroll taxes are employers typically responsible for?

In the US, employers pay FICA taxes (Social Security and Medicare), federal unemployment tax (FUTA), and state unemployment taxes (SUTA).

How much do employer payroll taxes typically cost?

US employers pay 7.65% for FICA on each employee's eligible wages, plus additional amounts for federal and state unemployment insurance contributions.

Are employer payroll taxes different from employee payroll taxes?

Yes. Employees also contribute to Social Security and Medicare, but employer payroll taxes are additional obligations paid entirely by the employer.

How do payroll taxes affect the true cost of hiring an employee?

Payroll taxes add approximately 10 to 15 percent to base salary costs, making total employment cost significantly higher than the agreed salary alone.