To calculate employer payroll taxes, you add up your share of Social Security tax (6.2% of wages up to the annual wage base), Medicare tax (1.45% of all wages), and federal and state unemployment taxes. These are separate from the amounts you withhold from employee paychecks. As the employer, you pay your own matching portion on top of what employees owe, plus unemployment taxes that fall entirely on you.
The Taxes You Owe as an Employer
Employer payroll taxes have four components. Two of them, Social Security and Medicare, mirror what your employees pay. The other two, federal and state unemployment taxes, are yours alone.
- Social Security: 6.2% of each employee’s gross wages, up to the taxable wage base ($184,500 for 2026). You stop paying once an employee’s earnings hit that cap for the year.
- Medicare: 1.45% of each employee’s total gross wages. There is no cap. Unlike Social Security, Medicare tax applies to every dollar an employee earns.
- Federal Unemployment Tax (FUTA): 6.0% on the first $7,000 of each employee’s wages per year. Most employers receive a 5.4% credit for paying state unemployment taxes on time, bringing the effective FUTA rate down to 0.6%.
- State Unemployment Tax (SUTA or SUI): Rates and taxable wage bases vary by state. Your rate depends on factors like your industry, how long you’ve been in business, and your claims history (often called your “experience rating”). New employers typically start at a default rate set by their state, which adjusts over time based on how many former employees file unemployment claims.
Note that federal income tax withholding is not an employer tax. You withhold it from employee paychecks and remit it to the IRS, but the cost belongs to the employee. The taxes listed above are costs that come out of your pocket as the employer.
How to Calculate Each Tax
Social Security and Medicare (FICA)
Start with each employee’s gross pay for the pay period. Multiply by 6.2% for Social Security and 1.45% for Medicare. Together, these two taxes are called FICA, and your combined employer rate is 7.65%.
For example, if an employee earns $1,000 in a pay period, your employer FICA cost is $76.50: $62.00 for Social Security and $14.50 for Medicare. The employee also pays $76.50, which you withhold from their check. So the total FICA on that paycheck is $153.00, split evenly between you.
Keep a running total of each employee’s year-to-date earnings. Once someone crosses the Social Security wage base, stop calculating the 6.2% on any wages above that threshold. Medicare has no ceiling, so the 1.45% applies to every paycheck regardless of how much the employee has earned.
There is an Additional Medicare Tax of 0.9% on employee wages above $200,000, but that is the employee’s responsibility only. You withhold it from their pay, but you do not owe a matching employer portion.
Federal Unemployment Tax (FUTA)
Multiply each employee’s wages by 6.0%, but only on the first $7,000 they earn in the calendar year. If you’ve paid your state unemployment taxes on time and your state is not subject to a credit reduction, you get the full 5.4% credit, making your effective rate 0.6%.
At the 0.6% effective rate, the maximum FUTA cost per employee is $42 per year ($7,000 × 0.006). Once an employee’s wages pass $7,000 for the year, you stop owing FUTA on their additional earnings. For most employers, FUTA is the smallest piece of the payroll tax calculation.
A small number of states occasionally lose their full credit due to outstanding federal unemployment loans, which raises the effective FUTA rate for employers in those states. The IRS publishes a list of affected states each year.
State Unemployment Tax
Your state assigns you a tax rate and tells you the taxable wage base (the maximum amount of each employee’s wages subject to the tax). State taxable wage bases range from around $7,000 to over $50,000 depending on the state. Your assigned rate can range from near zero for employers with a clean claims history to several percentage points for employers with frequent layoffs.
The formula is the same structure: multiply the employee’s wages (up to the state’s wage base) by your assigned rate. If your state rate is 2.5% on a $10,000 wage base, for instance, your maximum state unemployment tax per employee would be $250 for the year.
Putting It All Together
Here’s how a full calculation looks for one employee earning $60,000 per year, assuming a 2.5% state unemployment rate on a $10,000 wage base and the standard 0.6% FUTA rate:
- Social Security: $60,000 × 6.2% = $3,720
- Medicare: $60,000 × 1.45% = $870
- FUTA: $7,000 × 0.6% = $42
- State unemployment: $10,000 × 2.5% = $250
- Total employer payroll taxes: $4,882
That works out to about 8.1% of this employee’s salary. For higher-paid employees, the percentage drops slightly because Social Security and unemployment taxes cap out, while the base salary keeps growing. For lower-paid employees, the percentage is higher because more of their wages fall within all the taxable thresholds.
When and How to Pay
FICA taxes (your share plus the amount you withheld from employees) and federal income tax withholding are deposited together. The IRS assigns you a deposit schedule, either monthly or semi-weekly, based on the total tax liability you reported during a lookback period. New employers typically start on a monthly schedule, depositing by the 15th of the following month.
FUTA is reported annually on Form 940, but if your accumulated FUTA liability exceeds $500 in any quarter, you must deposit it by the end of the following month. State unemployment taxes follow each state’s own deposit and reporting schedule, which is usually quarterly.
You report Social Security and Medicare taxes each quarter on Form 941 (or annually on Form 944 if the IRS has notified you to use that form). This return reconciles what you owe with what you’ve already deposited.
Tracking the Wage Base Caps
The trickiest part of calculating employer payroll taxes is watching the annual caps. Three of the four taxes stop applying once an employee’s year-to-date wages cross a threshold: Social Security at the annual wage base, FUTA at $7,000, and state unemployment at whatever your state’s wage base is. Only Medicare has no limit.
If you run payroll manually or use a spreadsheet, keep a cumulative earnings column for each employee and check it every pay period. Most payroll software handles this automatically, stopping the calculation mid-paycheck if an employee crosses a cap partway through a pay period. For example, if an employee’s year-to-date earnings are $6,500 and they earn $1,000 this period, FUTA applies only to the first $500 of that paycheck.
Getting this wrong in either direction creates problems. Overpaying means filing for a refund. Underpaying triggers penalties and interest. If you process payroll for more than a handful of employees, payroll software or a payroll service pays for itself in accuracy alone.