Summary: US employers pay four payroll taxes: Social Security (6.2 percent to $184,500 in 2026, funding retirement and disability benefits), Medicare (1.45 percent on all wages, funding hospital insurance), FUTA (net 0.6 percent on the first $7,000, funding the federal unemployment system), and SUTA (a state-set rate funding state unemployment benefits). The employee matches the first two through withholding; the unemployment taxes are employer-only.
New employers usually discover payroll taxes the way most people discover potholes: by hitting one. The offer letter said $65,000, but the actual cost of that employee is several thousand dollars higher, and the difference is four taxes with four different destinations. Here is what each one is, what it pays for, and what it costs you.
Social Security tax, formally OASDI (Old-Age, Survivors, and Disability Insurance), funds the retirement, survivor, and disability benefits the Social Security Administration pays. You pay 6.2 percent of each worker's wages up to the annual wage base, $184,500 in 2026, and the worker pays the same 6.2 percent through withholding. Combined, 12.4 percent of covered wages flows to the trust funds.
Self-employed people pay both halves themselves as SECA tax: 12.4 percent on net earnings up to the wage base. That is one reason the jump from contractor to employee feels expensive on both sides of the table.
Medicare tax funds Hospital Insurance (Part A), which pays for inpatient hospital care for people 65 and older and certain younger people with disabilities. You pay 1.45 percent on all wages with no cap, and the employee pays 1.45 percent the same way. Unlike Social Security, there is no wage base where it stops.
High earners trigger the Additional Medicare Tax: an extra 0.9 percent on wages above $200,000. The employee pays all of it, but you withhold it, which means your payroll system needs the threshold programmed even though it costs you nothing directly.
Unemployment insurance is a joint federal-state system, which is why there are two taxes. FUTA, the federal piece, funds the administration of state programs and the federal backstop; you pay a net 0.6 percent on the first $7,000 of each worker's wages, or $42 per worker per year, filed annually on Form 940. SUTA, the state piece, actually pays the unemployment benefits; your state sets the rate and wage base, and your rate rises or falls with your layoff history.
Both unemployment taxes are employer-only: nothing is withheld from the employee's paycheck for either one. That makes them pure overhead, and the SUTA portion is the only payroll tax whose rate you can directly influence through stable employment practices.
Payroll taxes are not the whole loaded cost of an employee. They sit alongside income tax withholding, which you withhold but do not pay, plus the employer's share of health insurance, retirement matching, workers compensation insurance, paid leave, and any state-specific extras like paid family leave premiums or state disability insurance. When someone says an employee costs 1.25 to 1.4 times their salary, payroll taxes are roughly a third of the markup; benefits are the rest.
On a typical pay stub the employee sees Social Security and Medicare withholding as separate lines, plus federal and state income tax withholding. What the employee does not see is your matching share: another 6.2 percent for Social Security and 1.45 percent for Medicare that you pay out of pocket, plus the FUTA and SUTA taxes that never touch the employee's pay at all. When an employee asks why their $65,000 salary costs the company far more than $65,000, the answer is the employer half of FICA plus unemployment insurance plus benefits.
One more line sometimes confuses everyone: the Additional Medicare Tax. Once an individual's wages cross $200,000 in the calendar year, you must withhold an extra 0.9 percent from the employee. It looks like an employer tax because you are the one withholding it, but it is entirely the employee's liability. There is no employer match on that 0.9 percent, and no wage base where it stops.
No. Federal and state unemployment taxes are employer-only. Employees contribute to Social Security and Medicare through withholding, but nothing is withheld for unemployment insurance.
It funds Old-Age, Survivors, and Disability Insurance: retirement benefits, survivor benefits for families of deceased workers, and disability benefits, administered by the Social Security Administration.
No. Workers compensation is insurance you buy from a carrier or state fund, not a tax. But it is priced as a percentage of payroll, so it feels like one and belongs in the same budget.
Yes. All four employer payroll taxes apply to part-time wages the same as full-time. There is no hours threshold that exempts an employee from payroll taxes.
← Back to the employer payroll tax calculator 2026
Figures: 2026. Sources: the Social Security Administration (2026 contribution and benefit base), the Internal Revenue Service (FUTA, deposit rules), and the US Department of Labor. This page is for planning only and is not financial, tax, or legal advice. Verify with the cited source or a qualified professional.