What SUI rate does a new Ohio employer pay, and how is the taxable wage base applied?

New employers in Ohio pay a state unemployment insurance rate of 2.7%, applied to the first $9,000 of each covered employee's wages in a calendar year. That works out to a maximum SUI cost of $243 per W-2 worker annually until the employer earns an experience rate.

Does Ohio tax employee wages at the state level?

Yes. Ohio imposes a graduated state income tax on wages, so employers must withhold Ohio income tax from each W-2 employee's paycheck and remit it to the Ohio Department of Taxation. This withholding obligation is an administrative cost that does not apply when working with a 1099 independent contractor.

What happens if Ohio finds that a worker was misclassified as an independent contractor?

Ohio uses the ABC test to determine worker status for unemployment insurance purposes under ORC 4141.44. An employer found to have misclassified workers can owe back UI taxes on all misclassified wages, plus interest and civil penalties — making retroactive liability potentially substantial if the misclassification involved multiple workers over several years.

OH · Payroll tax 2026

The true cost of hiring in Ohio

What a W-2 employee actually costs an employer in Ohio— and how that compares to a 1099 contractor — with the state's real 2026 unemployment-insurance rates built in.

Ohio's employer economy runs through manufacturing hubs in Toledo and Dayton, logistics corridors tied to Columbus, and a healthcare sector that employs hundreds of thousands across Cleveland and Cincinnati. When a W-2 hire comes on payroll in Ohio, the true cost to the employer exceeds the stated salary by a predictable set of line items — and state unemployment insurance is the first one to calculate. New employers pay a 2.7% SUI rate on the first $9,000 of each worker's wages, adding up to $243 per employee per year at the taxable wage base ceiling. On top of that, federal FICA (7.65% on wages up to the Social Security ceiling), FUTA, and workers' compensation premiums apply. Ohio does levy a state income tax on wages, meaning payroll withholding is required for W-2 employees and adds administrative overhead even though it falls on the employee side. For a business in manufacturing, healthcare, or distribution — Ohio's core industries — understanding these obligations before making an offer prevents the common mistake of pricing a hire at salary alone.

Estimate a Ohio hire

Pre-filled with Ohio's 2.7% new-employer SUI rate. Adjust salary, benefits, and the 1099 rate to fit your hire.

Fully-loaded W-2 costOhio

$99,323/yr

1.32× base salary$47.75/hr$24,323 over base

W-2 employee

$99,323

1099 contractor

$75,000

W-2 costs $24,323 more (32.4%) than this contract. Breakeven rate: $99,323.

Annual salary

State

Health insurance/mo

401(k) match

Overhead

1099 contract/yr

New-employer rates · IRS Pub 15OH details

Ohio employer tax facts

Ohio employer payroll-tax rates for 2026
Item	OH	Context
New-employer SUI rate	2.7%	+0.63% vs national avg 2.07%
SUI taxable wage base	$9,000	national avg $22,573
Federal FICA (employer)	7.65%	6.2% SS + 1.45% Medicare
FUTA	0.6%	max $42 per employee/yr
State income tax on wages	Yes
Worker classification test	ABC test

Source: IRS Pub 15 · Ohio unemployment agency · Updated 2026-06-01

Example: a $75,000 hire in Ohio

At a $75,000 base salary with typical benefits, a W-2 employee in Ohio costs an employer $99,323 per year — $24,323 above base pay. An equivalent 1099 contract at $75,000 would cost $24,323 less; the breakeven contract rate is $99,323.

Misclassification risk in Ohio

Test: ABC test

ABC test; back UI taxes, interest, civil penalties (ORC 4141.44).

Penalties by state

Compare nearby rates

Ohio's 2.7% new-employer SUI rate sits near Alabama (2.7%), District of Columbia (2.7%), Florida (2.7%), Georgia (2.7%). See the full 51-state comparison or the 2026 employer payroll tax reference.

Ohio hiring-cost FAQ

What SUI rate does a new Ohio employer pay, and how is the taxable wage base applied?: New employers in Ohio pay a state unemployment insurance rate of 2.7%, applied to the first $9,000 of each covered employee's wages in a calendar year. That works out to a maximum SUI cost of $243 per W-2 worker annually until the employer earns an experience rate.
Does Ohio tax employee wages at the state level?: Yes. Ohio imposes a graduated state income tax on wages, so employers must withhold Ohio income tax from each W-2 employee's paycheck and remit it to the Ohio Department of Taxation. This withholding obligation is an administrative cost that does not apply when working with a 1099 independent contractor.
What happens if Ohio finds that a worker was misclassified as an independent contractor?: Ohio uses the ABC test to determine worker status for unemployment insurance purposes under ORC 4141.44. An employer found to have misclassified workers can owe back UI taxes on all misclassified wages, plus interest and civil penalties — making retroactive liability potentially substantial if the misclassification involved multiple workers over several years.