Employer payroll taxes explained (2026)

What employer payroll taxes are and who pays what

Payroll taxes are percentage levies on wages that fund federal and state social-insurance programs. They split between employer and employee shares. Both sides owe money on the same paycheck, but they are calculated and remitted separately.

The employer's share covers Social Security, Medicare (FICA), FUTA, and SUTA. The employee's share — an equal Social Security and Medicare cut withheld from their paycheck — is not the employer's cost. Employers collect it and forward it to the IRS, but it comes out of the employee's gross pay, not the employer's pocket. The distinction matters: when you budget for a hire, only the employer share is a true additional cost beyond the salary.

Use the payroll tax calculatorto apply your state's exact rate to a real salary, or see the full 50-state employer tax breakdown.

FICA: Social Security and Medicare

FICA (Federal Insurance Contributions Act) is the largest employer payroll obligation. It has two parts:

Social Security (OASDI) — 6.2%

Employers pay 6.2%of each employee's wages up to the annual wage base, which is $176,100 in 2026. Once wages cross that threshold for the year, Social Security tax stops for that employee. The wage base adjusts annually with the national average wage index. Employees pay an identical 6.2% on the same capped wages from their own paychecks.

Medicare (HI) — 1.45%, no cap

Medicare has no wage cap. An employer owes 1.45% on every dollar of wages, from the first paycheck to the last. There is no ceiling.

Employees also pay 1.45% from their side, plus a 0.9% Additional Medicare Tax on wages above $200,000. That 0.9% surtax is employee-only: employers withhold it but do not match it. The employer Medicare obligation is a flat 1.45% regardless of how high wages go.

Combined employer FICA rate: 7.65% on wages up to the Social Security wage base, then 1.45% on wages above it.

FUTA — 0.6% net on the first $7,000

The Federal Unemployment Tax Act (FUTA) funds the administrative infrastructure of the unemployment insurance system. The statutory rate is 6.0%, but employers in states that repay their federal unemployment loans on time receive a 5.4% credit — reducing the effective rate to 0.6%.

FUTA applies only to the first $7,000of each employee's wages per year. The maximum FUTA tax per employee is therefore $42. For a $85,000 salary, FUTA is capped at $42 — a negligible fraction of the wage.

If a state carries a federal loan balance at the end of a calendar year (a "credit reduction state"), the 5.4% credit shrinks, raising the effective FUTA rate above 0.6% until the loan is repaid. The IRS publishes the annual list of credit-reduction states each November.

SUTA / SUI — state unemployment insurance

State Unemployment Insurance (SUTA or SUI) is what actually pays unemployment benefits to workers who lose their jobs. The rates and wage bases vary substantially by state. Every employer pays the rate that applies to their account; the FUTA credit depends on paying SUTA in full and on time.

New-employer rates apply for the first several years before a business accumulates enough claims history to receive an experience-rated account. Nationally, new-employer rates average roughly 2.07% across all 51 jurisdictions, but they range from under 1% in several states to over 4% in others. Wage bases are equally varied — from $7,000 in California and Arkansas to over $72,800 in Washington.

Experience rating kicks in after two to four years of operating history. If a business has low claims, its rate falls below the new-employer level. High claims drive it up. Keeping turnover low is the most reliable way to control SUTA costs over time.

See exact rates and wage bases for all 50 states on the employer payroll tax by state page.

Extra state employer taxes: paid leave and disability programs

Several states levy employer-paid contributions to mandated paid-leave or disability programs that add to the payroll burden beyond SUTA. The most significant in 2026:

Connecticut, Hawaii, and New Jersey also require employer disability insurance contributions, though those rates vary by insurer and plan. See each state's detail page for the full picture, or compare how costs differ between states on the contractor vs. employee comparison.

Worked example: employer cost on a $85,000 salary (Texas)

Texas has no state income tax, no extra employer mandates, and a 2.7% new-employer SUTA rate on the first $9,000. Here is every employer payroll tax on a $85,000 W-2 salary:

The $6,788 in employer payroll taxes brings the all-in cost of this hire to $91,788— before health insurance, retirement contributions, workers' comp, equipment, or any other overhead. States with higher SUTA rates or extra mandates push that total further. The true cost of a hire with benefits typically runs 25–40% above base salary.

Filing deadlines and key forms

Payroll tax compliance involves three recurring obligations. These are the high-level rules; consult your payroll provider or a CPA for your specific deposit schedule.

Form 941 — Employer's Quarterly Federal Tax Return

Reports Social Security, Medicare, and income-tax withholding for each calendar quarter. Due the last day of the month following the quarter end: April 30, July 31, October 31, and January 31. Deposit frequency (monthly or semi-weekly) depends on your total tax liability in the prior look-back period, not the 941 due date.

Form 940 — Employer's Annual FUTA Tax Return

Reports federal unemployment tax liability for the full calendar year. Due January 31. Deposits are required quarterly if cumulative undeposited FUTA liability exceeds $500. The annual return reconciles all quarterly deposits.

Form W-2 — Wage and Tax Statement

Each employer must furnish a W-2 to every employee by January 31 of the following year. The same deadline applies for filing Copy A with the Social Security Administration. Electronic filing is required for employers submitting 10 or more W-2s (threshold lowered from 250 in 2024).

State payroll tax filings follow their own schedules — typically quarterly SUI reports and payments — which vary by jurisdiction. Payroll software handles these automatically for most businesses. If you want to see how your state's obligations compare, the state employer tax table lists SUI rates and wage bases for all 51 jurisdictions.