What does an employee really cost?
On top of each wage, employers pay 6.2% Social Security up to $184,500, 1.45% Medicare, federal unemployment tax of about $42 per employee, and state unemployment tax at their own rate. Benefits come on top. Enter a wage to see the full yearly cost of a hire.
Updated November 2026
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Federal unemployment assumes the full 5.4% state credit (0.6% on the first $7,000). Workers' comp, paid leave and local taxes aren't included. An estimate, not tax advice.
What payroll taxes does an employer pay?
- Social Security: 6.2% of each employee's wages, up to $184,500 for 2026
- Medicare: 1.45% of all wages, with no cap (the extra 0.9% over $200,000 is the employee's alone)
- Federal unemployment (FUTA): 6.0% of the first $7,000 of wages, cut to 0.6% by the credit for paying state unemployment tax on time, so about $42 per employee
- State unemployment (SUTA): your state's rate on its own wage base. New employers usually get a starting rate, then a rate based on their history
These are on top of the wage. The employee's own 7.65% comes out of their paycheck, and doesn't cost you anything extra.
What else does a hire cost?
Workers' compensation insurance, paid time off, health insurance and retirement matching can add far more than the taxes do. So can the payroll software and your time running it. That's why a $50,000 hire often costs $60,000 or more once everything is counted.
Our post on how much an employee really costs walks through a full example, and the hiring your first employee checklist covers the setup.
Sources
General information, not tax advice for your situation.
How much does an employer pay in payroll taxes?
About 7.65% of wages for Social Security and Medicare, plus federal unemployment of about $42 per employee and your state unemployment rate on its wage base.
Is FUTA really only $42 per employee?
For most employers, yes. It's 6.0% of the first $7,000, reduced to 0.6% when you pay state unemployment on time. Employers in credit reduction states pay more.
What is a typical state unemployment rate?
It varies by state and by your history. New employers often start between 1% and 4%, on wage bases from $7,000 to over $70,000.
Do I pay payroll tax for contractors?
No. You don't withhold or match for 1099 contractors. Make sure the person really is a contractor, though, because misclassification brings back taxes and penalties.
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