Employer Payroll Taxes
What Are Employer Payroll Taxes and What Do They Cost?
Employer payroll taxes are the taxes a business owes on top of employee wages—not deducted from paychecks. They include the employer share of FICA, FUTA, and SUTA, representing a real additional cost beyond gross wages.
While employees see taxes withheld from their paycheck, employers separately owe their own payroll taxes calculated as a percentage of wages paid. This includes matching the employee’s FICA contribution, plus FUTA (generally netting to an effective 0.6% on the first $7,000 of wages per employee) and SUTA (rates vary by state and by the employer’s layoff history).
For budgeting purposes, employers should think of total payroll cost as gross wages plus roughly 7.5–10%+ in employer-side taxes, though the exact figure depends heavily on the employer’s SUTA rate, which can range from under 1% to well over 6% for employers with a history of layoffs. New employers typically start at a state’s standard “new employer rate.”
Because these taxes are calculated and remitted separately from employee withholding, they don’t appear on an employee’s pay stub—which can make them easy for new business owners to underestimate when budgeting for a hire.
Key Employer Payroll Tax Costs: FICA, FUTA, and SUTA
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Includes employer FICA match, FUTA, and SUTA—paid on top of gross wages.
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FUTA typically nets to an effective 0.6% on the first $7,000 of wages per employee.
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SUTA rates vary by state and by the employer's unemployment claims history.
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Not visible on an employee's pay stub since they're employer-only obligations.
Frequently Asked Questions
Do employer payroll taxes come out of the employee's paycheck?
No—these are a separate cost paid by the employer on top of wages.
How much should a business budget for employer payroll taxes?
A rough rule of thumb is 7.5–10%+ of gross wages, depending heavily on the employer’s state SUTA rate.
Why do employer tax rates vary between businesses?
Primarily due to SUTA experience rating—employers with more unemployment claims history typically pay a higher state rate.
Can FUTA rates increase for employers in certain states?
Yes—if a state hasn’t repaid its federal unemployment loans, employers there face a credit reduction that raises their effective FUTA rate.
Can a new business reduce its SUTA rate over time?
Yes—maintaining low unemployment claims over several years typically lowers an employer’s experience-rated SUTA rate.
Related terms: FICA Taxes, SUTA/FUTA, Payroll Journal Entry