Every employer in the U.S. pays taxes on the wages they pay out. That's separate from taxes withheld from employee paychecks, even though they often show up on the same payroll run. The employer side adds roughly 7.5% to 10% on top of gross wages, more in states with higher unemployment rates or special local taxes. For a company with a $5 million annual payroll, that's $375,000 to $500,000 a year, larger than most line items other than salary itself. Getting the taxes right (and filing on time) matters. The penalties for late deposits compound quickly. This page covers the core federal taxes, state overlays, the 2026 rates, and how to avoid the most common deposit mistakes.
The Federal Employer Payroll Taxes
Three federal taxes hit every paycheck. The employer pays 6.2% of wages up to the Social Security wage base ($184,500 for 2026, up from $176,100 in 2025) for Social Security. Medicare adds 1.45% with no wage cap. FICA combined is 7.65%, matched by the employee's contribution withheld from their paycheck.
Federal Unemployment Tax (FUTA) adds 6% on the first $7,000 of each employee's wages, but most employers get a 5.4% credit for paying state unemployment, bringing the effective FUTA rate to 0.6%. That translates to a maximum of $42 per employee per year in most states. Check the Social Security Administration wage base page for the current year's Social Security limit.
State Unemployment Tax (SUTA) and Local Payroll Taxes
SUTA varies widely by state and by employer. New employers typically start at a default rate (often 2% to 3%) and move to an experience-rated rate after a few years based on how many of your former employees have drawn unemployment. A company with high turnover can end up with a SUTA rate two to three times higher than a stable employer in the same state.
Some states add disability insurance, paid family leave, or workforce training taxes on top of SUTA. California's SDI, New Jersey's TDI, and New York's Paid Family Leave are the best-known examples. Cities can add their own: San Francisco, New York City, and Philadelphia all have local payroll taxes in some form.
Who Pays the Federal Income Tax Withholding?
Federal income tax is withheld from the employee's paycheck, not paid by the employer. But the employer is responsible for depositing it on time. Late deposits or underpayments carry penalties of 2% to 15% depending on lateness, so the employer bears the consequences even when the employee's money is technically what's at stake.
Deposit Schedules and Filing Deadlines
Most employers follow either a monthly or semi-weekly deposit schedule based on their prior-year tax liability. Monthly depositors remit all payroll taxes from a month by the 15th of the following month. Semi-weekly depositors remit taxes for Wednesday-Friday paychecks by the following Wednesday, and Saturday-Tuesday paychecks by the following Friday. Form 941 is filed quarterly to reconcile.
Annual filings include Form 940 (FUTA), W-2s to employees and the SSA by January 31, and state equivalents. The IRS guide to depositing and reporting employment taxes has the current schedule rules.
Budgeting and Forecasting Employer Payroll Taxes
When finance plans headcount, they should budget 7.5% to 10% on top of gross wages for federal employer taxes, plus another 1% to 4% for state-level obligations (the exact number depends on your state mix and SUTA rate). Benefits costs stack on top of that. For most mid-sized companies, total burden runs 20% to 30% above gross compensation .
The fastest way to reduce employer payroll tax exposure is to reduce regrettable turnover, since a lower SUTA experience rate compounds year over year. Keep payroll records organized, file on time, and build a quarterly check into your close process to catch deposit errors before they turn into penalty notices. When in doubt, the IRS publishes Publication 15 (Circular E) with complete employer tax instructions.
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