Standard US Employer Payroll Taxes Reference
| Tax Type | Standard Employer Rate | Taxable Wage Limit | Purpose & Details |
|---|---|---|---|
| FICA Social Security | 6.2% | $168,600 (varies by year) | Employer match of national pension/retirement system |
| FICA Medicare | 1.45% | Unlimited | Employer match of medical care program for seniors |
| FUTA (Federal Unemployment) | 0.6% (standard net rate) | First $7,000 | Supports administration of state unemployment systems |
| SUTA (State Unemployment) | 1.0% – 6.0% (default 2.7%) | Varies by state ($7,000 – $60,000+) | Funds local unemployment benefits; rate depends on experience |
| Workers' Compensation | 0.5% – 5.0%+ (industry-dependent) | Unlimited | Required insurance covering on-the-job employee injuries |
What is the True Cost of an Employee?
When recruiting new staff or analyzing corporate profitability, looking only at an employee's base salary or hourly wage offers an incomplete picture. The actual cost of employment (often called the "fully burdened cost") includes employer payroll taxes, insurance premiums, retirement matches, workplace tools, and utilities.
The Employee Cost Formula
To find the total annual cost of an employee, sum up all forms of compensation, statutory taxes, benefit programs, and administrative overhead:
Total Annual Cost = Base Wages + Employer Taxes + Benefits + Overhead
Where:
• Base Wages = Salary OR (Hourly Rate × Hours/Week × Weeks/Year)
• Employer Taxes = Social Security + Medicare + FUTA + SUTA + Workers' Comp
• Benefits = Health/Dental Insurance + Retirement Match + Other Perks
• Overhead = Office space + Software Licenses + Training & Recruiting
A Detailed Example Calculation
Let's compute the fully burdened cost of a salaried worker with an annual salary of $75,000:
- Base Annual Salary: $75,000
- Employer Payroll Taxes:
- Social Security (6.2%): $4,650
- Medicare (1.45%): $1,087.50
- FUTA (0.6% on first $7,000): $42
- SUTA (2.7% on first $10,000): $270
- Workers' Comp (1.5%): $1,125
- Subtotal Taxes: $7,174.50
- Benefits (Employer Share):
- Health Insurance ($500/month): $6,000
- Other Insurance ($50/month): $600
- 401(k) Match (3%): $2,250
- Subtotal Benefits: $8,850
- Overhead & Admin:
- Office Space allocation ($150/month): $1,800
- Software & Hardware ($100/month): $1,200
- Training / Professional Development: $1,500
- Subtotal Overhead: $4,500
Adding these together:
$75,000 (Base) + $7,174.50 (Taxes) + $8,850.00 (Benefits) + $4,500.00 (Overhead) = $95,524.50
In this case, the employee's markup factor is 1.27x (or 27% above base salary).
Why Knowing the Markup Matters
Understanding this markup (also called the labor burden rate) helps businesses correctly price their services, set client project rates, determine hiring budgets, and perform accurate financial forecasting. Use our interactive calculator above to customize rates for your team.