Payroll taxes
How much are employer payroll taxes on a $20-an-hour employee?
Short answer: on a full-time $20-an-hour employee ($41,600 a year), the employer owes $3,182.40 in Social Security and Medicare, $42 in federal unemployment tax for most employers, plus state unemployment tax. That’s about $3,224 in federal employer taxes before your state’s share, or roughly $1.55 per paid hour.
Key takeaways
- Employer FICA is 7.65% of wages: 6.2% Social Security (up to $184,500 in 2026) and 1.45% Medicare.
- FUTA is 6.0% on the first $7,000 per employee, usually a net 0.6% ($42) after the state credit.
- State unemployment tax is the only piece that varies widely, and income tax withholding comes out of the employee’s pay, not yours.
On this page
Employer taxes versus withholding
New employers often lump two different things together. Employer taxes are costs you pay on top of wages. Withholding is money you take out of the employee’s check and send to the government for them. Both have to be deposited on time, but only the first raises your cost of labor. IRS Publication 15 is the IRS’s employer tax guide and covers both.
Employer taxes on a W-2 employee are: the employer half of Social Security and Medicare (FICA), federal unemployment tax (FUTA), and state unemployment tax (SUTA). Some states add small extra employer charges, such as training or disability funds. Withholding includes federal income tax based on the employee’s IRS Form W-4, the employee half of FICA, and state or local income tax where it applies.
The 2026 numbers for $20 an hour
| Employer tax | Rule | Year | Weekly |
|---|---|---|---|
| Social Security | 6.2% up to $184,500 | $2,579.20 | $49.60 |
| Medicare | 1.45% of all wages | $603.20 | $11.60 |
| FUTA | Net 0.6% of first $7,000 | $42.00 | front-loaded |
| SUTA (hypothetical) | 2.7% of a $10,000 base | $270.00 | front-loaded |
| Total employer payroll tax (with hypothetical SUTA) | $3,494.40 | ||
Weekly wages are $800 (40 hours at $20). Social Security and Medicare are the 6.2% and 1.45% rates from IRS Topic 751, and the wage base is confirmed in the 2026 Publication 15. FUTA and SUTA only apply to the first part of each employee’s wages, so you pay them early in the year and then they stop. At $800 a week, the $7,000 FUTA base is used up in about nine weeks.
The SUTA row is hypothetical. Each state sets its own taxable wage base and assigns new employers a starting rate; some bases are under $10,000 and others are far higher. Find your state’s figures through the DOL state unemployment insurance laws or your state workforce agency, and use the rate on your assignment notice.
What the employee’s check looks like
On the same $800 week, you would also withhold $49.60 for the employee’s Social Security and $11.60 for their Medicare, plus federal income tax from the IRS withholding tables in Publication 15-T, plus any state income tax. You send those amounts to the government along with your employer share. If you deposit late, the IRS charges failure-to-deposit penalties, so set a schedule from day one.
Deposits and filings you will have
- Form 941 each quarter to report wages, withholding, and FICA (very small employers may be told to file Form 944 annually instead).
- Form 940 once a year for FUTA.
- Form W-2 to the employee and the Social Security Administration after year-end.
- State withholding and unemployment returns on your state’s schedule.
Most new employers are monthly depositors for FICA and withheld income tax; Publication 15 explains the lookback rule that decides your schedule. A payroll service calculates, deposits, and files these for you, which is often worth it for a first hire.
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Taxes are only part of the cost
Payroll taxes add roughly 8% to wages in this example. Workers’ comp, which is insurance rather than a tax, can add as much or more for trade work, and you also pay for payroll software, tools, and any benefits. See the full picture in the cost to hire a first electrician’s helper or run the true-cost calculator with your state selected.
See the full cost Add your state’s SUTA rate, workers’ comp, and benefits.
Open the calculatorFrequently asked questions
How much does an employer pay in taxes on a $20-an-hour employee?
For a full-time employee earning $41,600 a year in 2026, the employer pays $2,579.20 in Social Security, $603.20 in Medicare, and usually $42 in net FUTA. State unemployment tax is extra and varies by state; at a hypothetical 2.7% on a $10,000 base it adds $270, for about $3,494 in total.
Is federal income tax an employer cost?
No. Federal income tax is withheld from the employee's pay based on their Form W-4. The employer must deposit it, but it is not an added cost on top of wages.
What is the 2026 Social Security wage base?
The IRS lists $184,500 for 2026 in Publication 15. Social Security tax of 6.2% each for employer and employee stops once an employee's wages for the year pass that amount. Medicare has no wage cap.
Federal figures were checked against 2026 IRS Publication 15 and the linked official pages in November 2026. Rows marked hypothetical are examples only. State rules and rates vary; confirm with your state agencies, an insurance agent, and your accountant before you hire.