How Much Are Payroll Taxes? The Four Parts, and Who Pays Each

Payroll taxes are not one tax with one rate. They are four: Social Security and Medicare, which employer and employee split evenly; federal unemployment tax, which the employer pays alone; and state unemployment tax, whose rate is set by your state and by your own claims history, so no article anywhere can tell you what yours is.

The federal rates and wage bases are set annually and published by the IRS in Publication 15, the Employer's Tax Guide; your state unemployment rate arrives as a notice from your state agency, usually once a year. This guide deliberately names no percentages, because an article that pinned them down would be wrong within twelve months. What it does instead is explain what each piece is, who pays it, and where the current number lives so you can look it up in about two minutes.

Why does no article give you a single payroll tax rate?

Because the number you want is the sum of four different things, and two of them are specific to you.

The Social Security and Medicare rates are set by statute and are the same for every employer in the country. The Social Security portion applies only up to an annual wage base that is adjusted each year; the Medicare portion has no ceiling, and an additional Medicare amount applies to high earners, withheld from the employee only. Federal unemployment tax applies to a small slice of each employee's wages and comes with a credit for the state unemployment tax you have already paid, so the effective federal rate depends on your state compliance.

State unemployment is where any general answer collapses. Each state sets its own wage base and its own rate range, and inside that range your individual rate is experience-rated: a business that has generated unemployment claims pays more than an identical business that has not. Two competitors on the same street can pay materially different payroll taxes on the same salary.

So the honest answer to "how much are payroll taxes" is: a fixed federal component you can look up in one document, plus a variable state component that was mailed to you.

What are the four payroll taxes?

Two things people commonly mistake for payroll taxes belong in a separate category. Income tax withholding is not an employer tax at all: it is the employee's own income tax, collected by you on their behalf, sized by their Form W-4 and the withholding tables. And workers' compensation is insurance, not a tax, though it behaves like one in your cost model because it is mandatory in almost every state and priced per hundred dollars of payroll by job class.

Who pays what?

The split is the part worth internalising, because it explains most of the confusion in the topic.

Social Security and Medicare are split down the middle. The employee sees their half come out of each paycheck. They never see the employer's half, but it is being paid on their behalf on the same wages. From the employer's side, gross salary is not the cost of an employee: the employer half of these two taxes is on top of it, before you count unemployment tax, workers' compensation or any benefit.

Unemployment taxes are the employer's alone, in the great majority of states. A few states also collect small employee contributions for related programs, and several run separate disability or paid family leave levies with their own rules, which is another reason the total varies by where your people sit rather than by where you are incorporated.

Self-employed people pay both halves themselves, as self-employment tax, because there is no employer. That is why a contract rate and a salary are not comparable numbers, which our guide to 1099 versus W-2 works through in detail.

What is a wage base, and why does payroll get cheaper in the autumn?

A wage base is an annual ceiling: once an employee's year-to-date wages pass it, that tax stops for the rest of the calendar year and restarts in January. Social Security has one. Federal unemployment has a much lower one. State unemployment has its own, set by the state.

The practical effect surprises owners every year. For a well-paid employee, the unemployment taxes are largely finished within the first quarter, and the Social Security portion may stop later in the year. Payroll tax cost is therefore front-loaded: your January payroll costs more than your November payroll on identical gross wages. If you budget payroll taxes as a flat percentage of the annual wage bill, your cash forecast will be wrong in both directions.

How do you find the exact rates that apply to you?

Four lookups, and you are done for the year.

1. Federal rates and wage bases. IRS Publication 15 for the year in question. This is the authoritative source and it also contains the withholding tables. The overview at understanding employment taxes is a shorter orientation to the same material.
2. Your deposit schedule. Not a rate, but the thing that generates penalties. Whether you deposit monthly or semi-weekly depends on your prior-year liability, and it is explained in the IRS guidance on depositing and reporting employment taxes.
3. Your state unemployment rate. From the annual notice your state unemployment agency sends you. If you cannot find it, the Department of Labor maintains a starting point on unemployment insurance with links out to state programs.
4. State and local income tax withholding. From your state revenue department, plus any city or county levies where your employees actually work, which is not necessarily where your office is.

What does an employee really cost above their salary?

Build it as a stack rather than a percentage: gross wages, plus the employer half of Social Security and Medicare, plus federal unemployment, plus your specific state unemployment rate, plus workers' compensation at your job classification, plus any benefits, plus the administrative cost of running the cycle.

The two entries that vary most between businesses are the state unemployment rate and workers' compensation, and both are driven by history and job class rather than by anything you set. That is why benchmarking your employer burden against another company's is close to meaningless, and why the only reliable version of this number is the one built from your own notices.

What actually goes wrong with payroll taxes?

• Late deposits. The most common and the most avoidable. Penalties escalate with lateness and are assessed even when the full amount is eventually paid.
• Withheld money treated as cash flow. The employee's share of Social Security, Medicare and income tax is not yours. Using it to cover a slow month can expose the individuals responsible personally, through what the IRS calls the trust fund recovery penalty. This is the single most serious risk in the topic and it does not stop at the company.
• Misclassifying an employee as a contractor. It removes the payroll tax today and creates liability for it later, with interest and penalties, plus a separate state exposure.
• A remote hire in a new state. One employee in another state can create registration, withholding and unemployment obligations there. This is now the most common way small employers acquire a compliance problem they did not know they had.
• Nobody reconciling payroll to the ledger. When payroll runs at one vendor and the books at another, the quarterly filings and the general ledger drift, and the gap is found at year end by whoever prepares the return.

Who actually handles payroll?

That last point is measurable. Of the 27,281 US accounting firms we profile from their own websites, 5,106 advertise payroll, which is 18.7%. Of those, 4,131 also advertise bookkeeping, and 975 do not: those are payroll bureaus rather than accountants, and hiring one means somebody else still has to reconcile the payroll register to your books each month.

Payroll expertise also clusters by industry, because the hard parts are industry-specific: certified payroll and multiple job sites in construction, tips and high turnover in restaurants. Among firms advertising payroll, 238 name construction as a served industry and 161 name restaurants.

What to do next

Find your state unemployment notice, look up the current federal figures in Publication 15, and write both into your payroll cost model rather than using a percentage you remember. Then check one thing that has nothing to do with rates: whether anyone is reconciling the payroll filings to your general ledger every quarter. If the answer is nobody, that is the gap worth closing first.

If you need help, accountants near you can be filtered by the services they advertise, so you can shortlist only the firms that actually run payroll rather than discovering it in a meeting.

Method and caveats

Directory figures come from the AccountingNearYou dataset as of 28 August 2026: 27,281 US accounting firms profiled from their own public websites, of which 5,106 advertise payroll services. A firm counts only where the service appears on the pages we crawled, so these are counts of what firms advertise, not of everything they do. The 2,896 figure is payroll firms matched to a state licensing record; an unmatched firm is unknown rather than unlicensed.

No rate, wage base or threshold appears in this guide, and that is deliberate: every one of them is set annually or by legislation, and state unemployment rates are specific to individual employers. Confirm current federal figures in IRS Publication 15 for your filing year and your state figures with your state agency. This is general information about how US payroll taxes are structured, it is not advice about your business, and payroll tax errors carry deadlines and personal exposure that make a professional opinion worth having.