Employer payroll tax rates: A guide to FICA, FUTA, and SUTA

If you’re the founder of a company with a growing team, payroll tax questions might be on your mind. Payroll is expensive, after all. According to employers who use Mercury, salary and payroll taxes represent 20% of their total budget. 

Fortunately, navigating payroll taxes doesn’t have to be complicated. This guide lays out everything you need to know about employer payroll tax rates, including what employer payroll tax rates actually are, how they work, and how to calculate rates.

What is the payroll tax rate? That’s a common question for business owners who are just learning how to do payroll. Fortunately, the answer is simple: The payroll tax rate is the percentage of an employee's wages that you or your employees pay in payroll taxes. 

Taxable wages are also limited by each tax's wage base (a capped amount of each employee's annual wages). For taxes that have a wage base, you’ll stop paying that tax once an employee reaches the limit for the year.

When you run payroll, you’re responsible for remitting employee and employer taxes. You’ll pay your share of taxes directly to the government, and the employee’s share of taxes by deducting the funds from their gross pay and passing it on.

Employer payroll tax rates are the percentages your business pays on employee wages to fund federal and state programs, like Social Security, Medicare, and unemployment insurance. They’re a true business expense, separate from anything you withhold from your employees.

Some taxes — like the Federal Insurance Contributions Act (FICA), which combines Social Security and Medicare — are a shared responsibility. That means the employee pays a share and the employer matches it. Other taxes are only paid by the employer.

Almost every employer obligation falls into one of the three categories below. Here’s a breakdown.

FICA (Federal Insurance Contributions Act)

Federal Insurance Contributions Act (FICA) funds Social Security and Medicare, and it’s one federal payroll tax that you and your employees split evenly. You’ll each pay 6.2% for Social Security up to the $184,500 wage base, and 1.45% each for Medicare with no cap. Once an employee's wages exceed the Social Security wage base, you’ll both get to stop paying for that piece for the year — but you’ll still need to pay Medicare tax.

No answer to “what is FICA tax?” is complete without explaining the Additional Medicare Tax. As the employer, you must withhold an extra 0.9% on any wages over $200,000 in a calendar year. There’s nothing for you to match here. This is purely a withholding duty, not an added cost to your business. Whether the employee actually owes the tax will depend on their total income and filing status (the thresholds differ for joint and separate filers), but it’s not your responsibility to track that. It’ll be reconciled when they file their own return.

FUTA (Federal Unemployment Tax Act)

The federal side of the unemployment insurance system is funded by federal unemployment taxes, specifically, the Federal Unemployment Tax Act (FUTA). FUTA is paid entirely by the employer.

The FUTA tax rate is 6.0% on the first $7,000 of each employee's wages — but there’s a credit available if you pay your state unemployment tax in full and on time. The credit amounts to 5.4%, which drops the FUTA rate to 0.6%. 

But there’s one exception to that credit: If your state borrows from the federal government to cover unemployment claims and doesn’t repay, the state’s employers lose part of the credit until the state repays its loan. It's worth checking your state’s status each year, so you’ll have the information you need to keep your budget on track.

SUTA (State Unemployment Tax Act)

The State Unemployment Tax Act (SUTA) is the state-level counterpart to FUTA, and it's where the answer to one common question — “What is employer payroll tax rate?” — gets genuinely complicated. There are a number of factors that drive your specific SUTA tax rate, including experience rating, industry, wage base, and year and state.

Experience rating

Employers whose former employees make more unemployment insurance claims generally receive higher experience-rated SUTA rates. As an employer, if you have a clean claims history, your rates will be lower.

Industry 

Some states assign higher starting rates to industries with seasonal or high-turnover work, like construction.

Wage base

Each state sets its own taxable wage base for SUTA, and these range widely.

Year and state

States adjust their rate schedules and wage bases annually based on the health of their unemployment trust fund. 

If you’re looking for current 2026 employer payroll tax rates, consider this your starting point. But remember, you should always verify your current state rates directly with the state agency, since SUTA rates vary by employer and by year, and no general guide (like this one) can tell you your company’s exact assigned rate.

If you’re wondering, “How often do employer payroll tax rates change?” you’re not alone. Except for the fixed statutory rates outlined above, tax rates shift on a regular basis. Reviewing the three payroll tax groups below will help you stay on top of any changes. 

Fixed statutory rates

The core percentages — Social Security at 6.2%, Medicare at 1.45%, and FUTA at 6.0% — are set in federal law and changing them requires action from Congress. These tax rates will generally remain stable from year to year.

Annually adjusted wage bases

Although the rates mentioned above will generally hold steady from year to year, that doesn’t mean you’ll pay the same amount every year. That’s because the wage bases they apply to often climb. The Social Security wage base, for example, rose from $176,100 in 2025 to $184,500 in 2026. The cap moves nearly every year with average wages, so even with an unchanged rate you could still see a slightly higher bill.

State-specific SUTA changes

This is the most active category — the one that has employers and finance departments googling “What is SUTA tax?” on an annual basis. States revise their unemployment rate schedules and wage bases every year, and your individual experience rating can shift, too. If you only double-check one thing each year, make sure it’s your state business tax obligations. Folding this review into your broader tax-season prep can keep it from slipping.

Unlike federal taxes, state unemployment taxes are guided by local rules — and these vary state by state. By comparing California employer payroll tax rates in 2025 with employer payroll tax rates in New York State in 2025, you’ll get a good sense of how much payroll tax rates can differ from state to state.

California

California stands out because of how many state payroll taxes are stacked together, all administered by the Employment Development Department (EDD). 

Employers pay both unemployment insurance and a separate Employment Training Tax — but only on a small, fixed slice of each employee's wages. The unemployment insurance rate itself is experience-rated and assigned to you individually each year. A third tax, State Disability Insurance (SDI), is withheld from employees’ paychecks and applies to all of their wages, and there’s currently no cap.

It sounds complex, but the EDD keeps businesses informed by publishing detailed employer payroll tax guidance and an annual Employer's Guide (called the DE 44). It also mails every employer a personalized rate notice. So, if your business is based in California, make sure to confirm your current rates through the EDD directly, rather than relying on a figure from anywhere else.

New York

In New York, unemployment insurance is the main state payroll tax, administered by the Department of Labor. But where California taxes only a small, fixed slice of wages, New York's unemployment wage base is considerably higher and rises each year under a formula tied to statewide wages. 

New York also layers on programs like Paid Family Leave, which is funded through employee payroll deductions and carried by employers as insurance. Because both the rate and the wage base change annually, New York employers should pull their current figures straight from the New York Department of Labor, rather than assuming that last year's rates still apply.

Here’s a concrete example to help you understand how to calculate employer payroll taxes: 

Imagine you have an employee who’s earning $60,000 a year, and you need to pay Social Security, Medicare, FUTA, and SUTA. Your calculations for the first three should look like this:

• Social Security: 6.2% × $60,000 = $3,720 (the full salary is under the $184,500 cap)
• Medicare: 1.45% × $60,000 = $870
• FUTA: 0.6% effective × $7,000 = $42

SUTA: SUTA is a bit more complicated because it’s variable. If your state assigned, say, a 3% rate on a $12,000 wage base, that's roughly $360 — but your actual figure will depend entirely on your experience rating and what state you’re in. For this example, assume the $360 is accurate.

The total: Add it all up and you’re looking at $4,992 in employer payroll taxes on a $60,000 salary.

Boost your chances of having a smooth tax season by running through the items on this checklist once a year — ideally before your first pay run in January:

• Confirm the federal rates and wage base. Social Security and Medicare rates rarely move, but the Social Security wage base usually does.
• Check your state SUTA rate and wage base. Pull your assigned rate directly from your state agency — and don't carry over last year's number.
• Account for local taxes where they apply. Since some cities and counties have their own taxes, be sure you’re up-to-date on local tax requirements.
• Update your payroll software. Make sure every new rate and wage base is reflected before the first run.

If you’re expanding your business into a new state, make sure to run through this checklist again.

Employer payroll taxes often look more intimidating than they actually are. The employer federal payroll tax rates attached to Social Security, Medicare, and FUTA are fixed and predictable, which means it’s the state's unemployment rate and the wage bases that you’ll have to keep an eye on. Once you know which numbers are set in stone and which ones you’ll need to recheck annually, the whole exercise will become routine, rather than a scramble. 

From there, it's mostly about staying current and automating what you can — whether you adopt software that simplifies payroll and tax compliance or you simply build the financial habits that keep tax season uneventful. 

Want a banking system that helps you keep track of payroll — and everything else — all in one place? Check out Mercury's business banking today.

This article is for informational purposes only and isn't tax advice. Verify current rates with the IRS and your local state agencies, and consult a qualified professional for your specific situation.