Employer payroll taxes basically refers to all the federal and state taxes that every employer is required by law to withhold and pay on behalf of their employees. The law requires employers to withhold and pay state and federal income taxes as well as social security and Medicare taxes from each of their employees’ wages. In addition to that, employers are required to pay a matching amount of money as social security and Medicate Taxes for employees plus federal and state unemployment taxes.

Generally speaking, employers have several payroll taxes withholding payment obligations they have to meet, according to the Federal Insurance Contributions Act (FICA), the law that requires employers to withhold three separate taxes from their employees’ wages. The following are the taxes that make up FICA:

• 2 percent as Social Security tax;
• 45 percent as Medicare tax
• 9 percent Medicare surtax for employees who earn over $200,000, since 2013

These amounts must be withheld from the employees’ wages. In addition to that, the law requires an employer to pay:

• 2 percent Social Security tax
• 45 percent Medicare tax

This means that the employer’s portion from the Social Security tax and the regular Medicare tax is the same amount that he is required to withhold from his employees’ wages. There are however, different rules for employees who receive tips and no employer portion for Medicare Tax for employees who earn higher salaries.

Unemployment taxes costs

Unemployment taxes are usually paid by employers based on the gross pay of employees in terms of wages and salaries. These are the taxes used to provide unemployment compensation to workers who have lost their jobs. There are both federal and state unemployment taxes that must be paid by all employers.

State unemployment tax rates are usually determined by individual state government based on a wage base for each state. Mostly, state unemployment taxes are based on an employee’s wages and salaries though they are paid in by the employer. Employers are not supposed to withhold any money from an employee’s salary or wages for the state unemployment tax.

In 2016 for instance, the federal unemployment tax rate was at 0.6%. The state unemployment tax rate varies from one state to the other, depending on their wage base.

Workers compensation insurance

This too is a significant form of payroll taxes for employers. The rates for this insurance are determined by three major variables:

• The type of business or industry
• The type of job being performed
• The employer’s history of claims

This kind of payroll tax cost is administered at the state government level, therefore employers should check with their individual states to know how much they should be paying as compensation insurance.

Payment of payroll taxes is a very important mandate for every employer in the country today. Failure to meet payroll tax due dates might see the business losing some of its valuable assets just to compensate for the unpaid taxes. Employers should therefore start by determining and estimate payroll taxes they need to pay, then make plans to pay for them on time.