Employer social-insurance costs in the United States
Reviewed by Mellow Editorial Team, HR & payroll content team
Hiring someone in the US means taking on a set of mandatory payroll taxes on top of whatever you pay in wages. The main federal obligations are FICA taxes — Social Security and Medicare — which employers must match dollar-for-dollar against the employee's own contributions.
What FICA actually costs you as an employer
Every pay period you withhold FICA from the employee's wages and add a matching employer contribution before sending the combined amount to the IRS.
The breakdown works like this:
- Social Security: 6.2% withheld from the employee, plus 6.2% paid by you as the employer, up to the annual Social Security wage base. Once a worker's earnings cross that threshold for the year, no further Social Security tax applies to either side.
- Medicare: 1.45% withheld from the employee, plus 1.45% paid by you. There is no wage cap on Medicare, so both contributions apply to every dollar of wages.
In practice, your total FICA cost on each employee's wages is 7.65% (6.2% + 1.45%) up to the Social Security wage base, then 1.45% above it. That cost is entirely separate from the employee's own share — you cannot recoup it from their pay.
The Additional Medicare Tax — employer's role is limited
When a high-earning employee's wages exceed the IRS threshold, an additional 0.9% Medicare surcharge applies. This one is different: it falls entirely on the employee, not on you as the employer. Your obligation is to withhold it once you have paid that individual more than the threshold in a calendar year. You do not match the 0.9% surcharge.
Federal Unemployment Tax (FUTA)
FICA is not the only federal social-insurance cost. You also owe Federal Unemployment Tax (FUTA), which funds unemployment benefits at the federal level. FUTA is paid entirely by the employer — nothing is withheld from the employee.
The standard FUTA rate applies to the first portion of each employee's wages per year. If your state unemployment taxes are current and paid on time, you qualify for a credit against the federal rate, which substantially reduces what you actually remit. Most employers in good standing end up paying a much lower effective FUTA rate as a result. Because the exact rates and credit amounts can shift, confirm the current figures directly with the IRS or your payroll provider for the 2026 tax year.
State unemployment insurance (SUI)
Every state runs its own unemployment insurance program, and every employer with employees in that state must register and pay into it. Several factors shape your SUI rate:
- Experience rating: Your rate is tied to your own claims history. The more former employees claim unemployment against your account, the higher your rate climbs over time.
- New-employer rates: If you are newly registered in a state, you typically start on a set rate until you build enough history for experience rating to kick in.
- Wage base: Each state sets its own taxable wage base — the amount of each employee's wages subject to SUI. These vary considerably from state to state and are updated periodically.
States also differ on whether they collect any additional workforce or training levies on top of the base SUI rate. When you hire in a new state, register with that state's workforce or labor agency promptly to get your account set up and your initial rate assigned.
State-level social-insurance programs beyond SUI
A growing number of states have mandatory paid leave programs that require employer contributions, employee withholding, or both. California, New York, New Jersey, Washington, and several others operate state disability insurance or paid family and medical leave funds with their own rates and wage bases. If you have employees in those states, these obligations stack on top of federal FICA and state SUI.
This is one of the more operationally complex parts of multi-state employment. If you pay workers across several states, you are effectively managing a separate contribution schedule for each one. A reliable payroll system that handles multi-country and multi-state payroll can keep the calculations and deadlines from slipping through the cracks.
Reporting and remittance
Federal FICA and income tax withholding are reported on Form 941, filed quarterly. FUTA is reported on Form 940 annually. Both require you to deposit taxes on a schedule — either monthly or semi-weekly depending on your total tax liability — so the filing deadline and the payment deadline are not the same thing.
By January 31 each year, you must furnish employees with their Form W-2 and file copies with the Social Security Administration. Late or incorrect filings carry per-form penalties that add up quickly if you have a sizeable workforce.
State agencies set their own filing and remittance schedules for SUI and any paid leave programs, so track each state's calendar separately from your federal obligations.
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