Payroll Tax Basics: The Essential Guide for Employers
Understand the difference between employer payroll taxes and employee withholdings to maintain total compliance and avoid costly penalties.
1. Employer vs Employee Payroll Tax Responsibilities
Managing payroll requires understanding two distinct buckets of tax liability:
- Employee Withholdings: Deductions taken out of the employee's gross pay on their behalf (Income Tax, employee share of Social Security / PF, Medicare / ESI).
- Employer Contributions: Direct taxes paid out-of-pocket by the company over and above employee wages (matching Social Security / PF, Federal & State Unemployment, workers compensation).
Calculate Your Team's Deductions
Use our interactive deduction tools to estimate take-home pay across different jurisdictions:
Frequently Asked Questions
What is payroll tax?
Payroll tax refers to taxes imposed on employers or employees based on employee compensation, such as income taxes, Social Security, Medicare, unemployment insurance, and local labor levies.
What is the difference between employer and employee payroll taxes?
Employee payroll taxes are withheld directly from the worker's gross salary (e.g. employee income tax and employee FICA/EPF). Employer payroll taxes are paid directly by the employer in addition to the gross salary (e.g. employer match for FICA, FUTA, or state unemployment).