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Ashley Explains the Cost of Paying an Employee in NYS [VIDEO]

Ashley Explains 04 FICA vs Federal Withholding

Ashley Explains 04 FICA vs Federal Withholding

In this episode, our resident tax guru Ashley explains the costs involved with paying an employee in New York State. 

Check out the video below: 

HubSpot Video

Read the Transcript:

Ashley: We get asked by businesses all the time: what's it going to cost me to pay an employee and their taxes?


Oh, I should probably explain...

Let's say you plan to pay an employee $40,000 a year. The $40,000 is the employees gross pay. Out of that number will come the employee's share of the taxes. This includes federal withholding, state withholding, and FICA taxes.

You know all this.

But on top of this $40,000, there will be employer taxes (the ones that you, as the employer, are on the hook for.) These include OASDI, which is taxed at 6.2%. On your employee's salary of $40,000 that comes out to $2,480.

Next is Medicare, at a rate of 1.45%, which equals $580.

FUI, or Federal Unemployment Insurance, is taxed at .6% on the first $7,000 worth of wages, which, in this example, is 42 bucks.

And SUI, State Unemployment Insurance, is taxed at 3.2% on the first $11,400 worth of wages, which works out to be $364.80.

So, on a $40,000 annual salary, when you add up OASDI, Medicare, FUI, and SUI, the total employer taxes collected comes out to $3,466.80.

Add that to the $40,000 salary and, you guessed it: $43,466.80.

Obviously this is hypothetical on just one employee throughout the year. That amount will change depending on their annual salary.

For the above example, the new client startup rate was used for New York State SUI. Your New York State unemployment rate will vary depending on your experience rating. New York State calculates your experience rating based on a number of factors, a couple being: employee turnover, and the overall state of the economy.

Got any tax questions you would like Ashley to explain?

Email her at ashleyexplains@completepayroll.com

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