About

Accurately estimating the total cost of employment requires distinguishing between gross salary and the actual burden on the company. While employees focus on Net Pay, employers must account for mandatory contributions that sit on top of the Gross Salary. In the United States, this primarily involves the Federal Insurance Contributions Act (FICA), comprising Social Security and Medicare taxes. Failure to budget for the Employer Contribution often leads to a 7-10% underestimation of labor costs.

This tool separates the financial flows into three distinct buckets: Net Pay (what the employee receives), Employee Withholding (deducted from gross), and Employer Tax (paid by the company). It uses updated Tax Wage Bases for 2023, 2024, and 2025, ensuring compliance with caps on Social Security contributions. The manual override feature allows financial controllers to input flat rates for Unemployment Insurance (FUTA/SUTA) or simulate UK/EU National Insurance contributions without complex legislative databases.

Formulas

The calculation follows a strict waterfall model based on the selected tax year and filing status.

{

Tax_SS = min(Salary, Limit) × 0.062Tax_Med = Salary × 0.0145Cost_Total = Salary + Tax_Employer

If the salary exceeds the Additional Medicare Threshold, the employee withholding increases:

Tax_Add = max(0, Salary − Threshold) × 0.009

Reference Data

Tax Component	Rate (Employee)	Rate (Employer)	Wage Base Limit (2024)	Notes
Social Security	6.2%	6.2%	$168,600	Stops after limit is reached
Medicare	1.45%	1.45%	No Limit	Applies to all wages
Additional Medicare	0.9%	0%	$200,000	Employee only (>200k)
FUTA (Federal Unemployment)	0%	6.0%	$7,000	Often reduced to 0.6%
UK NI (Class 1)	Varies	13.8%	Thresholds apply	Use Manual Override
France (Charges Patronales)	~20%	~25-45%	N/A	Use Manual Override

Frequently Asked Questions

Withholding is money taken out of the employee's agreed gross salary (e.g., their share of taxes). Employer Contribution is an extra cost the company pays to the government on top of the gross salary. The employee never sees the employer contribution, but it is a real cost to the business.

Social Security tax (6.2%) is only charged on earnings up to a specific limit (e.g., $168,600 in 2024). Any income earned above this threshold is tax-free regarding Social Security for both the employee and the employer. Medicare tax has no such limit.

Yes. While the automated brackets are US-centric (FICA), the tool provides "Custom Rate" fields. You can enter the aggregate employer tax rate (e.g., 13.8% for UK NI or 45% for France) to get an accurate Total Cost to Company estimation.

FUTA is technically 6.0% on the first $7,000, but most employers receive a credit of 5.4% if they pay state unemployment taxes on time, reducing the effective rate to 0.6%. Because this varies by state compliance, we recommend adding it via the Custom Rate field if precision is required.