The FUTA (Federal Unemployment Tax) rate is 6% and is an employer tax. However, employers receive a credit of 5.4% for timely SUI (State Unemployment) contributions paid to the state unemployment fund. We assume clients are eligible for the credit, so we calculate their payroll with FUTA at 0.6% up to the wage limit of $7,000 per year/employee.
FUTA Calculation Example
Employee taxable wages are $1,000.00 x 0.6% (.006) = employer owes $6.00 in FUTA. The maximum an employer will pay for an employee in a year is $42.00 (.6% of the $7,000 wage limit).
The SUI (State Unemployment Insurance) tax is calculated in a similar way. Each State (and each business) is assigned a SUI Tax Rate from the State Agency for Unemployment Taxes. This rate is something you provide to us upon beginning service as well as update us on if your rate changes. This tax is generally an employer tax only; however, some States assess SUI taxes for employee taxes as well.
SUI Calculation Example
SUI Rate Provided: 2.7%
State Wage Limit for SUI: $13,000
Employee taxable wages are $1,000.00 x 2.7% (.027) = employer owes $27.00 in SUI. The maximum an employer will pay for an employee in a year is $351.00 (2.7% of the $13,000 wage limit).
The information presented is intended for reference only and is neither tax nor legal advice. Consult a professional tax, legal or other advisor to verify this information and determine if and/or how it may apply to your situation.