What does payroll actually cost beyond wages?

The wage you pay an employee is just the starting point. On top of that, you’re responsible for employer payroll taxes, insurance costs, any benefits you provide, and the tools to run payroll correctly.

The employer’s share of FICA is currently 7.65 percent of wages. That covers Social Security at 6.2 percent and Medicare at 1.45 percent. The employee pays the same percentage from their check, so the government receives 15.3 percent total split evenly between you and the worker. This is your largest guaranteed employer cost and it applies to every dollar of wages.

Federal unemployment tax runs 6 percent on the first $7,000 of each employee’s annual wages, though most employers receive a credit that brings the effective rate down to around 0.6 percent. State unemployment tax varies by state and by your experience rating. New employers typically pay a higher starting rate that can improve over time with a clean claims history. In Georgia, new employer rates currently land around 2.7 percent on the state wage base, but your actual rate depends on your specific history and the state’s trust fund status.

Workers compensation insurance is required in most states and varies significantly by industry. Desk jobs might cost under one percent of payroll. Construction or roofing can run ten percent or more. Get quotes for your specific situation because the industry classification makes a big difference.

If you offer benefits, add your contributions to the cost. Employer health insurance contributions can easily run $400 to $600 per employee per month for individual coverage, or well over $1,000 for family coverage. Retirement plan contributions, paid time off accruals, and other benefits stack on top. These are optional, but competitive hiring often makes them feel necessary.

Then there’s the payroll software subscription. Most small business payroll platforms charge a monthly base fee plus a per-employee fee, and this varies by provider and features. You maintain and pay for this subscription directly. ClearLedgers® offers full-service payroll as a service on top of your platform, handling processing, tax filings, and compliance. Our fees sit above the software cost as a service fee, not a markup on the platform itself.

Add it all together and many employers find the true cost lands somewhere between 15 and 30 percent above the base wage, depending on industry, benefits, and state. A $50,000 salary might actually cost $58,000 to $65,000 or more once everything is paid.

Bookkeeping services in Alpharetta from ClearLedgers can help you see these costs clearly in your books and plan for them in your cash flow. The rates and thresholds mentioned here reflect current context and will vary, so verify the specifics for your situation. If you want help understanding your full payroll costs or setting up payroll correctly, book a consultation.