When a business hires someone, the salary is the visible cost. On top of it, the employer pays its own share of payroll taxes, and in the UK it also pays statutory sick and family pay and contributes to a workplace pension. The rules differ sharply between the US and the UK, which changes what the same salary costs. This guide sets out each system for 2026, with worked examples at several pay levels.
United States: three federal employer taxes
The IRS sets out the employer's share in Topic 751 and Topic 759:
| Tax | Employer rate | Applies to |
|---|---|---|
| Social Security | 6.2% | Wages up to $184,500 (2026) |
| Medicare | 1.45% | All wages; there is no wage base limit |
| Federal unemployment (FUTA) | 6.0%, usually 0.6% after credit | First $7,000 per employee |
The employee pays the same 6.2% and 1.45% through withholding, so Social Security and Medicare total 15.3% of wages, split equally. The IRS says employers who paid into state unemployment funds "may receive a credit of up to 5.4% of FUTA taxable wages", leaving 0.6%. In a credit reduction state, one that "hasn't repaid money it borrowed from the federal government to pay unemployment benefits", the credit is lower and the federal tax higher.
State unemployment tax comes on top. Rates and wage bases vary by state and by the employer's own history of claims, so they need checking with the state agency.
Worked examples
| $40,000 salary | $200,000 salary | |
|---|---|---|
| Social Security (6.2%) | $2,480 | $11,439 (capped at $184,500) |
| Medicare (1.45%) | $580 | $2,900 |
| FUTA (0.6% of $7,000) | $42 | $42 |
| Federal employer taxes | $3,102 (7.8%) | $14,381 (7.2%) |
The share falls at higher salaries because Social Security stops at the wage base. Both figures are before state unemployment tax, workers' compensation insurance and any benefits the employer offers.
Minimum pay
The federal minimum wage is "$7.25 per hour effective July 24, 2009". Full time at 40 hours a week, that is $15,080 a year. States and cities can set higher minimums, which then apply.
United Kingdom: employer National Insurance
For 2026–27, gov.uk's rates and thresholds for employers set the employer (secondary) threshold at £5,000 a year (£96 a week, £417 a month) and the main employer rate at 15%.
Younger employees and apprentices
For employees under 21, and apprentices under 25, gov.uk sets an upper secondary threshold of £50,270 a year. Below it, employer National Insurance is not due on their earnings. A 19-year-old on £25,000 costs the employer no National Insurance; a 30-year-old on the same pay costs £3,000.
The Employment Allowance
The Employment Allowance "allows eligible employers to reduce their annual National Insurance liability by up to £10,500" (gov.uk). Most businesses and charities can claim it, with exceptions (eligibility):
- A company whose only director is its only employee liable for secondary National Insurance cannot claim.
- Only one company in a group can claim.
- Domestic staff, such as a nanny or gardener, do not count, unless they are a carer or support worker.
- Workers within the off-payroll working rules do not count.
Worked examples
| Employer NI before allowance | |
|---|---|
| One employee on £30,000 | (£30,000 − £5,000) × 15% = £3,750 (12.5%) |
| One full-time employee at the National Living Wage | (£24,784.50 − £5,000) × 15% = £2,967.68 |
| One employee aged 19 on £25,000 | £0 (below £50,270) |
The National Living Wage example assumes 37.5 hours a week for 52 weeks at £12.71 an hour.
With the Employment Allowance. Two employees on £30,000 create £7,500 of employer National Insurance, all covered by the £10,500 allowance. Three create £11,250, so £750 is payable.
Minimum pay
From 1 April 2026, the National Minimum Wage rates are £12.71 an hour for workers aged 21 and over (the National Living Wage), £10.85 for ages 18 to 20, and £8 for under-18s and apprentices. Gov.uk already lists the April 2027 rates: £13.21, £11.27 and £8.31.
Statutory pay
UK employers pay statutory sick and family pay through payroll. For 2026–27:
| Payment | Rate |
|---|---|
| Statutory Sick Pay | £123.25 a week, or 80% of average weekly earnings if lower |
| Statutory Maternity Pay | 90% of average weekly earnings for 6 weeks, then £194.32 or 90% if lower |
| Statutory Paternity Pay | £194.32 a week, or 90% of average weekly earnings if lower |
Four weeks of sick pay at the full rate is £493. Some employers can recover part of statutory family pay from HMRC, which reduces the net cost.
Workplace pensions
Employers must enrol eligible staff in a workplace pension and contribute to it. Gov.uk says this applies to staff aged 22 to State Pension age who earn at least £10,000 a year. The minimum contribution percentages are set out by The Pensions Regulator.
Side by side
| US ($40,000) | UK (£30,000) | |
|---|---|---|
| Main employer tax | $3,060 (Social Security + Medicare) | £3,750 (National Insurance) |
| Unemployment | $42 FUTA + state tax | None separate |
| Young workers | No federal reduction | No employer NI up to £50,270 for under-21s |
| Small employer relief | None federal | Employment Allowance up to £10,500 |
| Statutory sick pay | No federal requirement | £123.25 a week |
| Pension | Not required federally | Auto-enrolment required |
| Minimum wage | $7.25 federal; states can be higher | £12.71 for 21 and over |
Employees and contractors
Employer payroll taxes apply to employees, not to genuine independent contractors paid on invoice. Whether someone is an employee depends on how they work, not on what the contract calls them, in both countries. In the UK, the off-payroll working rules (IR35) can apply, and those workers are excluded from the Employment Allowance. Treating an employee as a contractor can leave the business owing the taxes later.
Where software fits
Payroll software calculates these taxes, files the returns and pays employees. It costs far less than the taxes it handles: Square Payroll in the US is $35 a month plus $6 per person paid, and HMRC's own Basic PAYE Tools is free for employers with fewer than 10 employees. Our US payroll comparison and UK payroll comparison rank the services, and the payroll cost calculator shows the software cost at any headcount.
Recap
- US federal employer taxes are 6.2% Social Security up to $184,500, 1.45% Medicare on all wages, and usually 0.6% FUTA on the first $7,000.
- On a $40,000 salary, federal employer taxes come to $3,102, about 7.8%, before state unemployment tax and benefits.
- UK employer National Insurance is 15% on earnings above £5,000 a year in 2026–27; on £30,000 that is £3,750, or 12.5%.
- For employees under 21 and apprentices under 25, UK employer National Insurance starts only above £50,270.
- The UK Employment Allowance of £10,500 can wipe out the employer National Insurance bill for a small team.
- Minimum wages, statutory sick and family pay, and workplace pensions add to the cost in the UK.
Sources
Read on or before 4 November 2026. Rates and rules change; the source page is the current version.
- Topic 751 irs.gov
- Topic 759 irs.gov
- federal minimum wage dol.gov
- rates and thresholds for employers gov.uk
- gov.uk gov.uk
- eligibility gov.uk
- National Minimum Wage gov.uk