Payroll Calculator Guide
How to Calculate Payroll
Start with gross wages, calculate employee withholding, then calculate the employer taxes separately. Employee net pay is gross wages less employee taxes and deductions. Employer cost starts with gross wages and adds employer taxes and benefits.
Gross wages are entered as annual salary and divided by the selected payroll frequency. The current workflow covers one employee with ordinary taxable wages. It does not decide worker classification, exemptions or special benefit taxability.
Employee federal withholding uses the shared 2026 payroll engine. Enter current W-4 dollar fields and Step 2 settings directly. Verified state methods use separate state-form allowances; unavailable states show federal-only results.
Social Security and Medicare have employee and employer shares. Employer Additional Medicare tax is zero: that additional withholding belongs only to the employee. Prior wages let the per-paycheck estimate apply remaining annual wage bases.
Payroll Tax Calculation Example
For $1,000 of covered wages with no prior wages, employer Social Security is $62 and Medicare is $14.50. If the full FUTA credit applies, FUTA is $6 while wages remain within its base. Before state unemployment and benefits, employer cost is $1,082.50.
Without an eligible FUTA credit, the same first $1,000 produces $60 of FUTA instead. This difference is why the calculator asks for a credit percentage rather than assuming every employer qualifies for the reduced rate.
Employee Withholding vs Employer Payroll Taxes
Federal income tax withheld from an employee is taken from gross wages; do not add it again to employer wage cost. Employer Social Security, Medicare and unemployment taxes are additional employer costs.
Annual results assume a full year of equal wages. Per-paycheck results use the prior taxable wages entered. They are different views, so the annual amount is not necessarily the current paycheck’s taxes multiplied by the number of checks.
Payroll Taxes vs Income Taxes
Employment taxes fund programs such as Social Security, Medicare and unemployment insurance. Income-tax withholding prepays the employee’s annual income tax. They have different bases, thresholds and responsibilities.
FUTA is generally 6% on the first $7,000 of covered wages, reduced by an eligible credit of up to 5.4 percentage points. Credit reductions and late state payments can change the credit; this form does not determine eligibility.
Why Employer Payroll Cost Is Higher Than Gross Pay
Employer taxes and benefits add to gross wage cost. This calculator adds the entered monthly employer benefit contribution and the modeled employer taxes. It excludes workers’ compensation, administrative fees and other unentered costs.
State unemployment rates and wage bases must come from your state rules and employer rate notice. Leaving the rate or wage base at zero means that cost is unconfigured; it is not a finding that your employer is exempt. Enter Social Security, Medicare, FUTA and SUTA prior wages separately; annual equivalents assume a full year rather than projecting those prior wages.
Frequently Asked Questions
How do you calculate payroll?
Start with employee gross wages for the pay period, calculate employee withholding and deductions, calculate employer payroll taxes and contributions within the tool's scope, then show both the employee net paycheck and employer's estimated payroll cost.
How do you calculate payroll taxes?
Payroll-tax calculations depend on the specific tax. Social Security and Medicare use federal rules and wage limits, federal unemployment has its own rules, and state unemployment/payroll taxes vary by jurisdiction and employer.
What payroll taxes are deducted from an employee's paycheck?
Typical employee-side payroll deductions can include federal income-tax withholding, Social Security, Medicare, state/local withholding and benefit deductions. The exact mix depends on jurisdiction and employee elections.
Is federal income-tax withholding an employer expense?
The amount withheld from an employee's wages is generally collected from the employee's gross pay rather than added as an employer wage expense. Employer-side payroll taxes are shown separately.
What is the difference between payroll tax and income tax?
"Payroll tax" often refers to employment taxes such as Social Security, Medicare and unemployment taxes, while income tax is based on taxable income. Employers also withhold employee income tax through payroll.
Why is employer payroll cost higher than gross wages?
Employer payroll taxes, unemployment taxes, benefits and other employer-paid costs can make total labor cost higher than the employee's gross wage.
How is Social Security tax calculated?
For 2026, the employee and employer each pay 6.2% on covered wages up to $184,500. Prior taxable wages reduce the remaining wage base for this paycheck.
How is Medicare tax calculated?
Employee and employer Medicare is generally 1.45% each on covered wages without a wage cap. Employers withhold another 0.9% from employee wages above $200,000 paid by that employer during the year; there is no matching employer Additional Medicare tax.
What is FUTA?
FUTA is the federal unemployment tax system paid by employers under federal rules. The effective tax can depend on credits and other conditions, so use the current Form 940/IRS methodology rather than a simplistic universal percentage.
Is a payroll calculator the same as payroll software?
No. PayNumera estimates payroll amounts; it does not automatically run payroll, deposit taxes, file returns or manage employee records.
Can I calculate one employee's payroll?
Yes. V1 can be a single-employee/pay-period calculator. Multi-employee aggregate payroll can be added later without changing the core tax engine.
Why might my payroll software show a different result?
Differences can come from exact W-4 settings, benefit taxability, year-to-date wages, employer unemployment rates, state/local rules, rounding, supplemental wage methods and payroll-system configuration.
Methodology and Official Sources
Updated September 15, 2026. Examples are illustrative. Financial results are estimates within the stated scope; state calculation coverage and exclusions appear with the results. Report a discrepancy through the project's issue tracker, without posting personal financial information.
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