What payroll taxes does an Alabama employer pay?

An employer pays a 6.2% Social Security match up to the annual wage base, a 1.45% Medicare match with no cap, federal FUTA, and Alabama state unemployment insurance (SUI). Alabama has no employer disability or paid-family-leave tax, unlike some states.

What is the effective FUTA rate?

FUTA is nominally 6.0% on the first $7,000 of wages, but employers who pay their state unemployment tax on time receive a 5.4% credit. That leaves a net effective rate of 0.6%, a maximum of $42 per employee per year.

What is Alabama's SUI wage base and new-employer rate?

Alabama charges SUI on the first $8,000 of each employee's annual wages. New employers are typically assigned a 2.70% rate; established employers receive an experience rate that can range from roughly 0.20% to 6.80% based on their layoff history.

Does Alabama have an employer disability or paid leave tax?

No. Unlike California, New York, or Washington, Alabama does not levy a state disability insurance (SDI) or paid family and medical leave (PFML) employer tax. Those lines are zero for Alabama employers.

What is the true cost of an Alabama employee?

It is the gross wage plus all employer payroll taxes. For a typical worker the added employer tax is roughly 8 to 9 percent of wages, before benefits, workers' compensation insurance, and overhead, which add more on top.

Alabama Employer Payroll Tax Calculator

Email me this result

Get this tool's output sent to your inbox, plus one useful tool a week. No spam, unsubscribe any time.

Hiring in Alabama costs more than the salary you quote. On top of wages, an employer owes matching Social Security and Medicare, federal unemployment tax, and Alabama’s state unemployment insurance. This calculator adds all four to show the true cost of an Alabama employee.

How it works

Four employer taxes are summed:

Social Security = 6.2%  × min(wages, 168,600)
Medicare        = 1.45% × wages                 (no cap)
FUTA (net)      = 0.6%  × min(wages, 7,000)
Alabama SUI     = your rate × min(wages, 8,000)

The Social Security match stops at the annual wage base. FUTA is effectively 0.6 percent after the 5.4 percent state credit, capping at 42 dollars per worker per year. Alabama charges SUI only on the first 8,000 dollars of pay; the default rate is the 2.70 percent assigned to new employers, but you can enter your own experience rate.

Example

For an employee earning 50,000 dollars, the employer pays 3,100 dollars Social Security, 725 dollars Medicare, 42 dollars FUTA, and 216 dollars Alabama SUI at 2.70 percent — about 4,083 dollars total, roughly 8.2 percent of wages. The true cost of that employee is about 54,083 dollars before benefits.

Notes

This covers statutory payroll taxes only. Workers’ compensation insurance, health benefits, retirement matching, and overhead add further cost. Your exact Alabama SUI rate is reassigned each year by the Alabama Department of Labor based on your account’s history. Verify federal figures at irs.gov and state figures at labor.alabama.gov.