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💼 Employee Details
Enter salary or hourly rate for full payroll breakdown
$
%
$
💼 Payroll Results
Gross Pay
$2,500
per pay period
Net Pay
$1,850
take home pay
📊 Deductions Per Pay Period
🏢 Total Employer Cost
📅 Pay Breakdown by Period
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How Payroll Is Calculated
Payroll calculation involves determining an employee's gross pay then systematically deducting all required taxes and voluntary contributions to arrive at net take-home pay. Understanding this process helps both employers run accurate payroll and employees verify their pay stubs are correct.
Step 1 — Gross Pay:
Salaried: Annual Salary ÷ Pay Periods
Hourly: (Regular Hours × Rate) + (Overtime Hours × Rate × 1.5)
Step 2 — Pre-Tax Deductions (reduce taxable income):
401k contributions, health insurance premiums, FSA/HSA
Step 3 — Taxable Income:
Gross Pay - Pre-Tax Deductions
Step 4 — Federal Income Tax (based on tax brackets and W-4)
Step 5 — FICA Taxes:
Social Security: Taxable Income × 6.2%
Medicare: Taxable Income × 1.45%
Step 6 — State Income Tax:
Taxable Income × State Rate
Step 7 — Net Pay:
Gross Pay - All Deductions
Employer Additional Costs:
Social Security Match: Gross × 6.2%
Medicare Match: Gross × 1.45%
FUTA/SUTA: varies by state
Understanding FICA Taxes
FICA taxes fund Social Security and Medicare programs. Employees pay 6.2 percent of gross wages toward Social Security up to an annual wage base limit and 1.45 percent toward Medicare with no limit. Employers match both amounts exactly. High earners pay an additional 0.9 percent Medicare surtax on wages above $200,000 for single filers.
Pre-Tax vs Post-Tax Deductions
Pre-tax deductions like 401k contributions and health insurance premiums reduce your taxable income before taxes are calculated — saving you money on federal, state and FICA taxes. Post-tax deductions like Roth 401k contributions and life insurance are taken after taxes are calculated. Maximizing pre-tax deductions is one of the most effective ways to legally reduce your tax burden.
⚠️ Financial Disclaimer: This payroll calculator provides estimates for informational purposes using simplified tax calculations. Actual payroll may differ based on specific W-4 withholding elections, local taxes, additional deductions and current tax laws. Tax rates and brackets change annually. This tool does not constitute tax or legal advice. Always consult a qualified payroll professional or accountant for accurate payroll processing.
Frequently Asked Questions
How do I calculate payroll? +
Start with the employee's gross pay — annual salary divided by pay periods or hourly rate times hours. Subtract pre-tax deductions like 401k. Calculate federal income tax based on tax brackets and W-4 status. Deduct Social Security at 6.2 percent and Medicare at 1.45 percent of taxable wages. Deduct state income tax. The result is net take-home pay. Use our calculator above for instant accurate results.
What is the difference between gross pay and net pay? +
Gross pay is total earnings before any deductions — the salary amount in the employment contract. Net pay is the actual take-home amount after all deductions including federal income tax, Social Security, Medicare, state tax and voluntary deductions. Most employees take home 65-80 percent of their gross pay. The difference between gross and net is why a $60,000 salary does not mean $5,000 per month in the bank.
How much does an employee cost an employer beyond salary? +
An employee typically costs 20-40 percent more than their gross salary. Employer-side payroll taxes alone add approximately 8-12 percent — Social Security match 6.2 percent, Medicare match 1.45 percent, plus unemployment taxes. Adding health insurance benefits, paid time off, retirement contributions and other benefits the total employer cost is often 25-40 percent above base salary for a comprehensive benefits package.
What is FICA tax? +
FICA stands for Federal Insurance Contributions Act and refers to combined Social Security and Medicare payroll taxes. Employees pay 6.2 percent toward Social Security up to the annual wage base and 1.45 percent for Medicare with no limit. Employers pay identical matching amounts. Self-employed individuals pay both portions totaling 12.4 percent Social Security and 2.9 percent Medicare as self-employment tax.
How is overtime pay calculated? +
US federal law requires overtime pay of at least 1.5 times the regular hourly rate for all hours worked over 40 in a workweek. An employee earning $20 per hour working 45 hours receives: 40 hours at $20 = $800 regular pay, plus 5 overtime hours at $30 = $150, totaling $950 gross. Some states have stricter overtime rules including daily overtime thresholds for hours over 8 per day.
What payroll taxes do employers pay? +
Employers pay Social Security match at 6.2 percent of employee gross wages, Medicare match at 1.45 percent, Federal Unemployment Tax FUTA at effectively 0.6 percent on first $7,000 of wages after credits, and State Unemployment Insurance SUI which varies by state typically 1-5 percent. Total employer payroll taxes add approximately 8-12 percent above the employee's gross wages before any benefits costs.
What is the difference between a W-2 employee and 1099 contractor? +
W-2 employees have taxes withheld by the employer who also pays the employer FICA portion. Employees receive benefits and legal protections. 1099 contractors receive full payment without withholding and pay all taxes themselves including self-employment tax covering both employee and employer FICA. Contractors typically charge 20-30 percent above equivalent employee rates to cover their tax obligations and absence of benefits.