Payroll Tax

What Is Payroll Tax?

Payroll tax is the tax employers withhold from worker paychecks and/or pay themselves on top of wages. It includes federal income tax withholding, Social Security tax (6.2% employee + 6.2% employer), Medicare tax (1.45% each), federal unemployment tax (FUTA), and state unemployment tax (SUTA). Some states and localities add additional payroll taxes. For a W-2 employee, the employer's share of payroll taxes adds roughly 7.65–10% on top of the worker's wages.

Payroll taxes are non-negotiable—they're required by law, and getting them wrong creates penalties and interest. For staffing operations, payroll tax calculations get complex when you have workers in multiple states, varying pay rates, overtime, and shift differentials that change the taxable wage base.

Why Payroll Taxes Matter for Staffing Decisions

Payroll taxes are a significant hidden cost of employment. When you're comparing the cost of a permanent hire versus a flex worker, payroll taxes are part of the equation. Your $20/hour employee actually costs you ~$21.50–$22/hour after the employer share of payroll taxes, before benefits. Understanding this helps you make accurate staffing cost comparisons.

For flex workers provided through a platform, the platform typically handles payroll tax obligations—that's part of what you're paying for. This shifts the compliance burden and reduces your risk of payroll tax errors, penalties, and audits.

Payroll Taxes on GigSmart

When you use G-Flex for on-demand staffing, GigSmart handles payroll tax obligations for flex workers, simplifying your compliance and reducing administrative overhead. For your core team managed through G-Force, accurate time tracking and pay calculations feed directly into your payroll system, ensuring that payroll taxes are calculated on the right wage amounts every time. This reduces the risk of costly payroll tax errors.