The biggest step for a small business is hiring the first employee as you’re making an investment in the future of your company, laying the groundwork for growth and increased productivity.
With over 1 in 6 US residents collecting social security benefits in January of 2022 alone this tax is vital. It helps workers plan for their retirement and protects them if they become disabled. Thanks to its high average income, employers in Massachusetts contribute the most to social security taxes, with just over $4,500 per employee per year helping lift people out of poverty.
Another vitally important government program, Medicare provides affordable health insurance to millions of older Americans and people with disabilities to fight against poverty caused by medical debt. Employers in Massachusetts also contribute the most tax dollars to Medicare, at $1,058 per employee annually.
Making sure workers are looked after if their contracts are terminated is a key concern as better funding means unemployed workers can rejoin the workforce faster. Massachusetts leads the way in tax contributions for these programs, as employers pay $4,376 per employee per year.
Although only mandatory in certain states, the State Disability Insurance tax provides financial security to workers if they can’t work due to a physical or mental disability. It also covers paid family leave benefits. Employers in New Jersey contribute the most to this tax per employee at nearly $1,000 each year.
Taking the top spot as the state with the highest unemployment contributions per employee is Hawaii. Despite not having the highest tax rate, Hawaii has the highest wage base allowing for bigger tax contributions from employers.
Thanks to its relatively small population and limited competition from providers, healthcare in Alaska is the most expensive in the country. This means health insurance contributions from employers have to be higher, and Alaska has a very wide margin, with employers paying over $800 more than New York in second place.
Employee-sponsored retirement plans are crucial for businesses to attract and retain talented employees by offering competitive benefits. Employers in Massachusetts take the top spot for retirement contributions, with an average of over $2,000 per employee per year.
Now that we’ve looked at the average employee in each state, let’s see how your business measures up. Select your state below to find out how much they could be costing you.
We wanted to find out the cost of hiring an employee in each state. To do this, we took the average annual salary in each state and multiplied it by state and federal payroll tax rates and work benefits to reach the total cost per employee per year.
Average Annual Salary
The average annual salary for a single employee in each state according to the US Bureau of Labor Statistics.
The Medicare tax rate for a single employee according to TradeSherpa.
The state disability tax rate for a single employee in each applicable state according to Zenefits.
The average annual employer health insurance contribution for a single premium in each state according to The Kaiser Family Foundation.
The Old-Age, Survivors, and Disability Insurance tax rate for a single employee according to TradeSherpa.
Federal Unemployment Tax
The Federal Unemployment Tax rate for a single employee according to TradeSherpa.
The state unemployment tax rate in each state for a single employee according to Ballotpedia.
Average Retirement Plan Contribution
The average annual retirement contribution per employee according to TradeSherpa.