How Much Money Does Your Employer Pay You?

Sounds like a simple question? Well, let's take a look.

We'll assume that you make $1,000.00 a week. That is, your boss has hired you at a $1000.00 per week salary. What amount of money do you receive on your weekly paycheck?

We'll assume you are married, and are claiming two exemptions on your W-4. Let's also assume you don't have to deal with state taxes because you live and work in say, Florida or Texas as an example. You will then find that your employer deducts $76 in Federal Income Tax. Not too bad a hit. Of course he also deducts those two FICA Taxes: FICA-SS for $62 and FICA-MED for $14.50.

This Leaves you with a paycheck stub that reads like this:

Gross Pay $1,000.00

Taxes
Federal Withholding - $76.00
FICA-SS - $62.00
FICA-MED - $14.50
-------
Total Taxes $152.50

Net Pay $847.50

So on payday, your employer sends $847.50 to the bank for you and $152.50 to the U.S. treasury for the Federal Government to spend as they like, right? Oh don't you wish!

And doesn't your employer wish! Because the only place your employer ever puts those $62.00 and $14.50 FICA amounts is on your paycheck. On the calculation he does for Uncle Sugar, he has to double them. The actual tax rate that your employer is charged for FICA-SS on your $1000.00 is 12.4% not 6.2% And for the FICA-MED, he is charged 2.9%, not 1.45%.

So on payday, your employer sends $847.50 to the bank for you and $229.00 (in your name and social security number) to Uncle Sugar. So each pay day, He pays out $1076.50 And you receive $847.50 of it.

So how much do you earn? There are a couple of different numbers it might be, but $1000.00 a week never enters into anyone's thinking. You think, "I'm getting $847.50" and your employer thinks, "Damn, he costs me $1076.50!" But nobody thinks about that $1000!

And notice that if you live in a state with income tax the discrepancy gets wider. Do you have health insurance coverage through your employer? Your employer is likely paying, on your behalf, 4 or 5 times what you are paying and complaining about. It's pretty easy to get to around $700 for you and $1400 for your boss when he looks at your desk. No wonder people get laid off in tough economic times.

I didn't even mention Unemployment Taxes, Worker's Compensation or various other fees that might be charged based directly on your salary. Let's just say you are one expensive employee!