How to Figure Gross Pay if Employer Pays FICA

The Federal Insurance Contributions Act, or FICA, has two components: Social Security and Medicare. The Internal Revenue Service has statutory authority to collect both taxes. Both the employer and the employee are required to pay FICA taxes. An employee's gross pay is her income before deductions are taken out. If you are a household employer, and if you prefer, you can pay your employee's share of FICA taxes. Regardless of whether you are paying the employee's share of FICA, the procedure for figuring out her gross is the same.

  1. 1.

    Calculate gross pay for an hourly worker by multiplying his regular hours for the pay period by his regular pay rate. Regular hours are work hours up to 40 for the week. If applicable, multiply overtime hours by 1.5 times the regular pay rate. Under federal law, overtime hours are those exceeding 40 for the week. Add regular and overtime earnings to arrive at gross pay.

  2. 2.

    Figure out gross pay for a salaried employee by dividing his annual salary by the number of yearly pay periods.

  3. 3.

    Do not withhold Social Security or Medicare taxes from gross wages if you choose to pay them for the employee. For example, at the time of publication, the employee is required to pay 4.2 percent of gross wages up to the annual wage limit of $106,800 in Social Security tax and 1.45 percent of all gross wages in Medicare tax. You pay 6.2 percent and 1.45 percent, respectively. Since you are paying the employee's share, you pay a total of 10.4 percent in Social Security tax and 2.9 percent in Medicare tax.

  4. 4.

    Include the amount of taxes that you pay in the employee's gross wages for income tax purposes but do not count them as Medicare or Social Security wages. Assume that you pay the employee $350 weekly for FICA purposes. This means that you pay $14.70 in Social Security tax and $5.06 in Medicare tax for the employee, plus your share of $21.70 in Social Security tax and $5.06 in Medicare tax. For federal, and if applicable, state income tax purposes, the employee's gross wages are $369.76 ($350 + $14.70 + $5.06), but for FICA purposes, his gross wages are $350.