Employer payroll costs
Objective: Record employer payroll tax expense and liability.
Recommended first: Gross pay to net pay
Employers usually owe their own payroll taxes on wages, in addition to amounts withheld. These are an expense of the business. Record them when payroll is recorded, using the stated rate.
The true cost of an employee to a business is more than gross wages: employer payroll taxes and other employer-paid costs add to it. Recording employer taxes when payroll is processed keeps expenses in the right period. In exercises, the rate is stated and fictional; in real life, rates and caps depend on jurisdiction and change over time.
Keep employee withholdings and employer taxes separate in your reasoning: one is deducted from the employee's pay, the other is an additional cost to the employer, even when both are paid to the same authority.
Check your work
- Is employer tax recorded as an expense?
- Is it computed on gross wages at the stated rate?
- Is it kept separate from employee withholdings?
Fictional 8% on $2,000 gross = $160.
| Account | Debit | Credit |
|---|---|---|
| Payroll Tax Expense | $160.00 | |
| Payroll Taxes Payable | $160.00 |
Common mistakes
✗ Deducting employer taxes from employee pay.
✓ They are the employer's cost.
Guided practice
Use hints freely here.
Item 1 of 1
Employer payroll taxes
Corner Bean Café must also pay employer payroll taxes at this exercise's fictional rate of 8% on gross wages of $6,300.00. Record the employer tax liability on Mar 15, 2026.
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Independent practice
Try these without hints. Completing the lesson needs at least one independent item solved without revealing the answer.
Item 1 of 2
Accrue month-end payroll and employer tax
At Mar 31, 2026, Corner Bean Café owes employees $1,900.00 of unpaid gross wages and owes employer payroll taxes at this exercise's fictional 8% rate. Record one adjusting entry for both.
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References and provenance
- OpenStax, Principles of Accounting, Volume 1: Financial Accounting (accessed 2026-10-29)
Original lesson written for Bookkeeping Exercises (AI-assisted drafting). Calculations are verified by the platform's automated accounting tests. Not yet reviewed by a credentialed accountant. Updated 2026-10-29.