Definition
The portion of FICA payroll tax that funds the Social Security programme (Old-Age, Survivors, and Disability Insurance), assessed at 6.2% of gross wages for both employer and employee, up to an annual wage base limit.
UK Context
Best Practices
- Track cumulative employee earnings throughout the year and cease Social Security withholding once the wage base limit is reached
- Update payroll systems annually in January with the new wage base limit published by the SSA
- Factor the employer's 6.2% Social Security match into labour cost budgets and financial planning
- Monitor for employees with multiple jobs who may request adjustments near the wage base threshold
Frequently Asked Questions
What is the Social Security wage base for 2024?
The Social Security wage base for 2024 is $168,600. Both the employer and employee stop paying the 6.2% Social Security tax once the employee's cumulative earnings exceed this amount in the calendar year.
What happens if Social Security tax is over-withheld?
If an employee works for multiple employers and their combined wages exceed the wage base, they can claim a credit for excess Social Security tax withheld on their personal income tax return. Employers cannot recover their matching over-contribution.
Do all types of pay count toward Social Security tax?
Most compensation counts, including salary, wages, bonuses, commissions, and tips. Some exceptions include certain fringe benefits and employer contributions to qualified retirement plans. Employer-paid health insurance premiums are generally excluded from Social Security wages.