Payroll Tax Benefits for Employers
Promote Cultural Exchange and Save!
American Employers can legally save 7.79% off their total payroll expenses simply by promoting cultural exchange and hiring J1 students. As any employees, international students are required to pay Federal, State and local taxes, but are exempt from paying Medicare, Social Security or Federal Unemployment tax. Regularly, the employers match some of these taxes, contributing a sum equal to 6.2% of the employee's wages towards Social Security tax, 1.45% towards Medicare tax and up to 6.2% towards Federal Unemployment tax. Since J1 students pay zero Social Security, zero Medicare and zero Federal Unemployment, employers pay nothing to match these taxes, which account for at least 7.79% of their total payroll expenses (or 8.45% of the total employees' salaries).
In some instances, employers can save even more than 7.79% of their payroll expenses. Generally, Federal Unemployment tax rate is 6.2%, but employers are allowed to take a credit of up to 5.4% for their State Unemployment tax. If your State rate is less than 5.4%, your maximum credit for Federal Unemployment tax will decrease thus increasing total savings from hiring J1 exchange students.
For more information, please refer to IRS Employers Tax Guide Publication 5.15 or your state's taxation and revenue department.
|Payroll Taxes Paid by Employer||Regular Employees||J1 Foreign Students|
Federal Unemployment Tax
State Unemployment Tax
|Varies by State and Employer|
|*FUTA rate is 6.2%, but 5.4% can be credited from SUTA.|
Payroll Taxes Savings Calculator by Seasonal Staffing Solutions is licensed under a Creative Commons Attribution-Share Alike 3.0 Unported License.Based on a work at seasonalstaff.org.