Running payroll in New York means handling both federal and state obligations. The key is understanding which taxes you pay out of pocket versus which you simply withhold from employee wages. That distinction matters for budgeting and cash flow.

FICA covers Social Security and Medicare. You pay 6.2% for Social Security on wages up to the annual limit and 1.45% for Medicare on all wages with no cap. Your employees pay the same amounts through withholding. So for every dollar of wages, you’re paying 7.65% on top in employer FICA taxes.

FUTA is entirely your responsibility. The federal unemployment rate is 6% on the first $7,000 of each employee’s wages, but you receive a credit of up to 5.4% if you pay state unemployment taxes on time. That effectively reduces FUTA to 0.6% for most New York employers.

NY state income tax withholding isn’t a cost to you. You calculate it based on each employee’s IT-2104 form and remit what you withhold to the state. The amount varies by employee income and filing status.

NY Unemployment Insurance is an employer-paid tax. Your rate depends on your experience rating, which reflects your claims history. New employers start at a standard rate that adjusts over time. Getting your payroll system setup right means these calculations happen automatically and you’re not guessing at rates.

New York has two additional requirements that many employers don’t know about until they start hiring.

Paid Family Leave is funded by employees, not employers. You handle the payroll deduction and remit the funds to your PFL insurance carrier. The rate adjusts each year. While PFL doesn’t cost you directly, setting up the deduction correctly matters for compliance.

Disability Benefits Law requires employers to provide short-term disability coverage. You purchase a policy from a private insurer or the State Insurance Fund. The cost is minimal and can be shared with employees, though most employers cover it entirely since the employee contribution cap is just $0.60 per week.

All NY wage reporting and withholding gets filed quarterly on Form NYS-45. This form combines wages paid, state income tax withheld, and unemployment contributions into one filing. It’s due by the last day of the month following each quarter.

Payroll creates transactions that need to hit your books correctly every pay period. Employer tax expenses need to be tracked separately from withholdings you’re holding temporarily. Good small business bookkeeping on Long Island means those quarterly filings are straightforward because the numbers reconcile and nothing gets overlooked.