FUTA (Federal Unemployment Tax Act) is 6.0% on the first $7,000 of each employee’s wages per year, paid by the employer. Employers who pay their state unemployment tax on time generally get a credit of up to 5.4%, so the net rate is usually 0.6% (IRC §§3301, 3302, 3306). SUTA (state unemployment insurance) rates and wage bases vary by state and by employer experience, and construction employers often carry higher rates.
Why it matters
Unemployment taxes are front-loaded: they’re paid on the first dollars of wages each year, so labor burden is higher in the first quarter. Burden rates that average them evenly misstate early-season job cost.
Worked example
An employee has $6,000 of FUTA wages to date and earns $3,000 this check. Only $1,000 is still taxable: FUTA is $6.00 at 0.6% (illustrative).
Common mistakes
- Using one SUTA rate for every state.
- Missing the credit reduction that applies in some years to states with outstanding federal loans.
How os.construction handles it
In the accounting preview’s payroll, FUTA is built in and state unemployment uses one configured SUTA rate, with wage bases tracked year to date. See Payroll.