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Glossary · Payroll & compliance

FUTA

The federal unemployment tax employers pay on the first $7,000 of each employee's wages.

Also called:Federal unemployment tax

Definition

FUTA is the Federal Unemployment Tax Act. Employers, not employees, pay this tax on the first $7,000 of each worker's annual wages. The nominal rate is 6.0%, but employers who pay their state unemployment tax on time generally receive a credit that lowers the effective federal rate substantially, except in states with outstanding federal loans. Because FUTA and SUTA apply per worker, high-turnover temp staffing has more wage bases to cover, which is part of what an agency's bill rate pays for.

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This definition is general information, not legal, tax or financial advice. Rules vary by state and change over time.

Payroll & compliance

More terms on this topic.

10DLCThe registration system U.S. carriers use for business text messages sent from ordinary 10-digit phone numbers.
Adverse actionA decision not to hire, place or keep someone based in whole or part on a background check report.
Background checkA report on a candidate's history, such as criminal records or driving record, used in hiring decisions.
E-VerifyA federal online system that checks Form I-9 information against government records.
Employer of recordThe company legally responsible for a worker's pay, tax withholding and employment paperwork.
Fair chance hiringLaws and practices that delay or limit questions about criminal history in hiring.
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