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I received an offer letter today and found it very odd that they included Medicare and Social Security contributions the company would make on my behalf. I thought such employer + employee contributions were necessary as part of the IRS law or something. Whatever they are they are certainly nothing worthy of consideration as a perk right? Seems like a cheap move to inflate total compensation numbers above what they should otherwise appear as with respect to figures people actually have control over.

Here's one source I've found on the subject.

An employer's federal payroll tax responsibilities include withholding from an employee's compensation and paying an employer's contribution for Social Security and Medicare taxes under the Federal Insurance Contributions Act (FICA).

Here's an even more definitive source source

Topic 751 - Social Security and Medicare Withholding Rates The current tax rate for Social Security is 6.2% for the employer and 6.2% for the employee, or 12.4% total. The current rate for Medicare is 1.45% for the employer and 1.45% for the employee, or 2.9% total. Refer to Publication 15, (Circular E), Employer's Tax Guide, for more information;

  • IRS and FICA implies that this is in the United States, right? Was there potentially some discussion that the position might be a contract position rather than a full-time employee? – Justin Cave Jul 7 '15 at 5:16
  • @Justin Cave that's correct in the US. It was always understood this was a permanent position with the company. They were on the counter offer position and may have played this card, which though factual is ultimately nothing special in that every employer pays these 6.2% SS and and 1.45% medicare – jxramos Jul 7 '15 at 5:23
  • It is misleading. I doubt that it is illegal in the USA, but certainly misleading. On the other hand, if one company offers $50k + $3100 SS + $702 medicare, and another offers $52K, one candidate choses the first and another choses the second company, then the second company got the more clever employee! – gnasher729 Jul 7 '15 at 8:46
  • In today's world, where so many tech workers are 1099 contract employees, they may just be making it explicit that this is a W-2 position, and that the taxes work differently. I've been a contractor, contract employee, and W-2 employee. I know the differences well. Many don't. You see it here where so many contract employees call themselves contractors. If you understand it, there's nothing nefarious. If you don't (theoretical "you"), it may prompt you to ask, and then you'll understand it. Odd? Perhaps. Misleading? No. – Wesley Long Jul 7 '15 at 19:24
  • Did the offer itemize these amounts or just give you the total? That would be misleading. – user8365 Jul 7 '15 at 19:51
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I received an offer letter today and found it very odd that they included Medicare and Social Security contributions the company would make on my behalf.

If many of the candidates they are getting have previously been independent contractors, this can be a good "by the way! as a FT employee we pay 1/2 the FICA taxes!"

Anyone who is currently salaried will expect this (as you are currently), but someone coming from a contracting or 1099 role will find this another "perk" of being salaried.

Seems like a cheap move to inflate total compensation numbers above what they should otherwise appear as with respect to figures people actually have control over

Again, this might be more beneficial to someone who previously has a role where they paid both FICA taxes. Someone coming from that role probably will be receiving lower pay as salaried and so it might be helpful to have a listing of all company benefits (since that person was previously responsible for them).

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    I agree, this is only a benefit if you are comparing it to being self employed. Did they by chance include how much of the health insurance costs they pay? I did notice the company I am negotiating with now includes that in the benefits package literature, although not really part of the offer letter. – Bill Leeper Jul 7 '15 at 14:35
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    @BillLeeper, indeed, self employed/1099 is the key thing, since a W2 contractor would have their staffing agency cover that employer half of the equation. – jxramos Jul 7 '15 at 19:21
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I thought such employer + employee contributions were necessary as part of the IRS law or something.

That's correct. These are legally mandated employer contributions.

Whatever they are they are certainly nothing worthy of consideration as a perk right? Seems like a cheap move to inflate total compensation numbers above what they should otherwise appear as with respect to figures people actually have control over.

I worked for a company that did the same. They included such items in their "Total Compensation" website.

From the company's point of view, they are trying to convey the complete "here's what you cost the company" point of view. And of course, it makes their complete package of benefits bigger that it would otherwise appear.

Still, there's nothing nefarious about this practice (which seems to be becoming more a standard big-company HR/Benefits practice these days). As always, you need to understand what is included, and what is not, in order to evaluate it correctly.

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I have not seen the company contribution to FICA listed in an offer letter, but I have worked for several companies that did include it in an annual compensation summary statement.

In that statement they listed not just your wages and how they were divided between your take home pay, taxes, and employee funded benefits; but they also listed their contributions to FICA, insurance, vacation, sick...

Based on my experience I would actually be reading that section very carefully. I would be concerned that they were telling me that I wasn't being considered an employee, and they were reminding me that I was going to be expected to pay that portion of FICA also.

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It's not misleading as long as the offer clearly spells out how they arrive at a total for the "indirect benefits" section. Every company has a different benefits package to the point that it's usually impossible to directly compare the totals from two different offers. As far as I know it's standard policy to include these taxes in a job offer mainly because the company also wants to know how much it will cost to employ you, as such taxes can add a significant overhead. Usually that number will only be passed around between the hiring manager and HR but while it's unnecessary, it's not that strange for it to show up on the actual job offer. While this doesn't apply to you, it's standard practice in Europe for offers to be based on a pre-tax salary with the take-home being 40 to 50% lower.

It would be misleading if the offer included these taxes without telling you, meaning that the take-home would be lower than what was promised. I'm not familiar enough with US employment law to say if that would cross into illegal territory but it's sleazy enough that you'd be unlikely to have this happen with any reputable company.


In short, including the FICA benefits is not a problem in and of itself. As long as you didn't see any other red flags in the hiring process, assume that they simply want the offer to be completely transparant.

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It does seem odd to me to include those, and it may well be an attempt to make the offer seem better somehow.

Another possibility though is that they want you to be very clear on what your actual take home pay will be. For many people that actually matters more than the gross pay, since that is all they ever really see.

  • I should qualify that they explicitly listed the employer contribution among the set of "indirect benefits" as they called them. These included such things as medical benefits, pension, 401k stuff, etc. – jxramos Jul 7 '15 at 5:15
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    Including the employer contributions in no way affects your 'take home' pay. Only the employer contribution is reflected in this way. – Bill Leeper Jul 7 '15 at 14:33

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