The FICA tax is imposed upon employees by the federal government and the respective employer is obligated to withhold these funds from the employee and match the amount withheld. This cost is not born by the Professional Employee Leasing Organization (PEO) but rather is passed onto the client. This tax contribution is used by the government assist in funding such programs as Social Security and Medicare. The rate for employer contribution for Social Security as of 2009 is 6.2% and limited at $106 800. As for Medicare, the employer’s and employee’s obligation is %1.45 with no cap on contributions, therefore bringing the total FICA contribution to 12.4%.
The rate of contribution by the employee is nearly equivalent at 6.2% imposed upon the first $102 000 of income. This cost, as was previously mentioned, is passed along to the employer contracting a Professional Employee Leasing Organization (PEO) as it is a cost of being an employer, whether they contract a PEO or not.