Payroll in USA

Expand into the US with a Global Payroll Provider

  • Leverage our experience and ensure in-country Payroll compliance.

  • A single, centrally managed payroll system that delivers a fluid and consistent service to you and your employees.

  • A dedicated team and account manager so that you always have a central point of contact.

  • Pay every employee accurately and on time.

Looking for a payroll solution in the USA?

We care about your privacy. By submitting this form, you’ll receive the requested information as well as business insights from TopSource Worldwide. You can unsubscribe at any time. For details, view our Privacy Policy.

Hiring in the United States

The world’s major superpower (until China came along) has had one of the most powerful effects on global finances, culture and politics. Whether its the actions of the US president, or the ‘leader of the free world’’, or the Hollywood movies and American brands that pervade almost every country on earth, it’s safe to say we all know who America is what it stands for.

A highly-developed, highly industrialised nation that accounts for up to 30% of the total wealth in the world, the economy of the USA spreads to almost every corner of the world. Almost anything and everything is manufactured and exported, and the US is a leader in financial services, banking and corporate activities.

Many of the world’s largest and most recognisable companies employ the world’s largest highly skilled and highly educated workforce. Hiring in the USA can be lucrative due to competitive wages and a stable and secure business environment. However, there is strict labour regulation and investment rules, so payroll expertise shouldn’t be discounted for investors looking to hire in the USA.

Guide to becoming an Employer in the US

The United States needs no introduction as a place for international business. It’s the largest economy in the world by GDP, it has the third-largest population in the world (around 330 million people at the time of writing), and as such is a world leader in just about any sector or industry that you can think of. Nevertheless, services now make up around 80% of the American economy.

The benefits of doing business in the United States are many: a diverse and highly skilled workforce, economic and political stability, and strong links with virtually every other country, to name but three. But like anywhere else, the USA has its own characteristics when it comes to payroll, especially when there are 50 states (plus the District of Columbia) that all apply their own rules in certain areas.

Let’s take a look at the most important facts about setting up a business and doing payroll in the USA.

Establishing your business in the US

Every business looking at an American expansion should start by working out which state is the best for them to be based in, and then familiarise themselves with the specific business rules for that state; as laws vary from state to state.

Although a business’s HQ must be registered to a specific state, a business must register to operate in every state where they intend to do business. Customers ordering from a specific state don’t count in this context.

While this may sound complex, the good news is that most states don’t ask for any minimum capital level to set up a corporation, and those that do tend not to require a significant capital investment.

Employment Law in the US

The key legislation that enforces employment law in the United States is the Fair Labor Standards Act (FLSA), and employers are required to display an outline notice of that Act in workplaces. The requirements of the FLSA include maintaining hours and pay records on employees for up to three years: records that can be inspected by the Department of Labor if they choose to do so. Additionally, individual states may have their own laws that give workers additional benefits and protections.

Although there is no strictly defined maximum working week, overtime at 1.5 times the normal rate of pay applies for all work beyond 40 hours per week. Similarly, there are no rules around termination in the US, and employees can be dismissed at any time for almost any reason. Many industries, however, are unionised, and so collective bargaining agreements give some workers additional protection from termination.

What is the Minimum Wage in the US?

The federal government sets a national minimum wage rate, which is currently $7.25 per hour. While some states use this minimum, many others have adopted their own higher rate. As of 2022, the highest can be found in the District of Columbia at $15.20 per hour, more than double the nationally mandated minimum hourly wage.

The payment of bonuses is common in the US in certain jobs, although those bonuses do come with a tax implication of 22% (rising to 37% after the total value of your bonus exceeds $1million).

Severance pay is not a legal requirement, although many employers and employees negotiate this element into contracts on a case by case basis.

Minimum Wage inthe US

What are the Social Taxes in the US?

There are various tax considerations businesses have to take into account. As is the case in many countries, businesses should withhold tax from employees at source and remit them to the relevant authorities.

Income tax can be complex in the US. Firstly, there are seven progressively higher rates, ranging between 10% and 37%. Then different rates apply for single people, married couples, heads of households, and even widows and widowers. And on top of that, most states also levy their own state income taxes on top of the federal income tax.

Social security tax is levied at 6.2% each from employer and employee, and Medicare at 1.45% from each party. This is also withheld and remitted by employers, who are also required to contribute to federal and state unemployment taxes.

The current corporate tax rate is 21%.

American National Holidays & Annual Leave

There are many different public holidays in the United States, and every state has a different set of holidays that they observe, although employees aren’t legally entitled to paid time off on these days. Nine days are fully observed nationwide:

  • New Year’s Day
  • Martin Luther King Jr’s Birthday (a Monday in mid-January)
  • Memorial Day (last Monday in May)
  • Independence Day (4 July)
  • Labor Day (first Monday in September)
  • Veterans Day (11 November)
  • Thanksgiving (fourth Thursday in November)
  • Christmas Day
  • Boxing Day

Businesses in the US are not legally obliged to provide any paid vacation time, meaning that paid leave offered by employers can vary significantly based on the preference of the employer.

Paid sick leave is not federally mandated, but is required at varying rates by around one-third of states. The Family Medical Leave Act does however enshrine an entitlement to unpaid sick leave.

Maternity Leave in the US

Of the 38 nations in the OECD (Organisation for Economic Co-operation and Development), the US is the only one that does not give mothers any paid maternity leave, instead of providing 12 weeks of unpaid leave. Similarly, there is no legal entitlement for paternity leave whatsoever. Nevertheless, many employers choose to offer these benefits to their workforce.

Maternity Leave inthe US

Why become an Employer in the US

The overriding theme of this guide is that it’s almost impossible to treat the United States as one country from a payroll perspective. It’s like dealing with 50 different countries at the same time, as so many different factors vary from state to state in so many different ways.

This can potentially make expanding into the US market fraught with complexity, but despite these vast and swathing variables; the US is a market that cannot be ignored. The disposable income, access credit, and consumerist focus across the country makes it a prime location for growth whether you are operating a DTC (direct to consumer) or B2B (business to business) corporation.

Find out about outsourcing your payroll in…

Published date: 11th Feb 2022
Review date: 11th Feb 2023