Ranked sixth in the world for ease of doing business by the World Bank and home to the largest economy in the world, the United States continues to be fertile ground for businesses hungry for a taste of innovation.
With a GDP of more than USD$20 trillion, the country is a leader in several key industries and is currently the largest tech market in the world, with four cities ranking in the top 10 for global fintech, including Silicon Valley (#1) and Boston (#7).
For businesses around the world, expanding into the United States can provide plenty of opportunities for growth. However, they must be prepared to take on a complex market and ensure they do their due diligence before taking this step.
It depends on the employer. The most common are weekly, semi-monthly or biweekly.
US Dollar (USD)
Payroll and taxes in the United States
Payroll tax in the United States is imposed separately by the federal and state governments. Federal income tax is governed by the Internal Revenue Service (IRS).
Both employers and employees are subject to payroll taxes that are collected by the employer per payroll and remitted on a quarterly or annual basis to the taxing jurisdiction.
Mandatory contributions for employers in the United States currently comprise of:
Imposed by the Federal Unemployment Tax Act (FUTA), employers are required to report this tax by annually filing Form 940 with the IRS. As of June 2011, the current unemployment tax rate stands at 6.0% and can be reduced to a rate of up to 5.4% through credits earned through contributions to state unemployment programs under sections 3302(a) and 3302(b) in FUTA.
On a state level, employers are also required to pay a payroll tax under the State Unemployment Tax act (SUTA), also known as State Unemployment Insurance (SUI). The funds are channelled into the state unemployment fund on behalf of their employees.
In states such as Alaska, New Jersey, and Pennsylvania, both employer and employee are required to pay SUTA taxes. SUTA rates are assigned to each individual employer and are based on variables such as years of experience and type of industry.
Funded by the Federal Insurance Contributions Act (FICA) tax, social security is a federal government program that provides benefits for retirees, individuals with disabilities, and surviving children of deceased workers.
Some of the benefits offered under the Social Security Administration (SSA) include retirement insurance, prescription drug benefits, and public assistance and welfare services. Employer contributions on social security are currently 6.2% of wages up to an annual wage maximum.
Medicare is a government health insurance program that provides health insurance for Americans above 65 years old as well as younger individuals with disability status as determined by the SSA. A tax of 1.45% is levied on all employers to fund a portion of the Medicare program.
State disability benefits
Several states, including New York, New Jersey, and California, require employers to provide disability benefits to workers that cover injuries or illness not caused by an accident in the workplace. In some states, employers make payments into a state fund which channels these benefits to the employees, while in others, the employee may purchase an insurance coverage plan from an authorised provider or the state. Disability benefits can be funded:
Entirely by the employer
Via deductions from the employee's wages
As a combination of the above
Workers compensation insurance
Workers’ compensation is generally to protect employees who sustain workplace injuries and is put in place to protect employers from various tort claims made by employees. Private employees with one or more employees are expected to provide workers’ compensation insurance by most American states however it is optional in some states, such as Texas. In several states, employers are allowed to be self-insured for workers’ compensation.
Mandatory deductions for U.S. citizen employees include:
Withholding of U.S. Federal, State, and local income taxes
Deduction for U.S. Social Security taxes, Foreign Service retirement, Civil Service retirement, Federal Employees’ Group Basic Life Insurance (FEGLI), Federal Employees Health Benefits (FEHB)
Any court-ordered garnishments and bankruptcy payments
The table below illustrates a breakdown of federal, state, and local taxes across the United States:
All income made by U.S citizen employees is subject to Federal income tax and social security taxes. Deductions are also mandatory on local retirement, life, health, or other benefits when coverage is required by local law.
The minimum wage in the United States
The federally mandated minimum wage in the United States is USD$7.25 per hour, according to the U.S Department of Labor (DOL). However, the minimum wage varies according to State. The District of Columbia currently has the highest minimum wage in the U.S (USD$15.2 per hour) as of January 2022, followed by California (USD$15 per hour).
The table below illustrates the current minimum wage rates across the different states as of January 1, 2022.
Image from statista.com
Working hours in the United States
Working hours in the United States typically run between 9 am to 5 pm from Mondays to Fridays. This represents a five-day work week with an average of 40 hours per week. Employees covered by the Fair Labor Standards Act (FLSA) are entitled to overtime pay at a rate that is no less than one and a half times their regular pay rate for overtime hours worked during a 40-hour work week.
Employee Benefits in the United States
Most employers in the United States provide their workforce with benefit plans as an incentive to increase corporate retention and employee satisfaction. Also referred to as fringe benefits, common additional benefits typically found in the USA often include:
retirement benefit plans (such as 401(k), pension and long-term care insurance)
paid time off (PTO) such as vacation leave and sick leave
medical, prescription, vision, and dental plans
Flexible spending accounts (FSA) such as Health and Dependent Care FSAs
Legal assistance plans
Many employers in the United States also go as far as to provide their staff with Employee Discount Programs that provide workers with access to specialised discounts on products and services from different vendors. These programs can include discounts on hotels and holiday destinations, beauty and wellness treatments, financial services, movie and theme park tickets, and home services.
Most of these benefits are tax deductible for the employer and not subject to income tax for the employee.
Cafeteria plans are also a popular benefits scheme offered by American employers to their employees according to the requirements of section 125 in the Internal Revenue Code. These plans often include a “menu” of different levels of benefits for the employee to choose from on a pretax basis. Employees on a cafeteria plan must be allowed to choose one taxable benefit and one qualified benefit.
A qualified benefit refers to any type of benefit that is excluded from an employee’s taxable income and includes:
Accident and health benefits (excluding Archer medical savings accounts or long-term care insurance)
Dependent care assistance
Group-term life insurance coverage
Health savings accounts (Including distributions to pay for long-term care services)
Types of leave available in the United States
Federal law does not require private employers in the United States to provide employees with paid time off, vacation or sick days however, many employers choose to do so.
A growing list of jurisdictions have laws in place that require employers to provide their employees with paid sick leave, while some jurisdictions make it compulsory for employers to provide paid leave for reasons other than illness.
Many states and local jurisdictions have also implemented emergency paid sick leave policies while several jurisdictions have mandated paid leave for COVID-19 vaccination and recovery from side effects due to the vaccine.
Family and medical leave (FMLA)
The United States FMLA leave scheme provides employees with up to 12 weeks of unpaid leave per year. During this time, the employees’ jobs, along with any group health benefits, are maintained.
Eligible employees are entitled to:
Twelve weeks of leave within a 12-month period for:
Childbirth and care for a newborn child within a year of the birth
Care of an adopted or a foster child that has been placed within the employee’s care within one month of said placement
Care of a parent, spouse, or child facing serious medical conditions
Serious medical conditions that affect the employee’s ability to perform the essential functions of their job
Any qualifying exigency arising out of the fact that the employee’s spouse, child, or parent is a covered military member on “covered active duty;” or
Twenty-six weeks of leave during a single 12-month period to care for a covered servicemember with a serious injury or illness if the eligible employee is the servicemember’s spouse, son, daughter, parent, or next of kin. This is known as military caregiver leave.
Employees are eligible for FMLA if they have worked for their employer that employs 50 or more employees within 75 miles for a minimum of 12 months.
Paid time off (PTO)
There is no federal requirement for paid time off in the United States, according to the Department of Labor. PTO is usually regulated according to state laws, or oftentimes, it is up to the company to determine its own PTO policies.
Currently, only twelve states, along with Washington DC, have legislated paid sick leave.
Workers in Arizona, California, Maryland, Michigan, New Jersey, and Oregon earn an hour of PTO for every 30 hours of service.
Workers in Connecticut, Washington, Maine, and Nevada earn one hour of PTO for every 40 hours of service.
Workers in Rhode Island earn one hour of PTO for every 35 hours of service.
Workers in Washington, D.C, earn one hour of PTO for service between 37 to 87 hours, depending on the size of the business.
Funeral and Bereavement Leave
The USA''s Fair Labour Standards Act (FLSA) does not provide payment for any time off taken to attend a funeral. This benefit is typically based on an agreement between the employer and the employee. Most companies in the USA typically provide between one to five days of bereavement leave, with most HR policies providingan average of three days.
Public holidays in the United States
There are currently 11 calendar dates that the US Government has declared as federal holidays. Holiday dates that fall on a weekend are typically observed on the closest preceding or succeeding weekday.
The list below shows the public holidays observed by all regions in the USA.
New Year’s Day – January 1
Martin Luther King Jr Day – January 15 to 21(Floating Monday)
George Washington’s birthday - February 15 to 21 (Floating Friday)
Memorial Day – March 25 to 31 (Floating Monday)
Juneteenth National Independence Day – June 19
Independence Day - July 4
Labor Day – September 1 to 7 (Floating Monday)
Columbus Day – October 8 to 14 (Floating Monday)
Veterans Day – November 11
Thanksgiving Day – November 22 to 28 (Floating Thursday)
Christmas Day – December 25
Are background checks mandatory in the United States
There is no federal law that mandates employee background checks. However, many companies prefer to screen potential candidates prior to making an offer for various reasons that include: verifying their previous work credentials, minimising risk for the company, and keeping their workplace safe.
There are, however,various regulationsthat govern the ways in which background checks are conducted.
For example, employers using a consumer reporting agency (CRA) must follow the rules established by the Fair Credit Reporting Act (FCRA), which requires employers to inform and receive consent from potential employees before conducting a background check.
Under the FCRA, the employer must obtain the employee's written consent to obtain any background information and the potential employee is allowed to review the results of the background check and dispute any inaccuracies and act against employers that violate the FCRA.
In California, for example, employers are prohibited from asking job applicants about their criminal history until after a conditional job offer has been extended. This rule applies to all corporations with five or more employees. While Illinois’ ban the box law states that no enquiries about criminal history are allowed prior to the job interview or after a conditional job offer is made if no interview occurs. This, however, only applies to private business owners with 15 or more employees.
The Americans with Disabilities Act (ADA) is also important to take note of. For businesses with 15 or more employees, the ADA prohibits the use of medical information to discriminate against an employee.
According to the ADA, employers cannot subject potential employees to a pre-employment physical before a conditional job offer is extended.
The laws that surround employee background checks exist to protect the privacy of and prevent discrimination against job applicants and employees in the United States. They can, however, be a complex landscape for employers to navigate, especially due to the differences in local, state, and federal laws.
For employers that are planning to screen and hire candidates in the US, consulting with their HR department and doing their due diligence in reading up on the obligations surrounding background checks is the best way to minimise risk during the hiring process.
Minimum retirement age in the United States
For American employees born between 1943 to 1954, the full retirement age is 66. This increases gradually for those born between 1955 to 1960 until it reaches 67 years of age. Anyone born from 1960 onwards is entitled to receiving full retirement benefits at age 67.
Attracting talent in the United States
Understanding what employees want and value in the workplace is key to defining a talent attraction and retention strategy. Fair pay and good benefits continue to take centerstage; however, various attributes relating to employee well-being and culture have also risen in the ranks.
Companies must find a way to balance the importance of traditional employee values alongside new priorities that have come to the foreground. Making this part of their value proposition to potential employees will help employers optimise their talent attraction and retention strategies.
Here are some important employee values to consider:
According to Gallup, recruiters must be prepared to discuss these actions and commitments as well as answer questions relating to the efforts taken by the company to fulfil their commitment to creating a diverse and inclusive workplace.
Giving employees access to clear and transparent metrics of how a company’s diversity efforts are being measured is key to implementing a DEI policy that is targeted and impactful.
Source: Shutterstock/Jacob Lund
Flexible working options
By providing employees with greater flexibility, businesses are empowering them to have greater control over their work-life balance.
According to Citrix’s Work 2035 Project’s examination of global working patterns, a staggering 88% of knowledge workers want to work for companies that provide flexibility in working hours and location.
Out of more than 2000 workers surveyed, 500 were employees from the US and what's more, they feel that they are highly likely to relocate from urban cities for roles that allow them to work remotely.
One of the greatest benefits of flexible working conditions is that it gives workers the freedom to choose when and where they work, therefore allowing them to work when they’re at their most productive.
65% said that the COVID-19 pandemic made them rethink what they want in life, while 56% feel that they want to contribute more to society.
In the workplace, this can translate to growth opportunities, personalised career development programs, and working for businesses that are just as interested in giving back as they are in turning a profit.
Ultimately, employees want work that isn’t purely transactional. Companies that take the time to invest in their employees and connect with them on a more meaningful level will be the ones to successfully attract and retain today’s new wave of talent.
The call for better support in the workplace is a resounding one, and according to Harvard Business Review’s 2021 study, more than 91% of respondents feel that mental health support should be part of a company’s culture.
Another survey by HR tech firm Workhuman also showed that 40% of employees would like improved mental health benefits, and 53% of employees feel that providing mental health days would be helpful to employee wellness.
Mental health is at the forefront of employees’ minds, and employers that prioritise this will not only be able to strengthen their talent attraction and retention strategy but also stand to create an enriching dialogue on what employees truly need to thrive in their work and personal lives and contribute to this.
Termination of employment in the United States
Under US law, both employers and employees enter a working relationship on an “at-will” basis which also means that either party can choose to terminate the employment relationship for any reason and without notice. This is provided that the ground for termination is not for a discriminatory reason.
In any case, employers should ensure that all employment-related documents, such as employment agreements and company policy handbooks, support the at-will relationship. These documents should:
Not contain any provisions that create a contract undermining an employee’s at-will status
Include a disclaimer stating that:
Disciplinary procedures and policies do not modify the at-will employment relationship and do not create a contract of employment
The employer maintains the right to skip, repeat or modify disciplinary procedures at its discretion
Small or newly established businesses that don't have formal employment policies should make it a point to ensure that all employee communication reiterates the at-will relationship.
In the event of collective dismissals, the Workers Adjustment and Retraining Notification (WARN) Act required covered employers to provide at least 60 days’ notice in advance in the event of plant closings or mass layoffs to:
The affected workers or their representatives, i.e., a labour union
The state dislocated worker unit where the plant closing or mass layoff takes place
The local chief elected official
This notice is intended to provide workers and their families with time to prepare for potential unemployment, seek out new means of employment, or enter training and upskilling programs to help them successfully compete in the job market.
The WARN act currently covers companies with 100 or more employees. Employees must have worked for a minimum of six months with the same employee and for a minimum of 20 hours within a seven-day work week to be protected by the act.
The act currently does not protect:
Workers participating in strike actions or that have been locked out in a labour dispute.
Workers employed on temporary projects or facilities of the business who understand the temporary nature of their work when hired.
Business partners, consultants, or contract employees assigned to the business but who have a separate employment relationship with another employer and are paid by that other employer or who are self-employed.
Regular federal, state, or local government employees.
There is currently no law dictating a formal procedure when discharging individual employees. In these cases, the termination is subject to whatever agreement is stipulated in the employment contract or collective bargaining agreement.
US federal law does not require employers to offer severance pay. It is usually based on an agreement between the employer and the employee (or the employee’s representative). If severance pay is granted to the employee, the amount is typically determined by their length of employment prior to the termination, and a signed release in favour of the employer is required.
What are my options for hiring in the United States?
For businesses that want to hire employees in the United StatesAirswift provides a number of employment solutions that will help you hire employees efficiently and compliantly.
We take full administrative responsibilities during the hiring and onboarding process, helping you free up time to focus on other aspects of your business' growth.
*Although the information provided has been produced from sources believed to be reliable, no warranty, express or implied, is made regarding the accuracy, adequacy, completeness, legality or reliability of any information. For the latest information and specific queries regarding particular cases, please contact our team.
Table of Contents
Find out more
Learn how Airswift can help you hire employees in the United States