Introduction to Payroll in the United States of America (United States)
With a population exceeding 327 million people and a GDP of approximately $20 trillion, the United States of America is one of the largest and most profitable markets around the world. Its 50 states span a territory of nearly 4 million square miles and are home to some of the planet’s most thriving business destinations, including New York, San Francisco, and Chicago.
If you are a foreign company with ambitions to expand to the United States, you should brace yourself for an exciting, yet challenging, ride. One of the biggest hurdles is going to be managing payroll in the United States. However, joining forces with an expert and trusted payroll services provider like Skuad can help.
Payroll Process in the United States
Before you jump into the core payroll process, you will need to tackle a pre-payroll phase. This is composed of several different stages, and it can become complex and time-consuming. The most effective way to manage pre-payroll is by joining forces with an expert like Skuad, who can support you throughout the entirety of your payroll in the United States.
This phase includes setting up your organization, collecting and validating your payroll input, and complying with local payroll requirements.
Setting up the Organization
In order to create a standardized, efficient, and compliant way to approach payroll in the United States, you’ll need to define and communicate a series of corporate policies. These include:
You need to make sure that you register your business in the United States.
The United States is formed of 50 states, each with its own rules and regulations around labor and employment. Be sure to establish specific policies according to the area(s) where your company will be operating.
Although federal laws might now mandate businesses to guarantee any specific type of leave, as an employer you should define leave policies for your workforce. These include sick leave, vacation leave, and parental leave.
Tracking your employees’ attendance at work is essential when it comes to calculating their monthly salaries. Make sure that your organization can monitor regular attendance, special permits, and leave.
Operating within the federal and state payroll laws is vital in order to run a legal and compliant business in the United States.
It’s important to identify all the aspects that contribute to making up your employees’ salaries, including additions and deductions.
While US workers are generally paid once per month, it’s up to your organization to establish when, exactly, salaries are paid out every month.
Some information about your employees is mandatory in order to calculate their salary and manage other aspects of payroll in the United States.
Payroll Calculation Phase
The information that you have gathered during the pre-payroll phase is now transferred to your main payroll system. This helps your company calculate exactly how much money every employee will receive every month.
The core of your post-payroll process is represented by paying out your employees’ salaries. Often, this is also the biggest expense that companies incur every month.
To maintain your company’s accounts in order, it’s paramount that you record your employees’ salaries on a regular basis.
Payroll Reporting and Compliance
Another crucial aspect is liaising with external agencies to submit tax returns, send invoices, and communicate other information about payroll.
If this sounds quite overwhelming, speak with us — we are here to simplify and streamline your payroll in the United States.
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Payroll Processing in the United States
Considering that every US state follows its own rules and regulations on payroll, it can be very difficult to ensure that your company is fully compliant all the time, and that it always pays the right amount to the right person, at the right time.
Payroll Processing Company in the United States
You don’t need to navigate this complicated system on your own. The best and most cost-effective choice for your business is to work with a payroll processing company in the United States – someone like Skuad. Let us handle your payroll, while you get on with growing your business.
Payroll Management in the United States
Keeping all the financial records of your employees and observing both the federal and state payroll and labor laws are the two most crucial aspects of managing payroll in the United States.
Payroll Compliance in the United States
Statutory compliance in connection with payroll includes elements such as taxes, employee salary, employee benefits, and social security.
Payroll Components in the United States
In the United States, payroll includes standard pay with both additions and deductions. Below you will find a more comprehensive list of the main payroll components that influence payroll.
Currently, the minimum wage on a federal level in the United States is $7.25, as established by the Fair Labor Standards Act (FLSA). However, states also have their own rules in terms of minimum wage, and employers must follow both federal and state laws.
In the United States, typical working hours in an office are eight per day, with approximately one hour of lunch break, over five working days. Other sectors may observe different working days and hours.
When an employee has worked more than 40 hours in a week, they must receive overtime compensation. The standard rate is at least 1.5x the base hourly pay.
In the United States, employers withhold the Social Security tax from their employees’ salaries and send it to the government.
Employees in the United States are not eligible for any mandated paid sick leave on a federal level. Again, this can change quite significantly on a state-by-state basis, with some states requiring companies to offer paid sick leave to their employees.
There currently is no standard federal provision for maternity and paternity leave in the United States. However, the 1993 Family and Medical Leave Act (FMLA) provides legal parents with a maximum of 12 weeks of unpaid leave per year, following the birth or adoption of a child. Remember to check with the specific state in which you are operating, as some areas do require employers to offer some form of paid leave to new parents.
Below is a list of the main federal holidays in the United States:
- New Year's Day: January 1
- Birthday of Martin Luther King Jr.: January 17
- Washington's Birthday (Presidents' Day): February 21
- Memorial Day: Last Monday in May
- Juneteenth National Independence Day: June 19
- Independence Day: July 4
- Labor Day: First Monday in September
- Columbus Day: October 10
- Veterans Day: November 11
- Thanksgiving Day: Last Thursday in November
- Christmas Day: December 25
Employers in the United States are required to submit taxes and report them to the relevant authorities within the specified deadlines.
Termination of Employment
On a federal level, employers wishing to terminate an employee in the United States are not required by law to provide a fair warning. However, individual states do have their own provisions on the matter, so be sure to check with your specific state.
Paid Annual Leave
According to the Fair Labor Standards Act (FLSA), companies in the United States are not mandated to pay their employees for time off work, including vacations. Nonetheless, each individual company should still define and communicate its own decisions on this subject, and ensure that it complies with them.
Understanding and remembering these main payroll components in the United States might feel like an intimidating task. With such few provisions on a federal level, and so many state-dependent peculiarities, the overall landscape is, indeed, very complicated. Don’t worry, though — a knowledgeable partner like Skuad can help you stay abreast of all this, and more.
Payroll Outsourcing: The Best Way to Build a Solid, Talented Workforce in the United States
There are a few different ways in which you can manage payroll in the United States. These include, for example, paying your employees through a US subsidiary (internal payroll) — a costly option which requires you to hire a full team of HR professionals.
Alternatively, you can choose remote payroll, a method in which your parent company in the United States manages payroll for you. While cheaper than internal payroll, this method means always staying up-to-date with the complicated, changing laws on a federal and state level.
A third option is hiring a local payroll processing company, which can become very time-consuming as you need to search the local market for a trusted, experienced, and efficient payroll processing provider.
The best option to manage payroll in the United States is outsourcing payroll to a global payroll provider, like Skuad. With a reputable, knowledgeable, and ultra-efficient partner like us by your side, you have the peace of mind that every single aspect of your payroll is looked after with the greatest care, and you can go back to growing your business in confidence.
Would you like to know more about how we achieve this for you? Check out our FREE demo now.