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Payroll services in the United States

The United States has a complex payroll system governed by federal, state, and local regulations. Key industries include technology, healthcare, finance, and manufacturing. Employers in the U.S. must comply with wage laws, tax regulations, and social security contributions to ensure proper payroll management. Understanding these regulations is essential for smooth payroll operations and legal compliance.

Payroll breakdown in the United States

Employers in the U.S. must adhere to federal and state payroll regulations concerning wages, taxes, and benefits. Below is an overview of key payroll components:

Minimum wage and working hours

• Minimum wage: The federal minimum wage is $7.25 per hour, but many states and cities have higher minimum wage rates. Employers must follow the highest applicable wage law.
• Payroll frequency: Salaries are typically paid biweekly or semimonthly, but frequency varies by employer and state regulations.
• Standard working hours: The normal workweek in the U.S. is 40 hours, typically spread over five days.
• Overtime: Employees are entitled to 1.5 times their regular wage for any hours worked beyond 40 hours per week, under the Fair Labor Standards Act (FLSA). Some states have additional overtime rules.

Taxation and social security contributions

• Personal income tax: The U.S. has a progressive income tax system, with federal tax rates ranging from 10% to 37%, depending on income levels. Some states also impose state income tax, while others (e.g., Texas, Florida) do not.
• Employer contributions:
• Social Security Tax: 6.2% of the employee’s wages (up to an annual wage limit).
• Medicare Tax: 1.45% of the employee’s wages.
• Federal Unemployment Tax (FUTA): 6% on the first $7,000 of wages (credits can reduce this to 0.6%).
• State Unemployment Tax (SUTA): Varies by state.
• Employee contributions:
• Social Security Tax: 6.2% of gross wages (same wage limit as employer).
• Medicare Tax: 1.45% of gross wages, plus an additional 0.9% for high earners (above $200,000 for individuals).
• Federal and state income tax withholding: Based on IRS and state tax tables.
• Corporate tax: The corporate income tax rate in the U.S. is 21% at the federal level, with additional state corporate taxes that vary.
• Tax reporting: Employers must file payroll taxes with the Internal Revenue Service (IRS) and state tax agencies. Forms like W-2, W-4, and 941 must be submitted regularly.

Payroll compliance in United States

• Employment contracts: While not required for all employees, contracts or offer letters should clearly define salary, benefits, and work conditions.
• Payroll deductions: Employers must ensure proper deductions for taxes, health insurance, retirement plans (e.g., 401(k)), and other employee benefits.
• Compliance with wage laws: Employers must follow federal and state wage laws, ensuring compliance with minimum wage, overtime pay, and paid leave regulations.
• Employers must stay updated on changes to U.S. labor laws, tax regulations, and benefit requirements to avoid penalties.

Run payroll in the United States with Remote

Managing payroll in the U.S. requires careful attention to federal and state tax laws, employment regulations, and social security contributions. Employers must stay informed about tax rates, wage laws, and reporting deadlines to ensure smooth payroll processing and avoid penalties.

The good news is, you can pay anyone, anywhere — from your team in the office to your team abroad, all with Remote Payroll. To see just how easy global payroll can be with Remote, book a demo today.