Payroll & Employment Guide USA

Employment contracts in the U.S. establish and define the terms and conditions of the employment relationship between the employer and the employee. Although they can be written, oral, or implied, written contracts are preferred for establishing better clarity on terms like salaries, working hours, benefits, notice periods, and similar.

Notice periods: No legally required period (on the federal level).

Termination of employment: At-will employment - termination can occur at any time, with or without cause, and with or without notice.

Employers in the U.S. are typically required to provide health insurance, retirement plans, and paid time off. Many of them also offer extra perks to stay competitive in the job market. Understanding both of them is essential to attracting and retaining talent.

• Mandatory benefits: Social security, Medicare, and unemployment benefits.
• Common perks: Meal vouchers, transport reimbursements.
• Leave policies: Paid annual leave, sick leave, parental leave.

The U.S. has a multi-layered tax system that applies at the federal, state, and local levels. Employers must withhold federal income taxes, social security, and Medicare contributions from their employees’ salaries, as well as pay their share of these contributions.

However, additional tax considerations may include state income taxes, unemployment insurance, and specific rules for royalty and sales taxes, which vary by state.

Personal income tax rate: From 10% to 37% (federal tax rates).

VAT: 2.90% - 11.50% (sales tax, including state and local taxes)

Tax allowances: Child tax credits

Additional tax reliefs: Dependant care expenses

The legal framework of labour relations in the U.S. is primarily defined by federal laws. These laws cover aspects such as employment classification, minimum wage, working hours, anti-discrimination, overtime, and termination procedures. To stay compliant, employers must carefully follow both federal and state-specific regulations.

Total employment cost:

• Employer’s social security contributions: 6.2%
• Employer’s Medicare contributions: 1.45%
• Employer’s Federal unemployment tax (FUTA): 6%
• Employees’ social security contributions: 6.2%
• Employees’ Medicare contributions: 1.45%

Minimum wage: $7.25 per hour

Probation period: From 30 to 90 days.

With EOR services, every business can legally employ individuals in the U.S. without opening local legal entities. The EOR takes over all the legal responsibilities as your team’s official employer, including:

• Legal employment and contracts
• Payroll processing
• Tax withholding
• Benefits administration
• Onboarding/offboarding employees

With PEO services in the U.S., you can get the necessary HR and administrative support while you remain the legal employer. PEO services are beneficial for employers who already have legal entities in the country but need support to manage their workforce operations, including:

• HR support and workforce administration
• Payroll and benefits management
• Compliance and local labour law guidance
• Employment contracts assistance

With Native Teams’ locally adjusted payroll calculator, you can easily estimate net and gross salaries, employer and employee contributions, and other mandatory deductions in the U.S.