Payroll & Employment Guide: United States

Hiring in the United States

When hiring in the U.S., employers must identify the correct work location, classify workers properly and register with federal and state tax agencies before running payroll. Federal rules provide the baseline, but state and local laws often go further on wages and leave.

Key steps when hiring in the U.S.:

• Determine the employee’s work state and city — local laws may set higher minimum wages, paid-sick or family-leave entitlements and pay-transparency requirements.
• Classify each worker correctly as an employee or independent contractor; incorrect classification can trigger back taxes, penalties and benefits liabilities.
• Issue a written offer or contract that sets out pay, hours, exempt/non-exempt status, benefits and any probation terms.
• Collect Form W-4 for federal withholding plus any state withholding forms, and complete Form I-9 eligibility verification.
• Register as an employer with the IRS (EIN) and with each state tax and unemployment agency before payroll begins, or partner with an Employer of Record (EOR) if you lack a U.S. entity.

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Employee Benefits

U.S. employers must provide certain statutory protections and payroll contributions and typically offer additional benefits to attract and retain talent.

Mandatory / statutory benefits and protections:

• Social insurance payroll taxes: employer and employee contributions to Social Security and Medicare on most wages.
• Unemployment Insurance: federal FUTA and state unemployment insurance (SUI) premiums paid by employers, with rates depending on state and experience rating.
• Workers’ Compensation: state-mandated insurance covering workplace injuries and illnesses.
• Healthcare (ACA): Applicable Large Employers (ALEs) must meet Affordable Care Act employer shared-responsibility and reporting requirements.

Common employer-provided benefits (market):

• Health insurance (medical, dental, vision) for employees and often dependants.
• Retirement plans such as 401(k) with elective employer matching.
• Paid time off (PTO), including vacation, personal days and paid holidays.
• Paid parental leave top-ups, disability insurance and life insurance.
• Commuter benefits, wellness stipends, remote-work allowances and performance bonuses.

Leave policies:
There is no federal requirement for paid annual leave. Many employers offer 10–20 days of PTO for early-career employees, increasing with tenure. States and municipalities may mandate paid sick leave or paid family leave on top of company policies.

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Taxes in the United States

U.S. payroll combines federal income tax withholding, Social Security and Medicare payroll taxes, FUTA and state-level income and unemployment taxes. Employers must calculate, withhold and remit these taxes regularly.

Federal income tax:

• Withheld from employee wages based on Form W-4 and IRS tax tables.
• Progressive rates apply across multiple brackets, adjusted periodically by the IRS.

Social Security tax:

• 6.2% employee + 6.2% employer on wages up to the annual Social Security wage base.

Medicare tax:

• 1.45% employee + 1.45% employer on all covered wages (no wage cap).
• Additional 0.9% Medicare tax withheld on employee wages above certain thresholds — there is no employer match for the additional 0.9%.

FUTA (Federal Unemployment Tax Act):

• 6.0% on the first $7,000 of wages per employee each year, typically reduced to an effective 0.6% when full state UI tax credits are available.

State taxes:

• State income tax withholding applies in most states (a few states have no state income tax).
• State unemployment insurance rates and wage bases vary by state and by employer experience rating.

Rates, wage bases and thresholds change regularly, so employers should confirm annual updates from IRS and state revenue agencies when running payroll.

Payroll in the United States

Payroll in the U.S. requires precise handling of federal, state and sometimes local taxes, plus compliance with FLSA overtime rules, new-hire reporting and year-end forms.

Payroll currency & pay frequency:
Payroll is processed in USD. Most employers pay bi-weekly or semi-monthly; some industries use weekly or monthly. State law may set minimum pay frequencies for certain employee groups.

Payslips & itemised statements:
Employers should provide itemised pay statements showing:

• Gross wages by type (regular, overtime, bonuses, commissions).
• Employee tax withholdings (federal, state, local where applicable).
• Employee Social Security and Medicare deductions.
• Other deductions (benefits, retirement, garnishments).
• Net pay, pay period dates and hours worked for non-exempt employees.

Reporting & deadlines:

• Deposit payroll taxes using the Electronic Federal Tax Payment System (EFTPS) on monthly or semi-weekly schedules depending on liability.
• File quarterly Forms 941 (or annual Form 944 for small employers), annual Forms W-2 for employees and Forms 1099 for qualifying contractors.
• Report new hires to the appropriate state new-hire registry within the required timeframe.

Looking for detailed guidance on U.S. payroll cycles, overtime and statutory payroll taxes?

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Legal Regulations

U.S. employment law combines key federal statutes with state and local requirements. Employers must track rules at multiple levels and keep policies up to date.

Key federal frameworks:

• FLSA (Fair Labor Standards Act): Establishes federal minimum wage, overtime and recordkeeping rules, including exempt/non-exempt classifications.
• FMLA (Family and Medical Leave Act): Provides up to 12 weeks of unpaid, job-protected leave for eligible employees for qualifying reasons.
• ACA (Affordable Care Act): Imposes employer shared-responsibility and reporting obligations on Applicable Large Employers.
• ERISA: Governs many retirement and welfare benefit plans.

State & local standards:

• Minimum wage, paid-sick leave, scheduling rules, pay-equity and transparency requirements can vary substantially by state and city.
• Many states also have their own family-leave schemes, human-rights laws and meal/rest-break rules.

Total employment cost (illustrative):
Employer Social Security and Medicare contributions (7.65% combined), FUTA, state unemployment and workers’ compensation, plus any health and retirement benefits often add 20–40% or more on top of base salary, depending on benefits and state-specific costs.

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Work Permits & Visas for the U.S.

Hiring non-U.S. nationals generally requires employer sponsorship under the U.S. immigration system. Visa type depends on role, skills, seniority and nationality.

Common employment-based categories:

• H-1B (Specialty Occupations): Cap-subject in many cases, requiring a Labor Condition Application and lottery selection for most employers.
• L-1 (Intra-company Transfer): For managers, executives and specialized knowledge staff transferring within a multinational group.
• TN (USMCA/NAFTA): For qualifying Canadian and Mexican professionals.
• E-1/E-2, O-1 and others: Investor visas and visas for individuals with extraordinary ability.
• Employment-based green cards: Often require PERM labor certification and multi-step processing towards permanent residency.

Immigration is highly regulated and time-sensitive, so many employers partner with immigration counsel or an EOR that offers visa support.

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EOR & PEO Services in the U.S.

Using an Employer of Record (EOR) allows you to hire U.S. workers quickly without setting up your own U.S. legal entity. A PEO supports employers that already operate in the U.S. and want to outsource HR and payroll.

Employer of Record (EOR) in the U.S.:

• Issues compliant U.S. employment contracts and classifies roles as exempt or non-exempt under FLSA.
• Runs payroll, withholds and remits federal and state taxes, and files Forms 941, W-2 and state returns.
• Registers for state unemployment and workers’ compensation and manages ongoing compliance.
• Administers benefits such as health insurance and retirement plans, and helps meet ACA/ERISA obligations.

PEO services in the U.S.:
PEOs enter a co-employment relationship, providing payroll, benefits, HR administration, workers’ compensation and compliance support while you retain day-to-day control over employees.

EOR in U.S.

Payroll Calculator

Dhi ADT’s U.S. payroll calculator helps you estimate gross-to-net pay and total employment cost. You can model federal and state income tax withholding, employee and employer Social Security and Medicare, FUTA, state unemployment insurance and typical benefit loads.

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