The United States is one of the largest economies in the world today, and success in the American market often predicts success in other markets. It’s little wonder that so many global companies put the American market on a pedestal when it comes to expansion targets.
If you do plan to expand into the United States, you’re probably aware that it comes with a few challenges. The American market can be difficult to crack. Expansion needs to be planned and executed properly.
Beyond concerns about American consumers responding to your product or service, there are also business processes you must pay close attention to. A good example is American payroll. Although you’re likely familiar with payroll regulations in your home market, there are a number of differences to watch out for in the US.
If you plan to employ Americans to staff your expansion or provide service to your customers in the US, you’ll need to know about these five important aspects of payroll.
1. American Payroll Doesn’t Have Set Pay Periods
Most aspects of payroll in the United States are governed under federal law. Individual states are allowed to adopt rules adding to or building on the federal rules.
A good example is the lack of set pay periods in US federal law. There is nothing within American labour law that states when or how often employees must be paid. Employers are free to choose when to pay their employees. If desired, you could pay your employees one lump sum every year.
Some states have created their own rules, so you’ll need to ensure your company policy is in line with the law where you operate. If there is no regulation, you’re free to choose what will work best for your business.
2. Employers Are Responsible for Several Payroll Remittances
Tax withholding is fairly common around the world, and in the United States, the IRS considers it mandatory for employers to remit tax withholdings to them. Employees may be taxed at rates anywhere from 10 to nearly 40 percent, depending on how much they earn.
This only accounts for the federal portion of income tax. In most states, there is also a state income tax. Employers are expected to withhold this amount and submit it to the appropriate state revenue department.
Unemployment taxes are also levied on the employer.
3. Employers Contribute to FICA
Under the Federal Insurance Contributions Act, you as an employer will be expected to make contributions to programs like Social Security and Medicare. These contributions are deducted from your employees’ wages.
The amounts for these programs vary. You’ll need to check in with the IRS to ensure you’re using the proper calculations for withholding.
There are also wage limits, so if an employee earns above a certain amount, they may not need to be taxed on what they earn above the limit.
Finally, employers are expected to provide a match, which means you’ll need to contribute the same amount from your own funds.
4. Laws around Paid and Unpaid Time Off
Global companies hoping to employ Americans should look out for regulations around paid and unpaid time off.
Generally speaking, the US doesn’t have much in the way of paid time off. The Fair Labor Standards Act (FLSA) doesn’t mandate any paid time off. The Family Medical Leave Act (FMLA) outlines certain medical conditions that entitle employees to 12 weeks of unpaid leave.
The US also recognizes 10 national holidays, but employers don’t have to offer these as paid days off.
5. Expertise Makes It Easy
If you’re expanding into the US market, consider getting a helping hand with American payroll to streamline your efforts. Like any other market, the American system has a number of unique regulations you need to be aware of. By working with the experts, you can avoid the most common mistakes and make payroll easier for everyone in your organization.