If you’re planning to expand your business to the United States, you have plenty to learn about your new market. Some of it will be cultural, while other challenges will appear in logistics, supply chain management, and employment.
There will also be rules and regulations you have to familiarize yourself with. Some of those will be associated with US payroll. If you plan to hire and pay American workers, you’ll want to keep these considerations in mind.
US Payroll May Have to Be Conducted at Certain Intervals
There is no federal regulation dictating when you have to pay your employees in the US. If you want to pay them once a month or once a year, that’s absolutely legal according to federal law.
Individual states may have different rules on the matter, so you’ll want to check the legal fine print wherever you choose to set up shop. If you’ll be operating in two or more states, keep in mind that the regulations may differ.
The IRS Schedules Remittance Payments
Once you’ve established a schedule for conducting payroll, you’ll need to consult with the IRS to determine when your payroll remittances will be due.
The IRS collects federal income tax withholdings, which can range from around 10 to almost 40 percent of an employee’s wages. This is tied to how much they make.
The tax you withhold from your employees must be remitted to the IRS within a specified period. If you don’t submit on time, you’ll be subject to penalties for late payment. You’ll also need to get the proper paperwork submitted.
Tax Isn’t the Only Withholding
Income tax is the biggest portion of US payroll withholdings, but you will also have to hold back funds for programs like Social Security and Medicare. These withholdings are assessed as a percentage of wages.
As the employer, you’ll be required to supply a match for what you hold back from your employees. Keep in mind that portions of some employees’ salaries may be exempt if they make above a certain amount.
Misclassification Is an Easy Mistake
In recent years, the IRS and several states have become more concerned with employee misclassification. This situation usually arises when an employee is misclassified as a contractor.
You may know that, in US payroll, you don’t need to hold back income tax or payments to social programs like Medicare from 1099 contractors. If an employee has been misclassified, however, you may need to pay.
It’s a good idea to monitor worker classification to ensure compliance.
Minimum Wages and Overtime
Other aspects of US payroll you’ll want to keep in mind are regulations about minimum wages and overtime. The US federal minimum wage is $7.25 per hour.
Individual states are allowed to set minimums higher than the federal wage. Some states do not set their own minimum. Most do, and some of them have wages that are substantially higher than others.
Overtime is another key concern for employers. Some employees are exempt from overtime requirements, but many are paid time and a half if they exceed full-time work hours. The number of hours that count as “full time” can vary by industry and even by position, so you’ll need to pay careful attention to this aspect of your payroll activities.
Help Is Close at Hand
Perhaps the most important matter to keep in mind when it comes to US payroll is that you don’t have to go it alone. A professional employer organization can help you navigate the waters and conduct payroll correctly and on time.