Once you’ve made the decision to expand your business into the United States, you’ll need to begin the process of hiring local talent to streamline initial operations in the new market. Before you can hire any employees, however, you’ll have to set up a locally compliant payroll.
Taxation rules in the U.S.
The rules for taxation in the U.S. can vary from one state to another. In addition to state tax, companies need to be mindful of federal tax no matter where they are in the country. The U.S. has seven different federal income tax brackets based on income. The lowest rate is 10%, while the highest is 37%. It’s up to the employer to withhold the federal income tax from employees’ wages and forward that money to the government.
U.S. payroll options for companies
When it comes to setting up payroll in the United States, companies have a few options:
- Internal: Large companies may decide to establish a subsidiary in the U.S. and run payroll internally. This option requires a significant investment of time and resources for understanding and complying with all the local taxation and payroll laws.
- U.S. payroll processing company: With this option, compliance is ultimately the company’s responsibility, but the U.S. payroll processing company will take care of the administrative duties like calculations and payments.
- G-P: Another option is to partner with an Employer of Record (EOR) like G-P. This option enables companies to leave the complexities of payroll and employment to global HR and legal experts, so they can focus on building global teams.
How to set up a payroll in the U.S.
If setting up and managing payroll on their own, companies need to start by establishing a subsidiary in the U.S. To comply with federal tax laws, they’ll have to obtain an Employer Identification Number (EIN) when registering their subsidiary.
Payroll tax is state-based, so the process of setting up payroll will vary based on which state the company is registered in.
Entitlement/termination terms
Most of the U.S. operates under at-will employment, which means companies can terminate an employee at any time for any reason, as long as the reason is legal. A few illegal reasons for termination include race, sex, age, religion, and disability.
In the U.S., there are relatively few entitlements and termination terms that companies should be aware of from a legal standpoint. There’s no legal requirement for companies to grant severance pay to employees upon termination, though some businesses do offer it based on length of employment, position, and salary. For the most part, employers can set their own terms and outline them in the employment contract.
Streamline global payroll management with G-P.
G-P streamlines each step of the payroll management process with our market-leading Global Growth Platform™. Pay teams with confidence anywhere in the world in 150 currencies with our 99% on-time automated payroll system — all with just a few clicks. Our products also integrate with leading HCM solutions, syncing employee payroll data across platforms automatically to create one reliable, convenient source of truth for HR teams.
Contact us to learn more about how we can support you.