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Setting up and managing payroll in the US
With the world’s largest economy, a business-friendly culture and legal system, and an educated population of more than 300 million, the US is without a doubt one of the best places in the world to build and expand a business.
If you are interested in expanding into the US, an important step is hiring staff locally and setting up a payroll. This usually involves establishing an in-country entity, as well as adhering to the complex business and employment regulations that apply on both a federal and state level. This process can be long and difficult, potentially causing delays to your expansion and incurring unexpected expenses.
A popular way to bypass the complexity of US employment is to outsource your payroll setup and management to a global PEO. At Horizons, we can work with you to establish and run a fully compliant United States payroll outsourcing to facilitate your expansion, whether or not you already have an entity in the US.
Why choose the Horizons payroll solution?
If you have an entity
If you have already set up a legal entity within the US, we can take all the complex payroll administration off your hands, helping you employ locally in accordance with local employment laws, managing HR, contracts, and handle any associated administration.
This option is perfect for larger businesses that could benefit from outsourced USA payroll and consultancy services.
If you don’t have an entity
If you don’t have an established entity in the US, you can access our US subsidiary to act as your employer of record in the country. Through our entity, we can hire your employees and manage all of your in-country payroll, contracts, HR, and administration.
This flexible payroll service is perfectly suited to any organization looking to expand into the US with low risk and flexibility.
Hire borderless talent with Horizons
USA payroll guide
What are the tax and withholding rules in the US?
In the US, both employees and their employees must pay towards social funds. Both needing to pay 6.2% of salary to social security tax and 1.45% to Medicare. Employers also need to pay unemployment tax for each of their employees.
The US follows a progressive income tax system, with higher earners paying a higher percentage of salary in tax, ranging from 10% to 37%. Rates also vary depending on whether the payer is single, married, or head of a household. Employers do not need to withhold taxes, but some choose to.
Businesses are taxed on a federal level, but there are also varying rates imposed by different states, so you need to understand the specific laws in your location.
FICA Social Security | 6.20% |
FICA Medicare | 1.45% |
Additional Medicare Tax (for income above $200,000) | 0.90% |
FUTA (Federal Unemployment Tax Act) | 6.0% |
| Total Employment Cost | 14.55% |
|
FICA Social Security
|
6.2% |
|
FICA Medicare
|
1.45% |
|
FUTA (Federal Unemployment Tax Act)
|
6.0% |
|
Total Employee Cost
|
13.65% |
|
$0 – $9,875
|
10%
|
|
$9,876 – $40,125
|
12%
|
|
$40,126 – $85,525
|
22%
|
|
$40,126 – $85,525
|
24%
|
|
$163,301 – $207,350
|
32%
|
|
$207,351 – $518,400
|
35%
|
|
$518,401+
|
37%
|
|
$0 – $19,750
|
10%
|
|
$19,751 – $80,250
|
12%
|
|
$80,251 – $171,050
|
22%
|
|
$171,051 – $326,600
|
24% |
|
$414,701 – $622,050
|
35%
|
|
$622,051+
|
37%
|
|
$0 – $9,875
|
10%
|
|
$9,876 – $40,125
|
12%
|
|
$40,126 – $85,525
|
22%
|
|
$85,526 – $163,300
|
24%
|
|
$163,301 – $207,350
|
32%
|
|
$207,351 – $518,400
|
35%
|
|
$518,401+
|
37%
|
|
$0 – $14,100
|
10%
|
|
$14,101 – $53,700
|
12%
|
|
$53,701 – $85,500
|
22%
|
|
$85,501 – $163,300
|
24%
|
|
$163,301 – $207,350
|
32%
|
|
$207,351 – $518,400
|
35%
|
|
$518,401+
|
37%
|
Contractual rights and termination regulations
Most US states follow ‘at-will employment’, which means that employer can terminate employees for almost any reason and at any time (besides things like race, gender, or religion). Employees are also allowed to leave their roles for any reason and are not required to give notice.
In the US, there is no legal requirement for severance payments upon termination, but some employers do offer them as part of their benefits packages. Some employees may be entitled to payment when they lose their jobs through no fault of their own. They are also legally entitled to retain employer-linked health insurance for a time after losing their jobs.
How to establish United States payroll outsourcing
To start your own payroll in the US, you will need a US subsidiary, then you’ll need to register with various authorities and apply for an Employer Identification Number. Depending on your state of operation, there will be a complex mixture of federal and state-level laws to comply with, so it is crucial that you understand them all before starting,
A simpler option is to outsource all of your US payroll setup and management to Horizons. Our experts will handle everything for you, from setup to HR and compliance work. We also offer our US subsidiary to act as employer of record for your in-country employees, so you can benefit from our outsourcing solutions even if you don’t have an entity in the US.
Manage payroll in USA
Whether it’s EOR service or just payroll management, Horizons’ employment experts can help you get started in 24h.
