Payroll in United States

There is no single payroll cycle for every US employee. The dossier lists biweekly as the typical pattern, but the pay dates you set must meet the rules of the state where the employee works. California, for example, generally requires wages at least twice each calendar month on designated dates, with exceptions for certain employees and pay arrangements. Confirm payroll cutoffs, payslip details and final-pay deadlines before the first payment.

Payday and payslips

Put the pay dates in writing in the contract, along with the role, work location, salary, hours and overtime classification. Check state notice and translation rules rather than assuming one English offer letter covers every state.

For covered nonexempt workers, your records need to show hours, rates, gross pay, additions and deductions, pay dates and the periods covered. The FLSA generally requires payroll records for at least three years and supporting wage-calculation records for two years. Other laws can require longer retention. Payslip content is set mainly at state level, so ask what your state requires.

No 13th-month payment

The dossier lists no 13th-month or other mandatory extra salary payment. Bonuses are a matter of contract or plan. Define eligibility, targets, payment dates and treatment on departure in writing. Many promised or formula-based bonuses count toward the regular rate used to calculate overtime for nonexempt employees. Calling a payment discretionary does not make it so.

Withholding and employer taxes

For 2026, employees have 6.2% Social Security tax withheld on covered wages up to $184,500, and 1.45% Medicare tax with no cap. The employer pays a matching 6.2% and 1.45%. Employers must also begin withholding an extra 0.9% Medicare tax on wages above $200,000 in the calendar year, with no employer share.

Federal unemployment tax is generally 6% on the first $7,000 of covered wages per employee, reduced to 0.6% when the full state-tax credit applies. Federal income tax withholding depends on the employee's information and the withholding tables, and state and local income taxes may apply. State unemployment, disability and family-leave charges vary, so ask for the actual state rates and wage bases. The 7.65% payroll tax figure is not an all-inclusive employer cost.

The dossier does not give federal deposit or filing deadlines or form names. Check the current IRS and state deposit schedules for your employer category before your first pay run.

Working time that affects pay

Covered nonexempt employees generally receive at least 1.5 times their regular rate for hours over 40 in a workweek. The federal FLSA has no general daily overtime rule for adults. California adds daily overtime and double time, so check the state rules for each location.

Short breaks of about 20 minutes or less count as paid work. A genuine meal period, normally at least 30 minutes, can be unpaid only when the employee is fully relieved of duties.

Exempt status needs qualifying duties and a salary basis. For the main federal executive, administrative and professional exemptions, the salary level is at least $684 per week. California's 2026 salary floor is $70,304 annually, plus its duties requirements.

Federal law does not generally require pay for public holidays. Holiday pay and any premium come from your policy or contract, so list the paid holidays in the offer.

The United States has no single flat income tax rate for employees. Federal income tax is progressive and withheld from each paycheck, and state and local income taxes may apply on top of it. Employees also pay payroll taxes toward Social Security and Medicare.

Federal income tax rates and deductions

For tax year 2026, federal individual income tax rates range from 10% to 37%. The taxable-income bands depend on the employee's filing status. The dossier for this guide does not list the band thresholds, so take the current figures from IRS publications rather than from a calculator. The standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly.

How withholding works

Payroll withholding depends on the information the employee gives you and the applicable withholding tables. Two employees on the same salary can have different amounts withheld. State and local income taxes may also apply, depending on where the person works, including a home office. Confirm the state and city before the first payment. Do not use one average income tax rate to promise take-home pay.

Employee payroll deductions

Employees generally have 6.2% Social Security tax withheld on covered wages up to the 2026 base of $184,500. They also pay 1.45% Medicare tax on covered wages, with no cap. Together that is 7.65%.

Employers must begin withholding an extra 0.9% Medicare tax on wages paid to an employee above $200,000 in the calendar year, starting in the pay period that crosses the threshold. There is no employer share of this additional tax. The payroll withholding threshold is not the same as every employee's final tax-liability threshold, which depends on filing circumstances.

In California, state disability insurance and personal income tax are withheld from employees. Ask the provider about any other state or local deductions that apply to the employee's location.

Keep the employee deductions separate from the employer's matching share when you check a payroll quote or calculate take-home pay.

Overtime and tax

Qualifying overtime compensation can receive a federal income tax deduction under the 2025 to 2028 rules, subject to eligibility and limits. IRS payroll guidance still treats overtime as subject to Social Security, Medicare and FUTA taxes and generally to income tax withholding. Do not describe overtime wages as tax-free, and do not reduce employer payroll taxes because of the employee deduction.

Employer taxes are separate

The employer pays its own matching Social Security and Medicare taxes, federal unemployment tax, state unemployment tax and workers' compensation. These are employer costs and are not taken out of the employee's salary. The federal corporate income tax rate is 21%, which is also a business tax and not an employee deduction.

For ordinary US employment in 2026, the employer pays federal payroll taxes at 7.65% on covered wages, made up of 6.2% Social Security and 1.45% Medicare. Federal unemployment tax, state unemployment, workers' compensation and benefits come on top of that, so 7.65% is not an all-inclusive US employment burden.

Employer and employee rates

The employer and the employee each pay the same federal rates. The employee share is withheld from gross pay. The employer share is an extra cost on top of gross pay.

Ceilings and thresholds

Social Security applies only to covered wages up to the 2026 base of $184,500 per employee. Medicare has no cap. Employers must also withhold an extra 0.9% Medicare tax on wages paid to an employee above $200,000 in the calendar year, starting in the pay period that crosses that threshold. There is no employer share of this additional tax.

Federal unemployment tax (FUTA) is generally 6% on the first $7,000 of covered wages per employee each year. A full 5.4-percentage-point state-tax credit reduces it to 0.6%, or $42 on that wage base, but only when the credit conditions are met. Credit-reduction states and late or insufficient state payments can increase the amount. Do not apply FUTA to the whole annual salary.

What is and is not included

• Included in the 7.65%: employer Social Security and Medicare on covered wages.
• Separate employer costs: FUTA, state unemployment, workers' compensation, health and retirement benefits, and any employer of record fee.
• Not an employer cost: employee income-tax withholding and the employee share of FICA. These come out of gross pay and are not added a second time.

State payroll charges vary. Ask for the actual state unemployment rate, wage base and any disability, family-leave or local payroll charges for the place where the employee works. In California, for example, unemployment insurance and employment training tax are generally employer contributions, while state disability insurance and personal income tax are withheld from employees. A national percentage cannot replace this state calculation.

Worked cost example

Take an illustrative full year of $80,000 in wages subject to ordinary federal payroll taxes.

That total is a floor, not the full budget. State unemployment, workers' compensation, health and retirement benefits, provider fees, equipment and expenses are not included.

The United States has no federal requirement for paid vacation, paid holidays, paid sick leave, paid maternity leave or paid paternity leave in ordinary private employment. Most paid leave comes from the offer letter, company policy, state or local law, or a collective agreement. The employee's actual work state, and sometimes city, drives the answer, so confirm the location before you set terms.

Annual leave

The federal FLSA does not require paid vacation. State or local rules, covered government contracts and employment terms can add rights. State in writing how many paid days the offer includes, how they accrue, how leave is booked and what happens to unused leave. Do not confuse a voluntary vacation allowance with separate protected or statutory paid leave.

Unused leave matters at exit. In California, for example, discharged employees generally receive earned wages and accrued vacation immediately. Ask the provider to calculate wages, leave, commissions and other sums before confirming a final day.

Public holidays

The FLSA does not generally require private employers to pay for public holidays or to pay a premium because work falls on a holiday. The company's holiday policy, contract, collective agreement and any applicable government-contract rules can create rights. List the paid holidays in the offer and explain how holiday work interacts with overtime.

Sick leave

There is no general federal requirement for paid sick leave in ordinary private employment. State, local and some federal-contract rules can require it. In California, covered employees generally receive at least five days or 40 hours per year, whichever is greater. State eligibility includes working in California for the employer for at least 30 days in a year, with a 90-day employment waiting period before use. Exceptions and more generous local rules need checking.

Employers generally fund this leave directly through payroll. Confirm state and local sick leave charges, if any, with your provider.

Maternity, paternity and parental leave

There is no federal paid maternity or paternity leave. The main federal right is unpaid, job-protected leave under the FMLA.

• Eligible employees can take up to 12 workweeks for qualifying reasons, including their own serious health condition, specified family care, or bonding after birth, adoption or foster placement.
• Military caregiver leave can reach 26 workweeks in a single 12-month period.
• Coverage requires at least 50 employees for 20 workweeks in the current or previous calendar year, and 50 employees within 75 miles.
• The employee needs 12 months of service and 1,250 hours in the preceding year.

Because FMLA leave is unpaid, any pay during it comes from the employer's own policy, accrued leave or a state programme. Jointly employed workers count for both employers under FMLA rules, so ask your provider to work out eligibility and who handles notices, benefits continuation and reinstatement. A client cannot interfere with protected leave because the worker is on the provider's payroll.

Some states add their own rules. Washington Paid Leave job-restoration rules, for example, generally cover employees of employers with at least 25 employees when employment began at least 180 calendar days before leave. Check the state of work for paid family leave contributions and benefits.

Pregnancy and lactation

The Pregnant Workers Fairness Act requires covered employers, generally those with at least 15 employees, to provide reasonable accommodations for known pregnancy, childbirth or related limitations unless there is undue hardship. Assess a request even when the worker does not qualify for FMLA. The federal PUMP Act gives most covered employees reasonable breaks to express breast milk for one year after birth, and a private space that is not a bathroom.

US employment compliance is layered. Federal law sets a floor, but state and local rules often add to it, so confirm the actual state and city where the employee works, including a home office, before you issue an offer. A registered office in another state does not settle the question.

Written terms

There is no single federal employment contract form. Put the employing entity, role, work location, salary, pay dates, hours, overtime classification, benefits, leave and exit terms in writing. Distinguish an at-will arrangement from any promised fixed term or other contractual protection. Check required state notices and translations rather than assume one English offer letter satisfies every state. In California, for example, the Workplace Know Your Rights Act requires an annual employee notice, first due by 1 February 2026.

List paid holidays and leave in the offer. The FLSA does not generally require paid vacation, paid public holidays or paid sick leave for ordinary private employment, but state, local and contract rules can. In California, covered employees generally receive at least five days or 40 hours of paid sick leave a year, whichever is greater.

Registration and work authorisation

Ask which legal entity employs the person and how it operates in the employee's state. The employee must complete and sign Form I-9 Section 1 no later than the first day of work for pay. The employer generally completes Section 2 within three business days of that start. A job lasting less than three days requires completion on the first day. Let the employee choose acceptable documents. An EOR contract does not provide immigration permission by itself.

State payroll registrations, unemployment rates, wage bases and any disability or family-leave charges vary by state. Ask for the actual figures rather than relying on a national percentage. California's CalSavers programme covers eligible employers that do not offer a qualified retirement plan.

Payroll and payment

There is no single US payroll cycle. Biweekly is common, but set pay dates that meet the employee's state rules. California generally requires wages at least twice each calendar month. Confirm payroll cutoffs, payslip details and final-pay deadlines before the first payment.

For 2026, employer Social Security tax is 6.2% on covered wages up to $184,500, plus Medicare at 1.45% with no cap. Federal unemployment tax is generally 6% on the first $7,000 of wages per employee, reduced to 0.6% when the full state credit applies. Employers must withhold an extra 0.9% Medicare tax on wages above $200,000 in the calendar year.

Records

For covered nonexempt workers, keep accurate records of hours, rates, gross pay, additions and deductions, pay dates and the periods covered. The FLSA generally requires payroll records for at least three years and wage-calculation records for two years. Other laws can require longer retention. Agree how your team supplies complete hours and corrections, including remote work.

Notice and termination

There is no statutory notice period or severance for every US dismissal. At-will employment lets either side end the relationship without a fixed term, but not for discriminatory, retaliatory or otherwise unlawful reasons. Montana has a different framework, and contracts and collective agreements can change the position. Send the proposed exit to the EOR before announcing a last day.

Federal WARN can require 60 days' written notice for qualifying plant closings and mass layoffs by covered employers, and state laws can go further. Final-pay deadlines depend on the state. In California, discharged employees generally receive earned wages and accrued vacation immediately. Check whether COBRA or state continuation rules apply to the health plan, and have the provider deliver the notices.