What you'll learn
The United States of America (US or USA) is a country in North America consisting of 50 states, a federal district, 5 major unincorporated territories, 9 minor outlying islands, and 326 Indian reservations with limited sovereignty. The country is bordered by Mexico and Canada, and has the largest GDP in the world.
The United States is a melting pot of cultures and ethnicities, and its population has been profoundly shaped by its centuries of immigration from other countries. Federal employment regulations in the U.S. are numerous, and include anti-discrimination laws, as well as laws governing employee rights, hiring processes, leave, wages, working conditions, and many more.
Employment Terms
Types of Contracts
- Full Time Employee
- Part Time
- Fixed term
- Hourly rates
Job Title Restrictions
There are no restrictions on job titles that we can hire in the United States.
Working Hours
Standard working hours in the US are 40 hours a week, 8 hours per day to qualify as a full-time employee.
Overtime is managed based on the employee’s exempt vs non-exempt classification.
Minimum Wage
The federal minimum wage for non-exempt workers in the US is USD 7.25 per hour - however the minimum wage requirements vary by state.
The minimum wage for employees who receive tips is USD 2.13 per hour. The amount of tips plus the USD 2.13 must reach at least USD 7.25 per hour. If not, your employer must pay to make up the difference.
For minimum wage rates by state - see here (and here for tipped workers).
Wage Deductions
In general, withholding authorizations are required for any deductions - this applies to, for example, negative paid time off (PTO) balance, return of equipment, etc.
If an employee has a negative PTO balance, they must sign a withholding to allow deductions from the final if the employee is terminated or quits.
Note that the salary cannot drop below minimum wage via these deductions, so deductions would be capped if they reached this level.
Probation Period
The US is one of the few countries with at-will employment. At-will means that the employer or the employee can terminate employment at any time, with or without cause.
It’s important to note that if a notice period clause is added to a contract which applies to both parties, this is only enforceable for the employer - the employee still has a statutory right to a no-notice termination.
Taxes & Local Employment Costs
Employee Taxes
There are 4 basic taxes in the US, depending on the state:
- Federal taxes - varies by employee situation
- FICA Social Security: 6.2% of gross salary
- FICA Medicare: 1.45% of gross salary
- State taxes - varies by state and employee situation
- (E.g. Some states do not have state income tax, California & New Jersey, for example, have a disability fund. Some states have local taxes (e.g. city, county))
Certain visas allow Employees to be exempt from FICA taxes.
Employer Taxes & Contributions
Social Security
As with employee taxes, employer taxes vary depending on the state, city, etc.
Remofirst simplifies this with our Local Partner in the US by setting a flat rate of 12% across the board, which is an average covering all the employer obligations across all states.
Pension (401K)
In this case, the employee makes a choice of what percentage of their salary to contribute for 401K - the employer cannot make this choice for the employee. Employer will always have to match employee contribution, but not more than 4% of gross salary:
- 3% ER matches 3%
- 4% ER matches 3.5%
- 5%+ ER matches 4%
Please note that the employer will match only if the employee contributes, so the employee can either accept or waive this benefit. The 401k match cannot be altered at all. The employee will become eligible to contribute 401K on the first day of the month after 90 days of employment.
In California, it is mandatory to offer 401(k) - this still kicks in after 90 days of employment.
Mandatory Medical Insurance
There is a mandatory amount of benefits the employer has to provide as we have more than 50 employees in the US. Please note that this is a minimal amount, and it is highly recommended to provide more so as to offer a competitive package to employees.
If the employee wants a plan outside of the employer’s budget, the employee can pay the difference themselves.
Types of Leave
Annual Leave (Vacation)
There are no statutory requirements for annual leave (vacation days) in the US.
Sick Leave
Certain states require sick time but most do not. Most employers provide a general amount of PTO which covers sick, vacation and personal days.
Maternity Leave
No statutory requirements.
Paternity Leave
No statutory requirements.
Public Holidays
There are 10 federal holidays in the US, however there is no statutory requirement to grant employees paid time off (some states do).
Benefits
Summary
In the US, the most important benefit for employers to provide is medical insurance. Legally, any large employer (more than 50 employees) must provide “affordable, comprehensive” medical insurance under the Affordable Healthcare Act (ACA)’s Employer Mandate.
Other typical optional benefits include Dental, Vision, Life Insurance, Short Term Disability (STD) and Long-term Disability (LTD).
Medical Insurance
There is a mandatory amount of benefits the employer has to provide as we have more than 50 employees in the US. Please note that this is a minimal amount, and it is highly recommended to provide more so as to offer a competitive package to employees.
If the employee wants a plan outside of the employer’s budget, the employee can pay the difference themselves.
Termination Process
Notice Period
Notice periods, if desired, should be negotiated between the employee and employer as well as added to the contract.
It is possible to provide payment in lieu of notice (i.e. employment terminated effective immediately but paid out notice period amount).
Statutory Payments
For certain states, the remaining PTO needs to be paid out, (we are happy to provide more info on this topic when you get in touch). Severance pay is not required in the United States, but some employers provide 1-2 months of pay for every year worked at the company.
Some states require that any amounts owed to the employee must be paid on the date of termination - not on the next available pay cycle.
Additional Information
Employers located outside of the US should be aware of the nuances of healthcare and employment benefits in the United States.
