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Hiring in Spain? Read on to find out the employment norms (like taxes, payroll and benefits) and EOR (Employer on Record) norms in United States of America
Employment Norms in the United States of America
The United States of America is one of the most sought-after destinations for top talent across the world. The country attracts a high level of immigration applications every year. Its flexible business norms and free market make it a lucrative destination for business expansion. However, navigating the strict norms may be challenging for a new employer. EOR (Employer on Record) services help in this matter ensuring legal compliance.
General Information:
- The currency of the USA is United States Dollar (USD).
- Washington D.C. is the capital of the USA.
- There is no official federal language. However, English is the most commonly spoken. Spanish is the second most common language.
- As of 2021, the GDP of the USA was reported to be USD 23.32 trillion.
All federal labor laws are administered by the U.S. Department of Labor. In addition to the federal laws, different states set their separate laws.
Table of Contents
- Agreements
- Onboarding Process
- Visa
- Minimum Wage
- Payroll Cycle
- Annual Bonus
- Health Benefits
- Working Hours and Overtime
- Leaves
- Social Security
- Taxes for Employers
- Taxes for Employees
- Probation
- Termination
- Severance Pay
- Employees or Contractors
- Final Words
AgreementsOnboarding ProcessVisaMinimum WagePayroll CycleAnnual BonusHealth BenefitsWorking Hours and OvertimeLeavesSocial SecurityTaxes for EmployersTaxes for EmployeesProbationTerminationSeverance PayEmployees or ContractorsFinal Words
Agreements
- Employment agreements in the USA can be fixed-term, indefinite term or contractual. The agreement can be for part-time or full-time jobs.
- Individual agreements in the USA are considered to be “at-will” and generally require no notice period for termination by either party.
- The agreement should include points such as working hours, notice period, severance pay, leave policy, etc.
- While the USA has no official federal language, English is the most commonly spoken. All agreements are generally in English. Spanish is the second most common language in the USA.
Onboarding Process
- The employer must provide the employee with a copy of the written agreement and the offer letter.
- The employer must ensure the employee has completed the W-4 (taxes) and I-9 (employee eligibility) forms.
- New employees should be made aware of the payroll and benefits they are eligible for.
Visa
The US has many different types of work and business visas which should be filed with the US Citizenship and Immigration Services (USCIS).
- H-1B - 3-year visa for applicants with college degrees for specialized work
- H-1B-1 - for those while college degrees from Chile and Singapore
- H-2A - 1-year (extended up to 3 years) visa for seasonal agricultural work; valid only for certain countries
- H-2B - 1-year (extended up to 3 years) visa for non-agricultural temporary work; valid only for certain countries
- L - for inter-company transfers of employees in high managerial positions or with specialized knowledge
- O - for applicants exceptional in science, arts, education, business, or athletics
- B1/ B2 - for business, tourism or visiting purposes (valid for 6 months and can be extended up to 12 months)
The following is a list of employment-based immigrant visas.
- E-1- high-priority jobs for applicants exceptional in science, arts, education, business, or athletics
- E-2 - applicants with advanced degrees or extraordinary ability
- E-3 - skilled and unskilled workers and professionals
- E-4 - applicants belonging to certain immigrant communities
- E-5 - immigrant applicants with substantial investments in US companies
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Minimum Wage
The federal minimum wage is USD 7.25 per hour. Different states may have differentminimum wages. An employee has the right to choose the higher of the two.
Payroll Cycle
The payroll cycle differs in the United States. It can be weekly, bi-weekly, semi-monthly or monthly. However, monthly payments are the most common.
Annual Bonus
There is no mandatory provision to provide an annual bonus or a 13th-month salary. Employers, if willing, can give the New year's bonus or Christmas Bonus to their employees.
Health Benefits
- Health benefits are provided to those enrolled in the mandatory social security scheme.
- Both employees and employers are required to contribute 1.45% (each) of the employee's salary.
- An additional contribution of 0.9% (by the employees) is required for high-income employees.
- Part-time employees are not entitled to medical benefits.
Working Hours and Overtime
- Work hours: A typical work week consists of 40 hours. Part-time employees work for 30 hours or less.
- Break: A mandatory 15-minute break for 4-6 hours of consecutive work or a 30-minute break for over 6 hours of consecutive work. For more than 8 hours, both 30-minute and 15-minute breaks must be given.
- Overtime: Employers must pay 1.5 times the daily wage for overtime for hourly employees. This can be negotiated in employee agreements.
Leaves
The Family and Medical Leave Act (FMLA) grants eligible employees a total of 12 workweeks of unpaid, job-protected leave per 12-month period. There is no separate leave duration for different leave types. In addition to this, there are different leaves according to different states.
Sick Leave
Sick leaves include leaves taken due to -
- Serious illness rendering the employee incapable of working
- To care for a spouse, child or parent suffering from serious illness
Parental leaves
These can be taken within one year of the birth of the child.
- Maternal leave: Employees can avail of 12 weeks of unpaid leave during the birth or adoption of the child. This leave is granted by the 1993 Family and Medical Leave Act (FMLA).
- Paternity leave: Fathers cannot avail of paid leaves as defined by the Family and Medical Leave Act. New Jersey, California, New York, Rhode Island, Connecticut, Massachusetts, Washington, the District of Columbia and Oregon have a policy of paid paternity leaves.
Annual leaves
- There is no mandatory annual leave. This can be negotiated in employee agreements.
Military caregiver leave:
- Up to 26 weeks of leave (per 12-month period) is granted to the next-of-kin to care for a covered servicemember with a serious injury.
Public Holidays (for the Calendar year 2023)
- New Year's Day (January 1)
- Birthday of Martin Luther King, Jr. (Third Monday in January)
- Washington's Birthday (Third Monday in February)
- Memorial Day (Last Monday in May)
- Juneteenth (June 19)
- Independence Day (July 4)
- Labor Day (First Monday in September)
- Columbus Day (Second Monday in October)
- Veterans Day (November 11)
- Thanksgiving Day (Fourth Thursday in November)
- Christmas Day (December 25)
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Taxes for Employers
The following employer contributions are according to federal laws
- Social security tax (FICA) - 6.20% of the employee's salary
- Medicare (FICA) - 1.45%
- Federal Unemployment Tax Act (FUTA) - 0.6% to 6%; differs according to different states.
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Taxes for Employees
Social security taxes for employees according to federal laws:
- Social security tax (FICA) - 6.20% of the employee's salary
- Medicare (FICA) - 1.45%
- Additional medicare tax - 0.9% (applicable to high-income earners - salaries above USD 200,000)
Income tax:
- Federal income tax for single filers - 10% to 37% for income brackets from USD 10,275 to USD 539,901 or more.
- Federal income tax for those filing jointly (married) - 10% to 37% for income brackets from USD 20,550 to USD 647,851 or more.
- Federal income tax for the head of household - 10% to 37% for income brackets from USD 14,650 to USD 539,901 or more.
- Standard deduction and personal exemption rates -
- Single filer - USD 12,950
- Filing jointly (married) - USD 25,900
- Head of household - USD 19,400
Taxes may differ according to different states.
Probation
There is no mandatory probation period. A probation period of 3 to 6 months is common. For federal employees, at least a 1-year probation period is considered.
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Termination
Upon a voluntary or involuntary termination, the employer must complete the termination process as mandated by the federal and state governments. Usually, this includes -
- Processing of final pay.
- Issuing a termination notice within the notice period.
- Processing the COBRA (healthcare) benefit information.
Upon failing to process the above information, the employer is liable to penalties.
Notice period:
- There is no mandatory notice period. Either party can terminate the agreement without any notice period.
- In cases of mass dismissal of employees, the employer must give the employees a notice period of 60 days.
Severance Pay
There is no mandatory severance pay. However, it may be stipulated in the individual agreements.
Employees or Contractors
- Employees and contractors are treated as different entities in the USA.
- Contractors are paid for a specific task or a specific period as per the contractual agreement.
- Employees are those who are on the company payroll and have social security benefits. The employer is required to withhold and pay taxes on behalf of the employee.
- Misclassification of the two would lead to serious penalties.
Final Words
As one of the most sought-after job destinations, the USA offers a lucrative market for business expansion. Employers new to the market can avail EOR services which handle employee payrolls, taxes, benefits, etc. leaving businesses time to focus on their goals.
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