Employers in the United States are required to contribute to Social Security (6.2% of wages up to the annual wage base), Medicare (1.45% of all wages), Federal Unemployment Tax Act (FUTA), and state unemployment insurance (SUI) as applicable. Statutory benefits include workers’ compensation insurance (state-specific), and in some states, mandatory disability insurance or paid family leave. There is no federal requirement for paid vacation, sick leave, or a 13th month salary, but some states and municipalities may impose additional mandates.

Payroll taxes in the U.S. include employer contributions to Social Security (6.2%) and Medicare (1.45%), which are matched by the employee and withheld from their paycheck. Employers also pay Federal Unemployment Tax (FUTA) at 6.0% on the first $7,000 of wages per employee, though this is often reduced by credits, and state unemployment tax rates and wage bases vary by state. Employers are responsible for timely federal and state tax filings and remittances in accordance with IRS and state Department of Revenue requirements.

Beyond direct wages and statutory payroll taxes, employers often face hidden costs such as mandatory workers’ compensation insurance premiums, state-mandated disability and paid family leave in certain jurisdictions, and administrative expenses for payroll processing and compliance. Additional costs may include health insurance contributions under the Affordable Care Act (for employers with 50+ full-time employees), onboarding and training expenses, and potential legal costs related to employment law compliance. Severance pay is not required by U.S. law but may be incurred if specified by employment contracts or company policy.

Key legal requirements affecting cost include compliance with the Fair Labor Standards Act (FLSA), which sets federal minimum wage ($7.25/hour, with higher rates in many states), overtime pay for non-exempt employees, and recordkeeping obligations. Employers must also adhere to state and local labor laws that may impose higher minimum wages, mandatory paid sick leave, and other employment protections. Termination procedures are generally governed by 'at-will' employment, but employers should be aware of the Worker Adjustment and Retraining Notification (WARN) Act requirements for larger layoffs.

Most U.S. employees are hired on an 'at-will' basis, allowing either the employer or employee to terminate the relationship at any time, with or without cause, unless otherwise specified by contract. Standard practices often include a probationary period (commonly 60-90 days), annual performance reviews, and offering health insurance, retirement plans (such as 401(k)), and paid time off as part of competitive benefits packages. Contract types are typically W-2 for employees and 1099 for independent contractors, each carrying distinct legal and tax obligations for the employer.