With a mixture of emerging and booming economies, political uncertainty and extreme contrasts in business customs, the Americas can never be categorized as one homogeneous whole.
The United States is an attractive market for companies looking to invest overseas. Even when the federal system means that legal requirements vary state to state, there are common challenges and opportunities for HR and payroll managers. Here we take a quick look at how HR & Payroll works in the United States.
Social security System
- The social security system comprises Old Age, Survivors and Disability Insurance (OASDI), as well as Hospital Insurance (Medicare).
- Employers are required to withhold employees’ contributions to social security and remit it to the federal government.
- Employers and employees both contribute 6.2% of an employee’s salary each towards OASDI. Both also contribute 1.45% of salary each towards Medicare.
- Employees/employers annual contribution shall not exceed $118,500 for 2016 fiscal year.
- Self-employed individuals are also required to contribute to social security.
- The US federal and state laws prohibit employers from discrimination in hiring employees on the basis of race, color, religion, sex, age, ethnic/national origin, disability or veteran status
- The United States Fair Labor Standards Act:
- establishes the minimum age for employment to 14 years for non-agricultural occupations
- restricts working hours of youth under 16 years of age
- prohibits employment of youth under 18 years of age in hazardous occupations
- Employers must classify individuals as employees or independent contractors for tax purposes
- Most employment contracts in the US operate under the ‘at will’ employment rule, which entitles both the employer and the employee to terminate the employment relationship at any time without notice.
- Employers are required to request approval from the US Department of Labor to hire a foreign worker. The approval will be granted only after determining that there are insufficient US workers available to perform the work at the prevailing wages for the specific occupation, in the area of employment.
- After obtaining approval from the Department of Labor, the employer is required to request a visa for the foreign worker with the US Citizenship and Immigration Services. The employer can request a temporary worker visa or a permanent (immigration) visa
- Temporary worker visas are categorized as H, L, O, P and Q, depending on the nature of visit
- Permanent (immigration) visas are categorized as E1, E2, E3, E4 and E5, based on type of employee
- Employers must also file an Immigrant Petition for Alien Worker application for the desired employment-based preference category.
- Foreign workers are also required to establish that they are eligible for admission into the US under the Immigration and Nationality Act
- Each state may establish its own regulations on payroll cycles and minimum wage rates. Wages may be paid weekly, bi-weekly, monthly, or semi-monthly
- According to the Fair Labor Standards Act (FLSA), the federal minimum wage is fixed at $7.25 per hour, effective since July 2009.
- There is no legal obligation in the US to offer paid vacation, but a company may choose to do so via agreement with the employees.
- The US Department of Labor (DOL) is the primary government organization responsible for enforcing labor regulations in the US. The DOL administers and enforces nearly 180 federal labor laws, including:
- Fair Labor Standards Act (FLSA): Governs standards for wages and overtime pay for public as well as private sector employees
- Occupational Safety and Health (OSH) Act: Covers workplace health and safety standards
- Labor-Management Reporting and Disclosure Act (LMRDA): Governs relationships between unions and their members
- The Family and Medical Leave Act (FMLA): Requires employers of 50 or more employees to provide up to 12 weeks of unpaid, job-protected leave to eligible employees for birth or adoption of a child; or for serious illness of the employee or a spouse, child or parent
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Note: This is only a short summary. We highly recommend to check any information in detail based upon the individual case.