There are over 180 federal laws covering compensation, guarantees and benefits including:
- Wages and overtime pay, guaranteeing the federal minimum wage and overtime of one-and-one-half-times the regular rate
- Workers’ compensation programs vary between states
- Companies of over 50 employees must give up to 12 weeks unpaid, job-protected leave to eligible workers covering birth or adoption or serious illness of the employee, spouse or a child
- The federal minimum wage for non-exempt employees is $7.25 per hour. Where federal and state minimums vary, the higher rate applies
- Overtime is paid at one-and-a-half times the usual rate if the employee works more than 40 hours a week averaged over a 168-hour period
- At a federal level, there is no requirement to offer paid sick leave, though many states have their own laws
- The Fair Labor Standards Act (FLSA) does not require payment for vacations, sick leave, federal or other holidays. These benefits are matters of agreement between employer and employee
- There is no statutory paid maternity leave provision in the US. However, the Family and Medical Leave Act (FMLA) ensures that mothers can take up to 12 weeks off for unpaid pregnancy and child rearing, but only 60% of workers are eligible
Social Security in the USA
Social Security is run by the federal government, using taxes paid into a trust fund to provide benefits to people who are eligible and provides support for such as retirement and disability.
The fund builds from taxes withheld during employment. The employer withholds tax from the employee to comply with the Federal Insurance Contributions Act (FICA). This federal payroll (employment) tax is used to fund Social Security and Medicare. Both employer and employees contribute, with the employer contributing 6.2% for Social Security and 1.45% for Medicare.
Statutory Employment Costs in the USA
Hiring an employee in the USA brings considerable statutory employment costs. These feature:
- Employer pays under the Federal Insurance Contributions Act (FICA) – 7.65% up to the annual wage base, expected to rise to $142,800 in 2021, plus 1.45% towards Medicare over the annual wage base (the fixed amount of salary an employee can expect to earn in a year, excluding bonuses and commissions)
- Federal Unemployment Tax (FUTA) of $42 per employee.
- State unemployment tax which varies between states
- Workers’ insurance compensation varies from state to state and professional liability coverage may be required
- Under federal law, employers with more than 50 staff must offer health insurance and unpaid family and medical leave. Some states enforce paid leave laws, with the burden on the employers
What Benefits are guaranteed in the USA?
Employers must provide certain employee benefits as mandated by federal, state or local statutes. These include:
- Social Security, Medicare and complying with the Federal Insurance Contributions Act (FICA), which is a federal payroll (employment) tax used to fund Social Security and Medicare. Both employer and employees contribute, with the employer contributing 6.2% for Social Security and 1.45% for Medicare
- Unemployment insurance to assist workers who lose their jobs
- Workers’ compensation insurance to financially support employers unable to work due to injury or illness
- Health insurance is a guaranteed benefit from companies with more than 50 employees, along with up to 12 weeks unpaid leave during a 12-month period for qualifying medical or family reasons
- The national minimum wage of $7.25 per hour
What Restrictions exist on Benefits in the USA?
- To qualify for 12 weeks unpaid leave, the employee must have worked 1,250 hours over the previous 12 months; must work for a minimum of 12 months at a location with more than 50 employees
- To qualify for overtime payments at the rate of one-and-a-half times normal salary, employees must have averaged more than 40 hours a week over a 168-hour working period
- Apart from plant closures and mass layoffs under the federal Worker Adjustment and Retraining Notification Act (WARN) and state law counterparts, employers in the United States are not required to provide employees with notice of termination
Health Insurance and other Benefits in the USA
Health insurance may include a group health plan, established or maintained by an employer or an employee group organization such as a union. These provide medical care for participants or their families.
An individual employer pays into the Federal Insurance Contributions Act (FICA), a federal payroll tax used to fund Social Security and Medicare for the employee, matching similar percentage contributions from the employee. The Affordable Care Act (ACA) can penalize employers who do not comply.
Apart from the few mandatory benefits applying to US employment laws, employers may offer pension plans, child care, life insurance and flexible working hours.
Bonuses in the USA
Any bonuses paid are at the employer’s discretion as there are no federal or state laws stating employees are entitled to receive them. Employers can use bonuses to boost morale and motivation or reward performance and productivity. Any bonuses paid would be taxed as salary.
Work with Bradford Jacobs in the USA
Companies planning expansion into United States of America, either through establishing a subsidiary or by migrating staff, face a mass of complex laws, regulations and strict compliance issues at both federal and state level. Compensation and benefits, statutory costs, social insurance payments, health insurance and bonuses are issues that cannot be overlooked for the smooth transition of your operation in the USA. Be on top of these issues by working with Bradford Jacobs to utilize our Employer of Record payroll services – with 100% solutions to all these questions