Payroll in the US: The devil is in the detail
Article 4 minute read

Payroll in the US: The devil is in the detail

12 October 2021

As outlined in our Global Business Complexity Index 2021, the US ranks low in terms of global complexity, but the truth lies in the detail. While on an overall global complexity model the US represents a less complex market, this does not mean that payroll is simple. 

You have decided to expand your business into the US: the incorporation process is straightforward and sequential, and the overall legislative environment is widely considered to be simple. So surely the same can be said for the payroll process? Wrong.

There is much to take into account, and like many other countries there’s lots to consider that makes the US a little unique. Having an expert local partner on hand can help you to navigate the process, avoiding any potential pitfalls.

If you’re looking to cut through the complexity, here are three matters to consider:

1. Legislative simplicity?

Having arguably fewer government legislative mandates compared to other countries doesn’t necessarily make the work easier. In the US, the burden of determining what solutions, services and benefits you will provide to your employees becomes yours. The government does mandate certain things, however, much is left to the employer, who must determine how to deliver a competitive ‘employer of choice’ strategy.

This strategy includes similar items you would expect in every country (competitive base and variable pay, time off policies, etc.) but will also include decisions regarding benefit offerings (health, dental, life, disability) and retirement options, for example. These are all items you will need to design yourself. Working with a partner who has local expertise will help you to understand best practices for the US market, identify where there are legislative elements that must be taken into account, and guide you through the proper process to put these in place.

2. Taxation and labour unions

US taxation is relatively simple at first view, but as you peel back the onion you realise that not only are there layers of taxes, but also variations from one state to another, and even between cities. Depending on the city in which choose to do business, you may not only be subject to federal and state taxation but also local taxes for the city and county in which you operate.

On top of tax complications, some industries and states can have a smaller or larger union presence that will have to be factored in to how your run business. Having a good understanding of the landscape that awaits you can be critical to deciding where you locate your business.

3. Processing

Considering the items explored above, the US is perhaps more complex than most think. Once all decisions are made as to a company’s unique policies, practices, third party vendors, unions, and the locations you will operate in, your systems need to be configured to support flawless payroll processing.

In the US, having only one payroll cycle is not common; typically, organisations will have employee populations separated and processed every two weeks or monthly. In some cases, employees are even processed weekly. In our experience, the average company will have 3.5 payroll runs to process per month, in comparison to many other countries where processing is only done once per month.

Enlist help to cut payroll complexity

The US market is critical to many global businesses’ growth strategies. Expanding into this market is made much simpler by working with experts who can take the complexity out of compliance and the payroll process, so you can focus on driving your core business.

TMF Group is a trusted and reliable partner. Whether operating across one border or many, with a handful of staff or several thousand, we provide the business-critical support you need to expand, operate and grow while remaining compliant, anywhere in the world.

We provide a wide range of HR and payroll services, including payroll processing, management reporting and cost analysis, and outsourced HR services. Working with us, you can be sure that the full scope of payroll processing is securely managed from start to finish, mitigating compliance risk.

If you are already operating in the US, we can also help by simplifying, streamlining, and/or consolidating your operations, to aid you in your growth plans within the US. Are you planning to expand into the US? Talk to us today.

Written by

John Barker

Global Service Delivery Lead, HR & Payroll

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