United States

Overview

US payroll is administered in US dollars on a calendar tax year and is genuinely two-tiered: every employer follows federal rules (IRS, SSA, DOL) and the rules of each state (and sometimes city/county) where employees work. There is no single national payroll code — income tax, unemployment insurance, pay-frequency, and paid leave vary across 50 states plus D.C. and territories. Critically, there is no federal statutory paid vacation or paid sick leave; such entitlements exist only where a state or locality created them. This federal-plus-local layering is the central source of US complexity.

Payroll cycle & pay dates

Common frequencies are bi-weekly (26/year) and semi-monthly (24/year); weekly and monthly also occur. Minimum pay frequency is set by state law, not federally — many states mandate at least semi-monthly pay. Pay stubs showing gross pay, taxes and deductions are required by most states (specifics differ). Direct deposit is standard but cannot always be the sole forced method without consent under some state laws.

Federal income tax withholding

Employers withhold federal income tax based on each employee's Form W-4, computed using IRS methods (percentage or wage-bracket) in Publication 15-T, against a calendar tax year. Employers report withheld income tax plus Social Security/Medicare quarterly on Form 941, and issue Form W-2 to each employee and the SSA by January 31. (As of 2026.) Pub 15 · Form W-4 · Form 941.

FICA, FUTA & state contributions

• Social Security (FICA): 6.2% employer + 6.2% employee on wages up to the annual wage base $184,500 (2026). SSA wage base · IRS Topic 751.
• Medicare: 1.45% each (no cap); Additional Medicare Tax 0.9% withheld on employee wages over $200,000/yr (no employer match).
• FUTA: employer-only 6.0% on the first $7,000 of each employee's wages; timely state unemployment tax generally earns a 5.4% credit → effective 0.6%. IRS Topic 759.
• State income tax: varies widely; nine states levy no broad wage income tax (AK, FL, NV, NH, SD, TN, TX, WA, WY). SUTA (state unemployment) is employer-paid, experience-rated, with state-specific wage bases.

Mandatory benefits & leave

There is no federal paid vacation or paid sick-leave mandate. FLSA sets the federal minimum wage ($7.25/hr since 2009; many states higher) and overtime at 1.5× over 40 hrs/week for non-exempt employees. DOL — Minimum wage. FMLA gives up to 12 weeks of unpaid, job-protected leave at covered employers. Paid sick/family leave is a state/local patchwork — e.g. California Paid Family Leave (up to 8 weeks wage replacement, funded via employee SDI). CA EDD — PFL. Employment is generally at-will (except Montana).

Employer registration & compliance

Register federally for an EIN with the IRS, and with each state for withholding and unemployment (SUTA) accounts. Federal deposits via EFTPS on a monthly or semiweekly schedule set annually from lookback liability (IRS deposit rules); FUTA deposited quarterly once liability exceeds $500. File Form 941 quarterly, Form 940 (FUTA) annually, W-2/W-3 to SSA by January 31. Report each new/rehired employee to the State Directory of New Hires within 20 days. Complete Form I-9 for every hire. Late deposits/filings and misclassification carry IRS and DOL penalties.

Common pitfalls

• Multi-state withholding & nexus — remote/traveling employees can trigger withholding (and unemployment) in states with no employer office.
• Reciprocity agreements — some neighboring states tax only the resident state; the wrong rule over/under-withholds.
• Exempt vs. non-exempt misclassification — wrongly treating an employee as overtime-exempt (or as a 1099 contractor) is a costly FLSA error.
• Deposit-schedule rules — misapplying monthly vs. semiweekly, or the $100,000 next-day deposit rule, causes penalties.
• Local/city taxes — NYC, Philadelphia, many Ohio cities impose separate local income taxes, easy to miss.
• Imputed income / taxable fringe benefits — group-term life over $50,000, personal use of a company car, etc., must be added to taxable wages.

Official resources

• IRS — Publication 15 (Circular E) — master federal employment-tax guide.
• IRS — Form W-4 — employee federal withholding certificate.
• SSA — Contribution & Benefit Base — annual Social Security wage base.
• IRS — Topic 751 (Social Security & Medicare rates) — FICA rates and Additional Medicare Tax.
• DOL — Wage and Hour Division (Minimum Wage) — FLSA minimum wage & overtime.
• California EDD — Paid Family Leave — state paid-leave example.