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UTC -4 to UTC -10
at least 13.65%
United States Dollar (USD)
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This country guide is for general informational purposes only and should not be construed as legal advice, nor as binding based on your relationship with Lano. When using Lano's solutions, the specifics may depend on your EOR and Payroll setup with our partners. Although we update this guide regularly, it may not reflect current legal developments. Lano Software GmbH disclaims any liability for any actions you take or refrain from taking based on the content contained in this country guide.
U.S. employment regulations are very flexible and offer employers a lot of freedom when it comes to negotiating the terms of employment. Employee protection is minimal as employment in the U.S. is “at will”, meaning employers enjoy great flexibility in their hiring and termination processes. Also, there are very few legally enforced benefits which must be granted to employees.
What’s more, U.S. universities enjoy international prestige, with several of the world’s top ten universities being based in the United States, including Harvard and Stanford. Therefore, it’s hardly surprising that many companies decide to go searching for fresh talent in the U.S. employment market.
As there are no special regulations, an employment contract in the U.S. can have many different forms. There is no legal requirement for a written contract and many employees are hired without a proper employment contract. Instead, their employment is purely based on a written offer of employment outlining the general terms and conditions that regulate their employment relationship.
However, it is common for employers to put a written employment contract in place when hiring employees in high positions. In these cases, the employment contract might include the following information:
Identification of both parties
Job description, duties and responsibilities
Basic salary as well as other compensation or benefits
Total number of holidays
Causes for employment termination
Employers and employees are basically free to negotiate the terms of employment as they wish as long as they observe existing employment law regulations. Employment agreements can be concluded for either an indefinite period or a fixed term although U.S. law does not set any limits for the duration of fixed-term contracts.
Probationary periods are legally permitted. As there are no official regulations on trial periods, they can range from one up to twelve months. If an employee is subject to probation, this should be clearly stated in his or her offer letter or in the employment contract.
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General working conditions such as working hours and overtime pay are regulated by the Fair Labor Standards Act (FLSA). However, not all employees working in the private sector are covered by its regulations.
A standard working week normally comprises 40 hours but regulations on breaks and rest periods differ from state to state. In may states, there are legal provisions for an unpaid 30-minute lunch break after a certain number of hours. Some but not all states also rule that employees must have at least one proper rest day per week.
For employees under the FLSA, any work beyond a 40-hour week is considered overtime. According to the FLSA, employers should remunerate any additional hour at a rate of 150% of the employee’s usual wages. There are no limits on how many hours an employee can work on top of normal hours.
Payroll frequency is regulated by each state individually. In most states, it is mandatory to pay employees once or twice a month. In some cases, weekly payment may be necessary.
The federal minimum wage is currently (February 2023) set at USD 7.25 per hour. However, many states have their own minimum wage regulations and employees may be entitled to higher wages under state law. The complete list of the different minimum wages in each state can be found here.
Employees who are covered by the Family and Medical Leave Act (FMLA) can take up to twelve weeks of unpaid sick leave per year. During this time, the employee is protected from dismissal. Reasons for which employees can claim leave include:
birth and childcare for a newborn baby
need to care for a seriously ill direct family member
personal illness or injury
In order to claim medical leave, employees must have worked for the employer for at least twelve months, during which they must have completed at least 1,250 hours of work. In addition, work must have been carried out at a company office counting more than 50 employees – applicable on a 75-mile radar.
Employers may be obligated to provide sick pay under state, county or municipal laws that apply in the area where they operate their business.
There is no legislation on bonus payments.
Learn about tax reporting, compensation laws, registration requirements and more in our free Payroll Guide for United States.
Employees and employers in the United States are subject to the following tax and social security contribution rates (last review February 2023):
21% corporate tax
different VAT rates are levied by each state
up to 37% *
Individual income is taxed at federal and state level.
Federal income tax rates range from 10% to 37%
at least 13.65%
6.2% OASDI (Old-Age, Survivors, and Disability Insurance) on income up to USD 160,200
6% FUTA (federal unemployment tax) on first USD 7,000 earned per year
additional state unemployment insurance (SUI), rates vary between states
Further contributions may be levied on state level
up to 8.55%
6.2% OASDI on income up to USD 147,000
additional 0.9% Medicare on income exceeding certain thresholds
* Read more
Income in the US is taxed at both the federal and state levels. State tax rates vary. At the federal level, there are seven different payroll tax rates, with the tax brackets varying depending on the tax status of the employee (married joint assessment, married separate assessment, single assessment or head of household - a single person with a dependent child in the household).
For 2023, the income brackets for federal income tax are set as follows (applicable for single assessment):
Up to USD 11,000: 10%
USD11,000 – USD 44,725: 12%
USD 44,725 – USD 95,375: 22%
USD 95,375 – USD 182,100: 24%
USD 182,100 – USD 231,250: 32%
USD 231,250 – USD 578,125: 35%
Over USD 578,125: 37%
Please note that the social security contributions indicated above do not necessarily reflect the actual employment costs. These may differ depending on the employment contract and due to other factors (e.g. 13th and 14th salary, health insurance allowances, accrual for severance pay, etc.).
There is no federal law which mandates employers to provide their employees with paid annual leave nor paid time off on the occasion of the ten federal public holidays. In fact, under federal law, employees are not even entitled to time off on these days.
However, it is common practice among employers to give their employees a paid day off on these occasions as well as to offer between one and three weeks of paid annual leave. In some states, it is mandatory to pay higher rates for work performed on public holidays.
There are no legal provisions for maternity or paternity leave on federal level other than the regulations applying under the Family and Medical Leave Act (FMLA). See section on sick leave.
Towards the end of 2022, the new Providing Urgent Maternal Protections for Nursing Mothers Act (PUMP for Nursing Mothers Act) was passed. Under the new law, employers are obligated to provide an employee with reasonable break time to express breast milk during the first year after the child’s birth.
Some states have introduced special maternity leave for employees who are not covered by the FMLA.
There are no legal provisions for parental leave other than the regulations applying under the Family and Medical Leave Act (FMLA). See section on sick leave.
Employers and employees may negotiate further benefits such as paid sick leave, paid vacation days and paid parental leave. Also, it is common to provide employees with additional benefits such as disability, health, life or dental insurance.
U.S. labour law supports so-called “at will” termination which means that employers can dismiss employees at any time with or without reason – as long as the reason for dismissal is not illegal, e.g. linked to discrimination or whistleblowing. Neither employers nor employees have to respect a notice period when terminating the employment relationship.
The only notice period employers have to observe is 60 days in certain cases of collective dismissal as outlined under the Worker Adjustment and Retraining Notification Act (WARN).
Unless specified in the employee’s employment contract or in any applying collective agreement, severance pay is not necessary. However, most employers decide to offer severance pay based on the employee’s length of service.
This country guide is for informational purposes only and should not be construed as legal advice. The content of this guide contains general information, and although we update this guide regularly, it may not reflect current legal developments. Lano Software GmbH disclaims any liability for any actions you take or refrain from taking based on the content contained in this country guide.
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