Employers typically follow a bi-monthly payment schedule, with salaries paid every two weeks.
Salary must be paid in cash, by check, or by direct deposit to the employee’s account at a bank or other financial institution.
Some aspects of payroll processing are regulated by the Internal Revenue Service (IRS) and the Department of Labor (DOL). You must comply with these laws:

• Fair Labor Standards Act (FLSA)
• Federal Insurance Contributions Act (FICA)
• Federal Unemployment Tax Act (FUTA)

In addition, you also have to abide by state payroll processing laws. Each state has its own rules governing minimum wage, payday schedules and recordkeeping. Payroll compliance in the US can become cumbersome if you have employees in more than one state.
If you have 1-2 employees in one state, you can process payroll manually. You will still need to keep records of things like hours worked, wages paid and worker classifications. But as you add more employees and contractors, you’ll need to use an automated solution for payroll processing.
Before you start processing your payroll, you will need the following documents from your employees:

• W-4 Employee’s Withholding Certificate
• W-9 Employee’s Withholding Certificate – used for contractors or freelancers. You will need this to file 1099-NEC at the end of the year
• I-9 Employment Eligibility Verification
• Medical insurance and Retirement plan forms

Classifying employees correctly as employee or contractor is a major issue with US payroll processing. An error can lead to fines from the IRS. If you control the only the output or result, then the worker is likely a contractor. If you also control how the work is to be done, then the worker must be classified as an employee.
You can withhold income tax, Social Security tax and Medicare tax only for employees, not independent contractors or freelancers. For employees, you will need to file form W-2.
Employers are responsible for calculating and withholding money for federal, state and local taxes from every workers’ paychecks. It’s determined by the Forms W-4 submitted by your workers and tax rates. In addition, you need to pay federal unemployment tax (FUTA) . You will also match your employees’ contribution towards the Social Security and Medicare taxes.
If your employees opt to contribute towards 401K or other retirement plans, you will need to withhold their contribution and deposit in their retirement accounts. If you offer health and other insurance, you will have to deduct employee contribution towards those plans and pay to the insurance provider.
Sometimes, you may have to deduct towards court ordered deductions such as such as child support and alimony.
As you can see, setting up and entity, hiring employees and managing payroll in the US is a complex and costly affair. You’re better off going with an Employer of Record service provider like Globalify unless you plan to hire a large number of employees.
Individual Income Tax
In the US, domestic income is subject to income tax for both citizens and foreigners. Any foreign income of a resident is also taxed in the US. In addition to the federal income tax, most states and cities also levy income tax on their residents.
The US income tax system follows the progressive structure meaning people who earn more also pay higher taxes. United States offers married couples the option of filing their tax return jointly.

The following table shows federal income tax rates in the US as of July 2022:

Employer Costs in the US
According to the U.S. Bureau of Labor Statistics, employee benefits amounted to 31.2 percent of total employee cost in March 2022. Practically, one in every 3 dollars spent on labor cost went towards paying for employee benefits and payroll taxes.

Employers bear the following costs in the US:
FICA contributions (Social Security and Medicare) amount to 7.65% of employee’s compensation. It provides retirement, survivorship, disability, and supplemental health benefits to employees.
FUTA tax rate is 6%, but most employers get a credit of 5.4%. So, the net outgo is 0.6% of an employees’ wages.
SUTA (State Unemployment Tax) varies from state to state. You can find out the applicable rates from the state tax office in the states you employ people. In most states, you will pay about 2.7% of an employee’s wages towards SUTA.
All employers have to take Workers’ Compensation Insurance. This is used to pay regular wages to workers who get injured on the job. The rates for workers’ compensation insurance depend on the job classification and salary of the employee. In general, you will pay a much lower insurance premium for white collar jobs as the likelihood of an injury is low in these jobs. For example, if you hire a software developer in the US for $100,000 per year, you will pay between $300-400 per year for workers’ compensation insurance for this employee.
You must offer health insurance in order to attract high quality talent in the United States. This includes health, dental and vision care plans. Most companies offer contributory plans where both the employer and the employee pay a percentage of the premium. With the soaring health insurance costs, it has become impossible foe most employers to bear full cost of the insurance.
According to the Kaiser Family Foundation’s annual employer health benefits survey, the average employer contribution was over $16,000 per employee per year in 2021. The average cost to employees was nearly $8,000 per year. When you add on the cost of dental, vision and other insurance benefits, your annual expenses can cross $20,000 per employee per year.
The retirement plan (401K) is not mandatory in the US. But most employers offer a matching 401K plan to attract and retain employees. Employer typically provide a matching contribution between 3-6% of the salary. A minor detail to note is that bonus in the US is subject to retirement contribution. So, if you contribute 3% to your employee’s 401K plan, a 10% bonus will, in reality, become 13% after accounting for the 401K.