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Minimum wage in the United States
United States payroll structure
Statutory benefits in the United States
Other United States employee benefits
Seamless and compliant payroll with CXC
Payroll in the United States
Managing payroll in United States workplaces involves more than simply paying employees on time. Employers must comply with a patchwork of federal, state, and local requirements that govern wages, deductions, reporting, and benefits. The federal Fair Labor Standards Act (FLSA) provides a baseline by setting rules on minimum wage, overtime, and recordkeeping, but state and city laws often impose higher standards. For businesses employing staff across multiple jurisdictions, this layered system makes accurate payroll administration a critical priority.
A typical payroll cycle in the U.S. can be weekly, bi-weekly, or semi-monthly, depending on state rules. Employers must also withhold and remit taxes, including income tax, Social Security, and Medicare contributions. On top of federal obligations, state unemployment taxes and, in some areas, local levies apply. Non-compliance can result in penalties, audits, or reputational risk, which is why many organisations rely on professional payroll services in United States markets to keep processes accurate and compliant.
Employee benefits form an important part of payroll operations. Employers are responsible for funding Social Security and Medicare through payroll taxes, maintaining workers’ compensation coverage, and paying into state unemployment insurance systems. In addition, large employers must comply with the Affordable Care Act by offering health insurance to full-time staff. Family and Medical Leave Act (FMLA) protections, as well as state-level paid family leave schemes, also need to be integrated into payroll records.
Because of this complexity, effective payroll management is both a legal requirement and a strategic advantage. Employers who invest in clear policies, regular audits, and expert support reduce risk and maintain trust with their workforce. For companies expanding or managing diverse teams, streamlining payroll in United States operations is a vital step in building sustainable growth. Partnering with a provider such as CXC, which offers payroll solutions and acts as an Employer of Record, can further simplify compliance and administration.
Minimum wage in the United States
Pay practices in the United States are shaped by a mix of federal, state, and local regulations. For employers, compliance with minimum wage in the United States is a key requirement, as failing to meet the correct standard can result in penalties, back pay obligations, and reputational damage. The challenge is that there is not just one rate to track—businesses must consider overlapping laws that may set higher thresholds than the federal baseline.
Minimum wage laws in the United States
The federal minimum wage is currently 7.25 USD per hour, a figure that has remained unchanged since 2009 under the Fair Labor Standards Act (FLSA). Employers must always apply the highest rate that applies to their employees, whether it is set federally, by the state, or by a local jurisdiction.
For example, if a state sets its minimum wage at 10 USD, but a city within that state requires 12 USD, the higher rate must be paid to employees in that city. This layered system means that employers operating in multiple jurisdictions need to track compliance carefully.
As of September 2025, 21 states increased their minimum wages at the start of the year, with other adjustments scheduled for later months. Many urban areas, particularly on the West Coast and in the Northeast, have local minimum wages significantly above the federal level.
Questions about minimum wage in the United States
Employers often ask: What is the minimum wage in the United States? The answer is that it depends on where employees are based. While the federal baseline is 7.25 USD per hour, the average minimum wage in the United States is higher due to state and city legislation.
Another frequent query is, what is the lowest minimum wage in the United States? The federal standard of 7.25 USD remains the lowest enforceable rate, but in practice, many states have opted for higher thresholds.
A broader question is, why was the minimum wage created in the United States? The policy was originally introduced in 1938 to protect workers from exploitatively low pay and to promote fair labour standards nationwide.
Employers may also ask, how is minimum wage determined in the United States? At the federal level, it is set by Congress, while states and municipalities can pass their own legislation to raise the rate further.
For workforce planning, employers often look at the United States minimum wage per month. At the federal level, 7.25 USD per hour equates to roughly 1,257 USD per month for a 40-hour week, though this figure rises significantly in states or cities with higher local rates.
Best practices concerning minimum wage in the United States
Compliance with minimum wage laws in the United States requires ongoing vigilance. Recommended practices for employers include:
- Tracking federal, state, and local wage rules, and applying the highest applicable rate.
- Documenting policies clearly, so managers understand wage requirements.
- Conducting regular payroll audits to ensure workers are paid correctly and to identify errors early.
- Providing training on wage and hour compliance to HR and payroll staff.
- Reviewing pay structures for equity, to prepare for future increases in the United States’ current minimum wage.
By aligning policies with both statutory requirements and proactive pay equity measures, employers can reduce compliance risks while maintaining a competitive workforce strategy.
United States payroll structure
For employers, managing United States payroll means navigating federal standards while also meeting state and, in some cases, local requirements. Pay frequency, payroll taxes, and reporting obligations are all regulated, though the specifics vary depending on where employees are based. Employers operating across multiple states must therefore manage compliance on several levels.
Common payroll structure in the United States
The majority of states require wages to be paid semi-monthly, though some mandate weekly payment, while others permit monthly schedules. Employers should review state law carefully before deciding on a pay cycle.
A standard full-time employee typically works a 40-hour week, with overtime payable for hours beyond this threshold unless the employee is exempt. Unlike many other countries, there is no legal requirement for a 13th-month salary in the U.S. Benefits such as health insurance and retirement contributions are instead tied to employer policy or collective agreements.
Payroll systems in the U.S. must also track paid leave, deductions for benefits, and adjustments for local tax obligations. Regular internal audits are recommended to ensure accuracy and compliance.
Payroll tax in the United States
A core element of payroll tax in the United States is the Federal Insurance Contributions Act (FICA). For 2025, both employer and employee contribute 7.65% of wages: 6.2% to Social Security (up to 176,100 USD) and 1.45% to Medicare. Employees earning over 200,000 USD pay an additional 0.9% Medicare tax.
Employers are also responsible for Federal Unemployment Tax (FUTA), which is 6.0% on the first 7,000 USD of wages, though state tax credits can reduce the effective rate to 0.6%. In addition, state unemployment taxes (SUTA) apply, and rates vary depending on the employer’s claims history. Certain jurisdictions impose further levies, such as disability insurance or paid family leave contributions.
Self-employed individuals must cover both the employee and employer share of FICA, leading to a combined self-employment tax of 15.3% on earnings up to the Social Security wage base.
Employers often ask, who pays payroll taxes in the U.S.? The answer is that both employees and employers share the burden, with each responsible for their portion under FICA and related laws.
United States’ nonfarm payrolls
United States nonfarm payroll refers to a key measure of employment used by the Bureau of Labor Statistics (BLS). It tracks the number of paid workers in the economy, excluding farm labour, military personnel, and self-employed individuals.
According to the BLS August 2025 report, nonfarm payroll employment increased by 22,000, reflecting modest growth. Healthcare added 31,000 jobs, while sectors such as wholesale trade (-12,000), federal government (-15,000), and mining (-6,000) recorded losses. Average hourly earnings rose by 0.3% to 36.53 USD, marking a 3.7% year-on-year increase, while the average workweek remained steady at 34.2 hours.
This monthly data is closely monitored by policymakers, including the Federal Reserve, as it influences interest rate decisions and provides insight into the strength of the U.S. labour market.
Statutory benefits in the United States
Employers in the United States are legally required to provide certain core protections to their workforce. These statutory benefits in the United States form the foundation of employee welfare, covering areas such as retirement security, health care, unemployment support, and workplace injury coverage. Unlike voluntary perks, these obligations are non-negotiable and must be factored into every employer’s payroll and compliance framework.
Social security in the United States
Social Security and Medicare are central pillars of statutory benefits in the United States. Social Security provides retirement, disability, and survivor benefits, while Medicare offers health insurance to individuals aged 65 or older, as well as certain younger people with disabilities.
Both programmes are funded through payroll taxes under the Federal Insurance Contributions Act (FICA). Employers and employees each contribute 6.2% of wages to Social Security (up to 176,100 USD in 2025) and 1.45% of all wages to Medicare, with higher earners paying an additional 0.9% Medicare tax (Social Security Administration).
Employee insurance in the United States
Employee insurance in the United States includes two important state-mandated programmes: workers’ compensation and unemployment insurance.
Workers’ compensation provides medical care and wage replacement to employees injured on the job. Requirements differ from state to state, but in most jurisdictions, employers must maintain a policy, regardless of workforce size.
Unemployment insurance provides temporary financial support to employees who lose their jobs through no fault of their own. Programmes are state administered but funded by employer payroll taxes, with rates varying based on the employer’s claims history (U.S. Department of Labor).
The United States’ Affordable Care Act
The Affordable Care Act (ACA), sometimes called “Obamacare,” requires applicable large employers—those with 50 or more full-time equivalent employees—to provide affordable health insurance to their staff or face financial penalties. The law also established essential health benefits and protections for individuals, such as prohibiting insurers from denying coverage due to pre-existing conditions (HealthCare.gov).
For employers, compliance involves offering coverage that meets minimum standards of affordability and value. Smaller businesses are not mandated to provide insurance but may access tax credits if they do.
Other statutory benefits in the United States
Beyond the ACA, workers’ compensation, and unemployment coverage, additional legally required benefits include:
- Military leave protections: Safeguard the rights of employees who take time off to serve in the armed forces.
- Labour law postings: Employers must display notices informing staff of their rights under federal and state employment law.
Notably, there is no national requirement for retirement plans or 13th-month salary. However, where employers do offer retirement schemes or pensions, they must comply with federal laws under the Employee Retirement Income Security Act (ERISA).
Other United States employee benefits
Employers in the United States are legally required to provide certain benefits that go beyond wages, forming part of the broader framework of workforce protection. These United States employee benefits include unemployment insurance, workers’ compensation insurance, and family leave, alongside other state, or federally mandated entitlements. Each programme is designed to provide a safety net during times of hardship while ensuring that the employment relationship is fair and balanced.
Unemployment insurance in the United States
Unemployment insurance in the United States (UI) is a joint federal and state initiative that provides temporary financial support to workers who lose their jobs through no fault of their own. While it is governed by federal guidelines, each state operates its own UI programme, setting eligibility criteria, benefit levels, and maximum duration (U.S. Department of Labor).
Funding primarily comes from employer payroll taxes, though some states require small employee contributions. Eligibility typically requires that the worker be laid off or affected by a business closure, rather than being dismissed for misconduct or resigning voluntarily. Claimants must also meet state-defined wage or work-hour thresholds during a “base period.”
The system is intended as a short-term bridge while employees actively seek new work, rather than a long-term replacement for income.
Workers’ compensation insurance in the United States
Workers’ compensation insurance in the United States is a state-mandated system that provides medical treatment and partial wage replacement to employees who are injured or become ill due to their job. Employers fund the programme entirely through insurance premiums, the cost of which varies by state, payroll size, and industry risk classification.
This is generally a “no-fault” system, meaning employees are entitled to benefits regardless of who caused the injury. In return, they typically waive the right to sue their employer for negligence. However, claims can be denied in cases involving employee misconduct, such as working under the influence of drugs or alcohol.
Each state sets its own rules, with Texas being the only state that does not mandate private employers to carry coverage. In addition, federal programmes exist for specific groups such as longshore workers, coal miners, and federal employees.
Family leave in the United States
Family leave in the United States is governed primarily by the Family and Medical Leave Act (FMLA). This federal law grants eligible employees up to 12 weeks of unpaid, job-protected leave for events such as the birth or adoption of a child, serious personal illness, or caring for a close family member with a serious health condition.
While the FMLA does not require paid leave, many states have introduced their own paid family leave schemes, funded through payroll contributions from employers, employees, or both. These programmes differ in terms of benefit levels and qualifying conditions, meaning multi-state employers must manage compliance carefully.
Other employment benefits in the United States
Additional United States employee benefits include compliance with the Affordable Care Act for applicable large employers, which requires offering affordable health insurance to full-time staff. Employers are also responsible for contributing to Social Security and Medicare through payroll taxes, which provide retirement income and health coverage for eligible workers.
Together, unemployment insurance, workers’ compensation, family leave, and related statutory programmes form the foundation of employee protections. By integrating these obligations into payroll systems and HR policies, employers can reduce compliance risks while supporting workforce stability.
Seamless and compliant payroll with CXC
Managing payroll in the United States requires navigating complex federal, state, and local regulations. From taxes and benefits to compliance, the process can be time-consuming and overwhelming for employers.
When you partner with CXC, we will handle everything from tax withholding to employee bonuses on your behalf. This way, you can focus on growing your business while we handle the administrative and legal side of hiring workers in the U.S.
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