Getting started
What is US payroll compliance for a foreign company?
US payroll compliance is the recurring set of federal, state and sometimes local obligations a foreign-owned employer takes on the moment it pays a US worker: federal and state employer registrations, income tax withholding, FICA and FUTA contributions, state unemployment insurance, new hire reporting, workers' compensation coverage and quarterly and annual filings. It is operational compliance infrastructure, not commercial go-to-market activity, and it is enforced by penalties rather than by market forces.
What must a foreign company register for before running its first US payroll?
At minimum: an EIN with the IRS, a state withholding tax account in every state where an employee works, a state unemployment insurance account in the same states, workers' compensation coverage, and new hire reporting with the relevant state directory. Some cities and counties add local income or occupational taxes. Registration lead times range from same-day to six weeks depending on the state.
How long does it take to be payroll-ready in the United States?
Six to ten weeks is realistic for a first US employee if the entity and EIN already exist. The EIN itself takes one to three weeks by fax for a foreign responsible party. State withholding and unemployment accounts commonly take two to four weeks. Benefits carriers and workers' compensation add another two to three weeks. Compressing this below six weeks usually means using an employer of record for the first hires.
Can we pay a US worker as a contractor to avoid all of this?
Only if the working relationship genuinely meets the tests for independent contractor status under both federal and state rules, and several states apply a strict ABC test. Misclassification exposure includes back taxes, unpaid overtime, penalties and interest, and it is one of the most actively enforced areas in US employment law. Treating a full-time, directed, exclusive worker as a contractor is a liability decision, not a payroll shortcut.
Payroll mechanics and taxes
What payroll taxes does a US employer pay?
Employers withhold federal income tax, the employee's 6.2% Social Security and 1.45% Medicare contributions, and applicable state and local income tax. Employers separately pay a matching 6.2% Social Security and 1.45% Medicare, federal unemployment tax on the first $7,000 of wages per employee, and state unemployment tax at experience-rated rates that vary widely by state and industry.
How often must US payroll taxes be deposited and reported?
Federal deposit frequency is monthly or semi-weekly depending on prior-period liability, with a next-day rule above a $100,000 threshold. Form 941 is filed quarterly, Form 940 annually, and W-2s must reach employees and the Social Security Administration by 31 January. States impose their own deposit and filing calendars, which do not always align with the federal one.
What is a multi-state payroll obligation and when does it apply?
It applies as soon as employees perform work in more than one state, including remote workers. Each state where work is performed can require its own withholding and unemployment registrations, and reciprocity agreements between states change the withholding outcome. A single remote hire in a new state creates a full registration workload, which is why headcount planning and payroll planning belong in the same conversation.
Do foreign parent companies have to worry about US employment nexus?
Yes. Employing anyone in a state generally creates payroll nexus there and can contribute to income tax and sales tax nexus as well. A foreign parent that hires a US-based salesperson without an entity can inadvertently create a taxable presence for the parent itself, which is a materially worse outcome than registering an entity in the first place.
HR and benefits obligations
What HR compliance obligations come with US employees?
Written offer letters and at-will language, I-9 employment eligibility verification within three business days of hire, state-specific wage notices, mandatory workplace posters, anti-harassment training in several states, overtime classification under the Fair Labor Standards Act, paid sick leave in many jurisdictions, final pay timing rules on termination, and record retention schedules that differ by document type.
Is health insurance mandatory for a foreign company's US employees?
The federal employer mandate applies at 50 or more full-time equivalent employees, so most first-stage US operations are not legally required to provide health coverage. Practically, US candidates expect it, and a competitive package is often the difference between closing a hire and losing one. Budget 20% to 30% on top of base salary for benefits, taxes and insurance.
What is workers' compensation and do we need it?
Workers' compensation insurance covers work-related injury and illness and is mandatory in almost every state, with thresholds and exemptions varying. It is purchased through private carriers or state funds and must be in place before the first employee starts. Operating without it exposes the company to penalties and to direct liability for injury costs.
Accounting and choosing a model
What accounting obligations run alongside US payroll?
US GAAP bookkeeping, a monthly close that reconciles payroll liabilities, federal and state corporate income tax filings, franchise tax, sales tax where nexus exists, Form 5472 for foreign-owned entities with reportable transactions, 1099 reporting for contractors, and transfer pricing documentation for intercompany charges with the parent. Payroll data feeds most of these, so a clean payroll register is the foundation of the whole calendar.
Should we use an employer of record or run our own US payroll?
An employer of record is right when you need one to five hires quickly, before an entity is fully operational, or when you are testing a market before committing. Own payroll under your own entity becomes more economical and more controllable at roughly five to fifteen employees, and it is necessary when you need equity compensation, deep IP assignment control or a permanent US presence. Many companies use an employer of record first and migrate afterwards.
How does Seal Global run US payroll, HR and accounting compliance?
Seal Global builds the registration sequence, the compliance calendar and the monthly close as one operations enablement programme rather than three disconnected vendors. We register the federal and state accounts, stand up payroll and benefits, document the HR pack, and run bookkeeping and filings against a dated calendar so nothing is discovered late. It is deliberately operational work, kept separate from commercial go-to-market.