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Phone, internet, and coworking costs can be reimbursed tax-free when they are business-related. Employees must provide a tax invoice or receipt showing when and where they paid, how much, what service was purchased, and their name.
Employment in United States
Minimum wage
USD 33,280
Employer costs
8.25%
Employee contribution
7.65–8.55%
Employee tax
10–37%
In the United States, the reference annual minimum wage in this guide is 33280 USD. Employees typically contribute between 7.65–8.55% in social security and Medicare. On top of gross salary, employers should budget around an additional 8.25% for statutory costs such as federal and state unemployment taxes, Medicare, Social Security, workers’ compensation, and any location-specific taxes. Federal income tax is progressive, with headline rates ranging from 10–37%, and state income taxes may also apply depending on the employee’s location.
Onboarding time
We can help you get a new employee started in United States fast. The minimum onboarding time we need is only 48 hours. Our team ensures fast, compliant employee onboarding and payroll processing. The onboarding timeline starts once the employee submits all required information via the NEO platform.
Payroll
Employer payroll cost components
| Component | Notes |
|---|---|
| Futa Tax | Subject to a wage cap of 7000 USD |
| Suta Tax | State unemployment tax, rate varies by state |
| Medicare Base Tax | Employer Medicare contribution |
| Social Security Tax | Employer Social Security contribution |
| Workers Compensation | Workers’ compensation insurance |
| Location Additional Tax | Any location-specific employer payroll taxes |
Typical employer payroll burden (headline)
8.25%
Typical employee social security and Medicare (headline)
7.65–8.55%
Minimum wages
Reference annual minimum wage
33280 USD
Working hours
A standard full-time schedule in the United States under this guide is 40 hours per week, worked Monday through Friday.
Leave
| Leave type | Accrual | Carry-over | Maximum accrual |
|---|---|---|---|
| Sick leave | 5 days per year | Allowed | 10 days |
| Paid time off | Not specified | Not specified | Not specified |
Expenses
In the United States, employees must submit expenses within specific deadlines, and reimbursements of approved business expenses within the stated limits are not taxable. Expenses submitted late or without the required documentation may be treated as taxable income.
Expense submission deadlines
| Expense type | Deadline |
|---|---|
| Current year expenses | Submit within 60 days of the expense date or 30 days after return from business travel, whichever is later |
| Prior year expenses | Submit by February 1 of the following year |
Mileage is reimbursed at the IRS mileage rate, currently 0.725 USD per mile, which already covers fuel, insurance, and vehicle wear and tear. Employees should submit a mileage spreadsheet showing the date, miles traveled, starting location, destination, and purpose of the trip.
Communication and workspace expenses
- Phone subscription
- Internet subscription
- Coworking
Equipment and supplies
Laptops, office equipment and supplies, software subscriptions, postal charges, and similar items are reimbursed on a non-taxable basis when used for work. A tax invoice or receipt (or, for online purchases, final order details) must show the date, amount, merchant or service provider, description of the item or service, and usually the employee’s name.
- Laptop
- Office equipment
- Office supplies
- Software subscription
- Postal charges
Travel expenses
Most reasonable business travel costs are reimbursed tax-free when properly documented, including insurance, visas, accommodation, transport, fuel, and parking. Exchange rate charges are non-taxable only when the underlying trip is business-related; otherwise they are treated as a taxable allowance.
- Business travel insurance
- Visa fee
- Exchange rate charges
- Accommodation
- Flights (including luggage fees)
- Taxi or rideshare
- Train
- Public transport
- Car rental
- Fuel
- Mileage
- Parking or toll fees
Meals and entertainment
Everyday meals and client entertainment can be reimbursed tax-free when they are business-related and supported by receipts. Groceries are only non-taxable when clearly tied to business travel or another business purpose.
- Breakfast, lunch, and dinner
- Groceries
- Meal with client or partner
Other reimbursable expenses
Training, courses, books, and promotional items can be reimbursed on a non-taxable basis when they are work-related and supported by proper invoices or receipts showing the key transaction details and the employee’s name.
- Training, courses, and books
- Promotional items
Per diem
In the United States, only reimbursement of actual documented expenses is supported; per diem payments are not available under this policy.
Bonuses
Bonuses, including contractual and discretionary payments such as incentives, commissions, and signing bonuses, are taxed at federal and state supplemental rates. Signing bonuses are normally paid in the next payroll cycle once entered and authorized before the cut-off date, but they may also be processed as on-demand payments.
Allowances
In the United States, employers can offer a range of discretionary allowances, either one-time or recurring, such as housing, wellness, or relocation support. These can be built into custom employment letters, and clients may request a gross-up so that the employee receives a specified net amount while the client covers the related taxes and social security contributions.
If a recurring allowance is added in the first payroll cycle, it is paid in that first cycle initially and then in the second cycle for subsequent months. For employees on a semi-monthly schedule, fixed allowances are paid in the second payroll cycle so they are received at the end of the month.
Discretionary taxable allowances
The following allowances are optional and may be offered to one or more employees at the employer’s discretion. All of them are treated as taxable income, and no supporting documentation is required for processing; they must be submitted manually for payroll.
| Type | Status | Taxation | Limitations |
|---|---|---|---|
| Work from home allowance | Optional | Taxable | Offered at employer’s discretion; may be limited to selected employees |
| Gym membership | Optional | Taxable | Offered at employer’s discretion; may be limited to selected employees |
| Medical insurance | Optional | Taxable | Offered at employer’s discretion; may be limited to selected employees |
| Life insurance | Optional | Taxable | Offered at employer’s discretion; may be limited to selected employees |
| Wellness | Optional | Taxable | Offered at employer’s discretion; may be limited to selected employees |
| Medical cost | Optional | Taxable | Offered at employer’s discretion; may be limited to selected employees |
| Relocation | Optional | Taxable | Offered at employer’s discretion; may be limited to selected employees |
| Utilities | Optional | Taxable | Offered at employer’s discretion; may be limited to selected employees |
Imputed income is the cash value of any non-cash benefits received as part of an employee’s compensation. These amounts are taxable and must be reported on Form W-2.
Termination
Employment contracts in the United States under this framework do not specify a minimum notice period, and probationary periods can be used at the employer’s discretion.
Maximum probation period
180 days
