Employment trends and job market analysis in the United States 

With a GDP of more than USD$20 trillion, the United States is a leader in several key industries, including technology, oil and gas and renewable energy. The country has one of the largest tech markets in the world, with four cities ranking in the top 10 for global fintech, including Silicon Valley (#1) and Boston (#7).

Ranked sixth in the world for ease of doing business by the World Bank and home to the largest economy in the world, the United States continues to be fertile ground for businesses hungry for a taste of innovation.

For businesses around the world, expanding into the United States can provide plenty of opportunities for growth. However, they must be prepared to take on a complex market and ensure they do their due diligence before taking this step.

The labor force in the United States serves as the backbone of its economy. The nation has experienced an overall upward trend in the number of individuals employed, with the notable exception of the COVID-19 pandemic. Despite an increase in labor force participation since the pandemic, the figures have yet to match pre-pandemic levels due to the phenomenon coined as the "Great Resignation," prompting workers to contemplate the trajectory of their lives.

As of 2022, the labor force participation rate in the U.S. stood at 62.2 percent, noticeably lower compared to the ten countries with the highest participation rates.

The United States is experiencing notable growth in transportation and warehousing. Throughout the pandemic, the sector witnessed an increase of approximately 23,000 jobs on average, resulting in a total of nearly 955,000 new positions. Presently, trucking jobs have surpassed the levels seen in 2019, while warehouse employment has risen by approximately 50%.

Despite not recording the highest growth, the manufacturing sector boasts one of the lowest unemployment rates across various job sectors, standing at 2.4%. However, the industry is grappling with a significant shortage of skilled labor. Even if all unemployed individuals possessing the required skills were to fill the current job vacancies, approximately one-third of durable manufacturing jobs would remain unfilled.

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Capital                                                           Washington D.C

Languages spoken                                        English

Population size                                              332 million

Payroll frequency                                          It depends on the employer.

                                                                      The most common are weekly,

                                                                      semi-monthly or biweekly.

Currency                                                       US Dollar (USD)

VAT                                                                Nil

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For more economical and fiscal information on the United States of America, visit the dedicated section.

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Labour laws to be aware of when hiring employees in the United States

Hiring employees in the United States involves compliance with a range of federal and state labour laws. Below are some important labor laws to be aware of:

1. Fair Labor Standards Act (FLSA): The FLSA sets the federal minimum wage, overtime pay requirements, and rules for child labor. It also defines the criteria for classifying employees as exempt or non-exempt from overtime pay.

2. Family and Medical Leave Act (FMLA): The FMLA requires certain employers to provide eligible employees with up to 12 weeks of unpaid, job-protected leave for specific family and medical reasons, including the birth or adoption of a child, serious health conditions, and caring for a family member with a serious health condition.

3. Occupational Safety and Health Act (OSHA): OSHA mandates that employers provide a safe and healthy workplace for employees. It establishes standards for workplace safety and health, as well as guidelines for reporting and addressing workplace injuries and illnesses.

4. Immigration Reform and Control Act (IRCA): Employers must verify the identity and employment eligibility of all employees hired after November 6, 1986. This is typically done using the Form I-9, which verifies an employee's eligibility to work in the U.S.

5. National Labor Relations Act (NLRA): The NLRA governs the rights of employees to engage in collective bargaining and protects their rights to form, join, or assist labor unions.

6. Employee Retirement Income Security Act (ERISA): ERISA sets standards for employee benefit plans, including retirement and health plans, to ensure they are managed in a fair and responsible manner.

7. Worker Adjustment and Retraining Notification Act (WARN): Employers with a certain number of employees must provide advance notice of mass layoffs or plant closings under the WARN Act.

8. State Labor Laws: In addition to federal laws, each state has its own set of labor laws that cover areas such as minimum wage, overtime, paid sick leave, and other employment-related issues. It's important to be familiar with both federal and state laws to ensure full compliance. We'll cover this in more detail later in the guide. 

Remember that labor laws can be complex and subject to change. It's advisable to consult with legal counsel or human resources professionals to ensure you're following all relevant laws and regulations when hiring and managing employees in the United States.

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Payroll and taxes in the United States

Payroll tax in the United States is imposed separately by the federal and state governments. Federal income tax is governed by the Internal Revenue Service (IRS).

Both employers and employees are subject to payroll taxes that are collected by the employer per payroll and remitted on a quarterly or annual basis to the taxing jurisdiction.

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Employer contributions

Mandatory contributions for employers in the United States currently comprise of:

Unemployment taxes

Imposed by the Federal Unemployment Tax Act (FUTA), employers are required to report this tax by annually filing Form 940 with the IRS. As of June 2011, the current unemployment tax rate stands at 6.0% and can be reduced to a rate of up to 5.4% through credits earned through contributions to state unemployment programs under sections 3302(a) and 3302(b) in FUTA.

On a state level, employers are also required to pay a payroll tax under the State Unemployment Tax act (SUTA), also known as State Unemployment Insurance (SUI). The funds are channelled into the state unemployment fund on behalf of their employees.

In states such as Alaska, New Jersey, and Pennsylvania, both employer and employee are required to pay SUTA taxes. SUTA rates are assigned to each individual employer and are based on variables such as years of experience and type of industry. 

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Social security

Funded by the Federal Insurance Contributions Act (FICA) tax, social security is a federal government program that provides benefits for retirees, individuals with disabilities, and surviving children of deceased workers.

Some of the benefits offered under the Social Security Administration (SSA) include retirement insurance, prescription drug benefits, and public assistance and welfare services. Employer contributions on social security are currently 6.2% of wages up to an annual wage maximum.

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Medicare

Medicare is a government health insurance program that provides health insurance for Americans above 65 years old as well as younger individuals with disability status as determined by the SSA. Employers are required to contribute 1.45% of wages to support the Medicare program, ensuring that Americans have access to essential healthcare services.

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State disability benefits

Several states, including New York, New Jersey, and California, require employers to provide disability benefits to workers that cover injuries or illness not caused by an accident in the workplace. In some states, employers make payments into a state fund which channels these benefits to the employees, while in others, the employee may purchase an insurance coverage plan from an authorised provider or the state. Disability benefits can be funded:

• Entirely by the employer

• Via deductions from the employee's wages

• As a combination of the above

 

Workers compensation insurance

Workers’ compensation is generally to protect employees who sustain workplace injuries and is put in place to protect employers from various tort claims made by employees. Private employees with one or more employees are expected to provide workers’ compensation insurance by most American states however it is optional in some states, such as Texas. In several states, employers are allowed to be self-insured for workers’ compensation.

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Employee tax contributions in the USA

Mandatory deductions for U.S. citizen employees include:

• Withholding of U.S. Federal, State, and local income taxes

• Deduction for U.S. Social Security taxes, Foreign Service retirement, Civil Service retirement, Federal Employees’ Group Basic Life Insurance (FEGLI), Federal Employees Health Benefits (FEHB)

• Any court-ordered garnishments and bankruptcy payments

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All income made by U.S citizen employees is subject to Federal income tax and social security taxes. Deductions are also mandatory on local retirement, life, health, or other benefits when coverage is required by local law.

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Which states have local payroll taxes?

Eight states (Alabama, Colorado, Delaware, Kansas, Kentucky, Missouri, Pennsylvania, and West Virginia) opt for the direct collection method for managing local income taxes. Indiana, Iowa, Maryland, and New York employ the piggyback method. Minnesota, New Jersey, Ohio, and Oregon employ a combination of the two by either adopting the state income definitions or collecting the tax on the local level.

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The minimum wage in the United States

The federally mandated minimum wage in the United States is USD$7.25 per hour, according to the U.S. Department of Labor (DOL). However, the minimum wage varies according to State. The District of Columbia currently has the highest minimum wage in the U.S (USD$15.2 per hour) as of January 2022, followed by California (USD$15 per hour).
 

Average salary in the United States

The average salary in the United States varies across a variety of factors including industry, age group, educational background, job position and level of experience. However, the nationwide average salary is $59,428 per year. 

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Working hours in the United States

Working days in the United States typically run between 9 am to 5 pm from Mondays to Fridays. This represents a five-day work week with an average of 40 hours per week. Employees covered by the Fair Labor Standards Act (FLSA) are entitled to overtime pay at a rate that is no less than one and a half times their regular pay rate for overtime hours worked during a 40-hour work week.

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Employee benefits in the United States

Most employers in the United States provide their workforce with benefit plans as an incentive to increase corporate retention and employee satisfaction. Also referred to as fringe benefits, common additional benefits typically found in the USA often include:

• retirement benefit plans (such as 401(k), pension and long-term care insurance)

• paid time off (PTO) such as vacation leave and sick leave

• relocation assistance

• medical, prescription, vision, and dental plans

• Flexible spending accounts (FSA) such as Health and Dependent Care FSAs

• Legal assistance plans

• Adoption assistance

• Childcare benefits

• Transportation
   

Many employers in the United States also go as far as to provide their staff with Employee Discount Programs that provide workers with access to specialised discounts on products and services from different vendors. These programs can include discounts on hotels and holiday destinations, beauty and wellness treatments, financial services, movie and theme park tickets, and home services.

Most of these benefits are tax deductible for the employer and not subject to income tax for the employee.

Cafeteria plans are also a popular benefits scheme offered by American employers to their employees according to the requirements of section 125 in the Internal Revenue Code. These plans often include a “menu” of different levels of benefits for the employee to choose from on a pretax basis. Employees on a cafeteria plan must be allowed to choose one taxable benefit and one qualified benefit.

A qualified benefit refers to any type of benefit that is excluded from an employee’s taxable income and includes:

• Accident and health benefits (excluding Archer medical savings accounts or long-term care insurance)

• Adoption assistance

• Dependent care assistance

• Group-term life insurance coverage

• Health savings accounts (Including distributions to pay for long-term care services)

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Employee rights in the United States

In the United States, employees are granted several rights and protections under federal and state laws. Some of the key employee rights include:

Equal Employment Opportunity (EEO)

Employees have the right to be free from discrimination and harassment based on factors such as race, color, religion, sex, national origin, age, disability, and genetic information. This includes protections against unfair treatment in hiring, promotion, compensation, and other employment-related decisions.

Fair compensation and overtime

Employees have the right to receive at least the federal or state minimum wage (whichever is higher) for their work. Non-exempt employees are entitled to overtime pay (usually 1.5 times their regular pay rate) for hours worked beyond 40 in a workweek.

Safe and healthy workplace

Employees have the right to work in an environment that is free from recognised hazards that could cause serious injury or death. Employers are required to comply with Occupational Safety and Health Administration (OSHA) standards to ensure workplace safety.

Family and medical leave

Eligible employees have the right to take unpaid leave for certain family or medical reasons under the Family and Medical Leave Act (FMLA). This includes leave for the birth or adoption of a child, serious health conditions, and caring for family members with serious health conditions.

Freedom from retaliation

Employees have the right to report workplace violations, health and safety concerns, and other legal issues without facing retaliation or adverse employment actions.

Right to organise and collective bargaining 

The National Labor Relations Act (NLRA) protects employees' rights to form, join, or assist labor unions and engage in collective bargaining with employers.

Right to accommodation

Under the Americans with Disabilities Act (ADA), employees with disabilities have the right to reasonable accommodations to perform their job duties, as long as these accommodations do not impose undue hardship on the employer.

Right to review personnel records

Some states grant employees the right to access their personnel records to ensure accuracy and transparency.

Right to protected activities 

Employees have the right to engage in certain protected activities, such as filing complaints with government agencies, participating in investigations, and opposing discriminatory practices without facing adverse consequences.

It's important to note that employee rights may vary by state, industry, and specific circumstances.

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Types of leave available in the United States

Federal law does not require private employers in the United States to provide employees with paid time off, vacation or sick days however, many employers choose to do so. It's also important to know that leave allowance may vary depending on contract vs. permanent roles.  

Sick leave

A growing list of jurisdictions have laws in place that require employers to provide their employees with paid sick leave, while some jurisdictions make it compulsory for employers to provide paid leave for reasons other than illness.

Many states and local jurisdictions have also implemented emergency paid sick leave policies while several jurisdictions have mandated paid leave for COVID-19 vaccination and recovery from side effects due to the vaccine.

Family and medical leave (FMLA)

The United States FMLA leave scheme provides employees with up to 12 weeks of unpaid leave per year. During this time, the employees’ jobs, along with any group health benefits, are maintained.

Eligible employees are entitled to:

• Twelve weeks of leave within a 12-month period for:

• Childbirth and care for a newborn child within a year of the birth

• Care of an adopted or a foster child that has been placed within the employee’s care within one month of said placement

• Care of a parent, spouse, or child facing serious medical conditions

• Serious medical conditions that affect the employee’s ability to perform the essential functions of their job

• Any qualifying exigency arising out of the fact that the employee’s spouse, child, or parent is a covered military member on “covered active duty;” or

Twenty-six weeks of leave during a single 12-month period to care for a covered servicemember with a serious injury or illness if the eligible employee is the servicemember’s spouse, son, daughter, parent, or next of kin. This is known as military caregiver leave.

Employees are eligible for FMLA if they have worked for their employer that employs 50 or more employees within 75 miles for a minimum of 12 months.

Paid time off (PTO)

There is no federal requirement for paid time off in the United States, according to the Department of Labor. PTO is usually regulated according to state laws, or oftentimes, it is up to the company to determine its own PTO policies.

Currently, only twelve states, along with Washington DC, have legislated paid sick leave.

• Workers in Arizona, California, Maryland, Michigan, New Jersey, and Oregon earn an hour of PTO for every 30 hours of service.

• Workers in Connecticut, Washington, Maine, and Nevada earn one hour of PTO for every 40 hours of service.

• Workers in Rhode Island earn one hour of PTO for every 35 hours of service.

• Workers in Washington, D.C, earn one hour of PTO for service between 37 to 87 hours, depending on the size of the business.

Funeral and bereavement leave

The USA''s Fair Labour Standards Act (FLSA) does not provide payment for any time off taken to attend a funeral. This benefit is typically based on an agreement between the employer and the employee. Most companies in the USA typically provide between one to five days of bereavement leave, with most HR policies providing an average of three days.

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Public holidays in the United States

There are currently 11 calendar dates that the US Government has declared as federal holidays. Holiday dates that fall on a weekend are typically observed on the closest preceding or succeeding weekday.

The list below shows the public holidays observed by all regions in the USA.

• New Year’s Day – January 1

• Martin Luther King Jr Day – January 15 to 21(Floating Monday)

• George Washington’s birthday - February 15 to 21 (Floating Friday)

• Memorial Day – March 25 to 31 (Floating Monday)

• Juneteenth National Independence Day – June 19

• Independence Day - July 4

• Labor Day – September 1 to 7 (Floating Monday)

• Columbus Day – October 8 to 14 (Floating Monday)

• Veterans Day – November 11

• Thanksgiving Day – November 22 to 28 (Floating Thursday)

• Christmas Day – December 25

 

Are background checks mandatory in the United States?

There is no federal law that mandates employee background checks. However, many companies prefer to screen potential candidates prior to making an offer for various reasons that include: verifying their previous work credentials, minimising risk for the company, and keeping their workplace safe.

There are, however, various regulations that govern the ways in which background checks are conducted.

For example, employers using a consumer reporting agency (CRA) must follow the rules established by the Fair Credit Reporting Act (FCRA), which requires employers to inform and receive consent from potential employees before conducting a background check.

Under the FCRA, the employer must obtain the employee's written consent to obtain any background information and the potential employee is allowed to review the results of the background check and dispute any inaccuracies and act against employers that violate the FCRA.

Many state and local governments across the USA have also enacted “ban the box” laws that prohibit employers from asking job applicants and employees about their criminal history. As of 2021, 37 states, the District of Columbia and more than 150 cities and counties have passed some form of ban the box legislation.

In California, for example, employers are prohibited from asking job applicants about their criminal history until after a conditional job offer has been extended. This rule applies to all corporations with five or more employees. While Illinois’ ban the box law states that no enquiries about criminal history are allowed prior to the job interview or after a conditional job offer is made if no interview occurs. This, however, only applies to private business owners with 15 or more employees.

The Americans with Disabilities Act (ADA) is also important to take note of. For businesses with 15 or more employees, the ADA prohibits the use of medical information to discriminate against an employee.

According to the ADA, employers cannot subject potential employees to a pre-employment physical before a conditional job offer is extended.

The laws that surround employee background checks exist to protect the privacy of and prevent discrimination against job applicants and employees in the United States. They can, however, be a complex landscape for employers to navigate, especially due to the differences in local, state, and federal laws.

For employers that are planning to screen and hire contractors in the US, consulting with their HR department and doing their due diligence in reading up on the obligations surrounding background checks is the best way to minimise risk during the hiring and remote hiring process.

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Minimum retirement age in the United States

For American employees born between 1943 to 1954, the full retirement age is 66. This increases gradually for those born between 1955 to 1960 until it reaches 67 years of age. Anyone born from 1960 onwards is entitled to receiving full retirement benefits at age 67.

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Termination of employment in the United States

Under US law, both employers and employees enter a working relationship on an “at-will” basis which also means that either party can choose to terminate the employment relationship for any reason and without notice. This is provided that the ground for termination is not for a discriminatory reason.

In any case, employers should ensure that all employment-related documents, such as employment agreements and company policy handbooks, support the at-will relationship. These documents should:

• Not contain any provisions that create a contract undermining an employee’s at-will status

• Include a disclaimer stating that:

  • Disciplinary procedures and policies do not modify the at-will employment relationship and do not create a contract of employment

  • The employer maintains the right to skip, repeat or modify disciplinary procedures at its discretion

Small or newly established businesses that don't have formal employment policies should make it a point to ensure that all employee communication reiterates the at-will relationship.

Collective dismissals

 

In the event of collective dismissals, the Workers Adjustment and Retraining Notification (WARN) Act required covered employers to provide at least 60 days’ notice in advance in the event of plant closings or mass layoffs to:

• The affected workers or their representatives, i.e., a labour union

• The state dislocated worker unit where the plant closing or mass layoff takes place

• The local chief elected official

This notice is intended to provide workers and their families with time to prepare for potential unemployment, seek out new means of employment, or enter training and upskilling programs to help them successfully compete in the job market.

The WARN act currently covers companies with 100 or more employees. Employees must have worked for a minimum of six months with the same employee and for a minimum of 20 hours within a seven-day work week to be protected by the act.

The act currently does not protect:

• Workers participating in strike actions or that have been locked out in a labour dispute.

• Workers employed on temporary projects or facilities of the business who understand the temporary nature of their work when hired.

• Business partners, consultants, or contract employees assigned to the business but who have a separate employment relationship with another employer and are paid by that other employer or who are self-employed.

• Regular federal, state, or local government employees.

Individual dismissals

There is currently no law dictating a formal procedure when discharging individual employees. In these cases, the termination is subject to whatever agreement is stipulated in the employment contract or collective bargaining agreement.

Severance pay

US federal law does not require employers to offer severance pay. It is usually based on an agreement between the employer and the employee (or the employee’s representative). If severance pay is granted to the employee, the amount is typically determined by their length of employment prior to the termination, and a signed release in favour of the employer is required.

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Do you need to hire employees in the United States?

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Talk to us

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Contact

Mrs. Emanuela Ferina

Head of Global Payroll

emanuela.ferina@studio-bcs.com

Phone 0039 0 363 360254

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