If your company is intending to take on employees to work in the US, you’ll need to do some heavy homework on US payroll frequency laws – to say they’re a minefield is a major understatement. In this blog, PeoplePay flags up the issues and shows how to stay on the right side of the law.
Businesses all over the world aspire to the American dream. Breaking into the US market is a serious ambition for many organisations and one which, if efficiently planned, can reap enormous benefits. However, there are certain areas where a company should be wary, and the complexities of payroll frequency are near the top of the list, regardless of whether you have one employee on the ground or hundreds. Get this wrong and the dream could turn into a compliance nightmare.
Pay frequency is the statutory regularity with which workers receive their remuneration. However, there is no overarching federal law in America which dictates a specific payroll frequency; it only requires that it should be consistent. Instead, each state has separate laws relating to how often employees and contractors should be paid, which vary considerably. A glance at the US Department of Labor state payday requirements table demonstrates this – here are a few examples:
· Arizona – payday is two or more days a month, not more than 16 days apart.
· Iowa – employers are required to pay most employees via a regular payday at least biweekly, semi-monthly or monthly. Any predictable and reliable pay schedule is permitted as long as employees get paid at least monthly and no later than 12 days (excluding Sundays and legal holidays) from the end of the period when the wages were earned. This can be waived by written agreement and employees on commission have different requirements.
· Louisiana – payment is required no less than twice during each calendar month and this is applicable to entities employing 10 or more employees engaged in manufacturing, mining or boring for oil, and also for every public service corporation.
· Massachusetts – hourly employees must be paid either weekly or biweekly. Employers may pay salaried employees semi-monthly, and salaried employees can also be paid monthly if they voluntarily agree.
· Nebraska – payday is designated by the employer.
· South Carolina – no payday frequency law
Employees can be paid every week, every two weeks, twice a month (which isn’t exactly the same as every two weeks) or monthly. Once this frequency has been fixed, a business can’t deviate from it unless there’s a genuine reason and providing it doesn’t cause delay to, or avoidance of payment. The change must also be permanent, not a one-off.
As you can see, it’s a logistical headache, and getting it wrong isn’t an option. Compliance with US payday frequency laws is absolutely essential – and they regularly change. Make a mistake and your new venture will be liable for heavy penalties. You will also have an office full of resentful employees which isn’t the best start. And don’t forget the importance of compliance with all the other US employment laws in your chosen location – including tax withholding, pension and healthcare benefits, holiday arrangements and worker classification.
In order to stay on the right side of US compliance laws in whichever state you decide to do business, the most practical solution is to use a global payroll service.
PeoplePay’s cost-effective global payroll service removes all the stress of paying your employees in whichever country you’re planning to expand into and reliably ensures watertight compliance with local laws and regulations. We can run your payroll in 140 countries worldwide from just one employee upwards, and we manage every aspect of the process so you can concentrate on managing your business.
If you are planning to expand into the US, or if you’re already out there and need help with global payroll, why not contact us and let the PeoplePay professionals take the pressure off.