Payroll in the United States

Payroll in the United States means calculating gross-to-net salary, withholding 6.2% Social Security and 1.45% Medicare from each employee, deducting federal income tax on a progressive scale, paying a matching 7.65% employer share on top, issuing pay statements and filing Form 941 with the IRS each quarter. The key local issue is that there are two tax layers, not one: every payroll runs through a federal layer that is the same everywhere, plus a state layer that changes the moment an employee lives or works in a different state.

Total employer cost for a $70,000 annual salary is about $75,355 (federal FICA only; state unemployment and workers’ compensation extra), around 8% on top of gross.

Our verdict: Fewer than 2 employees and no local entity in United States: use an EOR at $199 to $650 per employee per month. At 2 or more, opening a Inc., Corp. (roughly $4,500 in setup costs and 8 to 14 weeks to complete) usually works out cheaper. Already running a local entity: standard payroll outsourcing is the cheaper route.

Use this page if you already have, or plan to set up, a US entity and want to know what running payroll actually involves. If you want to hire in the United States without becoming the legal employer, an Employer of Record is the faster route.

No US entity yet? See our guide to EOR in the United States.

Payroll in the United States at a Glance

How Does Payroll Work in the United States?

US payroll usually runs every two weeks or twice a month rather than monthly. You calculate each employee’s gross salary, strip out their Social Security, Medicare and income tax to reach net pay, add the matching employer share on top, then report and deposit the federal amounts to the tax authority on a set schedule.

That tax authority is the IRS, the Internal Revenue Service. It is the federal body that collects income tax and payroll taxes and that audits employers when the numbers do not line up. Almost everything on the federal side of US payroll eventually reports to the IRS.

The payroll taxes you withhold are known together as FICA, short for the Federal Insurance Contributions Act. FICA is two charges in one: Social Security, which funds retirement and disability benefits, and Medicare, which funds health coverage for older Americans. You withhold both from the employee and pay a matching amount as employer.

Income tax sits on top of FICA and comes in two layers. The federal layer is the same in every state and runs on a progressive scale, while a separate state layer is set by each state, so the same salary nets differently in Texas than in California.

Each employee tells you how much federal income tax to withhold through a Form W-4, the IRS form a new hire completes to set their withholding. The W-4 drives the federal income tax line on every payslip, so a wrong or missing W-4 is a common cause of an incorrect run.

Get FICA, the W-4 withholding or the deposit timing wrong and two things break at once: the employee’s take-home pay is incorrect, and your quarterly filing to the IRS no longer matches what you paid.

What Payroll Taxes Apply in the United States?

Three charges sit on every US salary: the employer’s matching FICA, the employee’s Social Security and Medicare, and income tax across the federal and state layers. They are calculated in a fixed order, and that order is what makes the gross-to-net result.

Employer Payroll Contributions in the United States

The employer matches the employee’s FICA exactly, paying 7.65% on top of gross salary: 6.2% for Social Security and 1.45% for Medicare. This is a charge in addition to gross pay, separate from anything you withhold, and on the federal side it is the main statutory cost of employing someone.

For most salaried staff this matching FICA is your largest predictable employer add-on. It is why the total cost of a hire runs above the headline salary, and why you budget on total employer cost rather than gross.

Two further employer payroll taxes sit outside this page’s worked example: federal unemployment tax (FUTA) and state unemployment tax (SUTA). FUTA is small and capped, while SUTA varies by state and by your claims history, so we treat both separately rather than fold them into the figures below.

The true cost of employing in United States

Statutory employer rates; items can apply to different wage bases or carry conditions, so lines do not always sum to the total.

United States has no statutory 13th-month, holiday or profit-sharing bonus.

Sources: taxsummaries.pwc.com (employer contributions), taxsummaries.pwc.com (bonuses).

Employee Payroll Deductions in the United States

You withhold FICA from the employee at 7.65%: Social Security at 6.2% and Medicare at 1.45%. Social Security applies only up to an annual wage base of $184,500 for 2026, after which the 6.2% stops, while Medicare has no cap and applies to all wages.

These are the employee’s contributions, but you are responsible for calculating, withholding and remitting them alongside the matching employer share. If your provider miscalculates FICA, the employee is over or underpaid and your Form 941 will not reconcile against what you deposited with the IRS.

Income Tax on Salary in the United States

Federal income tax is collected through payroll on a progressive scale running from 10% to 37% as pay rises through the brackets. Before those brackets apply, a standard deduction is subtracted from pay: the flat amount of income the IRS treats as tax-free, set at $16,100 for a single filer in 2026.

On top of the federal layer, most states levy their own income tax, while a handful (such as Texas, Florida and Washington) levy none at all. State rates and rules vary widely, so a complete payslip depends on which state the employee works in, and the worked example below covers the federal layer only.

Payroll Tax Example: Gross Salary to Net Pay

Here is how the federal charges stack up for a representative salary. The figures come from the contribution and tax rates above, calculated in the statutory order.

Simplified illustration: Federal only, single filer, 2026 standard deduction of USD 16,100, no state or local income tax (tax = 1,240 + 4,560 + 770 on the 2026 brackets). The Social Security wage base of USD 184,500 is not reached at this salary, so the full 6.2% applies. SCOPE NOTE: the employer cost shown is federal FICA only (7.65%); it EXCLUDES FUTA, state unemployment insurance (SUTA) and workers’ compensation, which add several percentage points in practice, so the true employer on-cost is understated here. Do not quote this figure as the total US employer burden. USD 16,100 for a single filer in 2026 (2025: USD 15,750 after the One Big Beautiful Bill Act retroactive increase); reduces taxable income before federal brackets apply.

Read the two bold rows together. A worker on $70,000 gross takes home $58,075 on the federal numbers, while your total cost as employer is $75,355.

The gap on the employee side is the federal income tax and FICA load; the gap between gross and your cost is the matching 7.65% FICA. That is the federal-only US payroll signature: budget on the $75,355, not the $70,000, and remember that adding the employee’s state income tax would lower their take-home further.

What Payroll Filings Are Required in the United States?

The US reports federal payroll on a quarterly return rather than with every run, which is unusual compared with countries that file in real time. The filing that carries it is Form 941, and it is the centre of your federal compliance quarter.

What Form 941 Reports

Form 941 is the quarterly federal return every US employer files with the IRS, reporting total wages, the federal income tax withheld, and both the employee and employer shares of Social Security and Medicare. In one submission it tells the IRS what you withheld and what you owe in FICA for the whole workforce that quarter.

Because it is a summary return, it has to reconcile with the deposits you make through the quarter and with the year-end W-2 forms. The IRS cross-checks these, and a mismatch is a common trigger for a payroll notice.

When Form 941 Is Due

Form 941 is due on the last day of the month following the end of each calendar quarter, so April 30 for the first quarter, July 31 for the second, and so on. The filing is quarterly, but the tax deposits are not: you deposit the withheld taxes far more often, on either a monthly or a semi-weekly schedule.

Which deposit schedule applies depends on your tax liability in a lookback period. Monthly depositors pay by the 15th of the following month, semi-weekly depositors pay on a Wednesday or Friday schedule tied to payday, and a liability of $100,000 or more triggers a next-day deposit rule.

Who Files It

The legal obligation sits with the employer. In practice, your payroll provider prepares and files Form 941 and makes the deposits on your behalf, or your in-house team files it directly if you run your own US payroll.

Either way, confirm in writing who files and deposits each period. The liability for a late or wrong filing stays with you as employer regardless of who does the keying.

What Happens If Payroll Filings Are Wrong

A late Form 941 draws a failure-to-file penalty of 5% of the unpaid tax for each month or part-month the return is late, up to 25%. A missed or short deposit draws a separate failure-to-deposit penalty, tiered from 2% to 15% of the unpaid amount depending on how many days late it is. Beyond the money, a return that does not reconcile invites scrutiny of the whole payroll, which is why getting FICA and withholding right the first time matters more than the headline penalty suggests.

What Are the Payroll Deadlines in the United States?

US payroll obligations split across two rhythms: the Form 941 return is quarterly, but the tax deposits behind it land monthly or semi-weekly. New-hire reporting is the third pattern, due shortly after each hire rather than on the payroll calendar.

Late filing: Failure to File (e.g., Form 941): 5% of the unpaid tax for each month or part of a month the return is late, up to 25%. Failure to Deposit: Tiered penalty from 2% to 15% of the unpaid deposit, based on the number of days late.

Payroll Operations Risk in United States

Employers in United States file with 4 separate agencies.

Sources: dol.gov (compliance), federalreserve.gov (payments).

What Payslip and New-Hire Reporting Rules Apply in the United States?

The US does not run a single national employee register the way some countries do. Instead, two lighter records do the job: a Form W-4 on file for each employee to set their federal withholding, and a new-hire report sent to your state’s directory soon after someone starts.

New-hire reporting is the step foreign employers overlook. Each state runs its own new-hire directory, mainly to enforce child-support orders, and you must report a new employee to it shortly after their start date, with the exact window set by the state.

Pay statements are the second obligation, and the rules sit at state level rather than federal. Most states require an itemised pay statement each pay period showing gross pay, each deduction and net pay, though the detail required differs by state, so confirm the rule for the state your employee works in.

At year end the federal record closes with the Form W-2, the annual wage-and-tax statement you must give each employee and file with the Social Security Administration. A provider that runs Form 941 cleanly through the year should produce W-2s that reconcile to it, and that reconciliation is worth confirming when you assess a provider.

How Much Does Payroll Outsourcing Cost in the United States?

There are two separate numbers in US payroll cost, and confusing them is the most common budgeting mistake. The first is your statutory employer cost, which is mainly the matching 7.65% FICA plus state and federal unemployment tax.

12 of the 16 EOR providers we track publish United States fees; they range from $199 to $650 per employee per month.

Published list prices in USD: EOR fees are per employee per month, contractor fees per contractor per month. Providers that publish neither fee for United States are not shown.

According to Whichapp’s July 2026 analysis of EOR fees across 40 countries, providers charge $199 to $650 per employee per month in United States.

12 of the 16 providers we track publish United States EOR fees. The lowest published rate is $199 per employee per month and the highest is $650.

Contractor management fees in United States run from $6 to $49 per contractor per month.

The second is the fee you pay a provider to run the payroll for you. They are unrelated, and only the second is negotiable.

Managed Payroll Provider Fees

Managed payroll in the US is normally priced per employee per month, and most providers quote rather than publish a rate. The price turns on headcount, on whether you also need HR or benefits administration, and on complexity such as multiple pay frequencies or employees spread across several states.

The fee buys the calculation, the Form 941 filing, the federal deposits, pay-statement production and year-end W-2s. It does not include the taxes themselves, which you fund on top, so gather two or three quotes before committing.

What Payroll Provider Fees Usually Include

A standard managed payroll fee in the US should cover the per-period gross-to-net calculation, withholding of FICA and federal and state income tax, federal tax deposits, quarterly Form 941 filing, pay statements and year-end W-2s. Ask for that list in writing. If any of it sits outside the headline fee, you want to know before the first run, not after.

Extra Payroll Costs to Ask About

The gaps tend to appear at the state edges of the system. Ask specifically about multi-state payroll tax registration, per-state SUTA setup and ongoing filing, contractor 1099 processing alongside W-2 employees, correction filings such as the 941-X, and onboarding setup fees for taking on your payroll. These are the line items that turn a tidy per-head quote into a larger annual number.

When Payroll Outsourcing Becomes Cheaper Than EOR

The choice between running your own payroll and using an EOR is mostly about headcount and how long you plan to stay. An EOR carries a higher monthly fee per person because the provider is the legal employer and absorbs the entity, but it saves you setting one up and registering in each state.

Running your own payroll through a US entity is cheaper per head once you are past a handful of employees and committed to staying, because the entity, the state registrations and the provider fee spread across more people. In our assessment, the more people you hire and the longer the horizon, the more the economics favour your own entity with outsourced payroll.

Payroll in the United States vs EOR in the United States

The line between the two routes is simple: standard payroll assumes you are the legal employer through a US entity, while an EOR makes the provider the legal employer so you do not need one.

Use payroll outsourcing if you already have a US entity (such as an LLC or C-corporation) or are hiring enough people to justify one. Use an EOR if you need to hire before setting up an entity.

If that second case is you, our guide to EOR in the United States covers the providers, state coverage and costs in full. EOR pricing and provider ranking live there, not on this page.

Best Payroll Providers for the United States

These providers all run payroll in the US, but they are built for different situations. Below is where each one fits and the local point to check before you sign. We do not list EOR prices here; for unpriced managed payroll, treat the fee as by quote and confirm it during your shortlist calls.

6 providers in Whichapp’s independent index cover United States. The top 5 by composite score:

1. Deel (9.1/10). From $599/month. Best for scale, automation and contractor volume. Runs its own United States entity.
2. Multiplier (8.5/10). From $400/month. Best for APAC expansion and mid-market value. Runs its own United States entity.
3. Papaya Global (8.2/10). From $650/month. Best for multinational payroll consolidation. Runs its own United States entity.
4. Remote (8.0/10). From $599/month. Best for IP protection and owned-entity purity. Runs its own United States entity.
5. Oyster HR (7.0/10). From $699/month. Best for platform UX and B Corp ethics. Runs its own United States entity.

Rankings come straight from Whichapp’s provider index (coverage 30%, pricing transparency 25%, security and compliance 25%, integration depth 20%); see how we score.

All 6 major EORs we track in United States run their own local entity there.

Entity model as reported on provider websites, last checked 2026-06-06. An own entity means the provider is the direct legal employer; a partner model adds a third party to the chain.

Deel for Payroll in the United States

Deel is a strong fit if the US sits alongside other international hires you want on one platform, with a single dashboard and API across markets. US watch-out: confirm it registers and files payroll tax in every state your employees work in, not just at the federal level, and that it handles Form 941 and year-end W-2s directly. Read our Deel review.

Remote for Payroll in the United States

Remote runs much of its payroll through owned entities, which gives a cleaner compliance chain than a partner-network model. That suits employers who want a direct line of accountability for Form 941 filing and federal deposits.

US watch-out: confirm Remote handles multi-state payroll tax registration and per-state SUTA filings, not only the federal layer, and that W-2s are produced inside the platform. Read our Remote review.

Papaya Global for Payroll in the United States

Papaya Global is built for consolidating payroll across many countries with finance-grade reporting and audit trails, so it earns its place when the US is one market in a larger stack. Its weakness is the opposite case: for a single US entity in one or two states, the platform is heavier than the job requires.

US watch-out: Papaya leans on local partners in some markets, so confirm whether your US payroll runs on its own engine or a third-party bureau, and how directly it owns the Form 941 filing and multi-state registration. Read our Papaya Global review.

Rippling for Payroll in the United States

Rippling appeals when you want payroll wired into the same system as HR, IT and device management, with automated journal entries, and its US payroll engine is one of its deepest products. US watch-out: confirm how it handles state pay-statement rules and per-state SUTA across every state you employ in, since requirements differ from one state to the next. Read our Rippling review.

Multiplier for Payroll in the United States

Multiplier is the value option for multi-country payroll where price predictability matters, which fits smaller US teams. The trade-off for that price is depth: in a market as state-fragmented as the US it tends to carry less local specialist weight than a US-focused provider.

US watch-out: confirm it files Form 941 and registers for payroll tax in each state directly rather than through a reseller, and that its gross-to-net engine models the federal-plus-state stack accurately before you anchor any salary offers on it. Read our Multiplier review.

Safeguard Global for Payroll in the United States

Safeguard Global is a payroll-led specialist rather than an HR platform with payroll bolted on, which appeals when running the payroll correctly is the whole point and you do not need a wider people stack. That focus is also its limit: if you want integrated HR, devices and onboarding in one tool, it does less than Rippling or Deel.

US watch-out: confirm its US coverage is run in-house rather than subcontracted, and that the service includes multi-state registration and IRS correspondence, not just the federal calculation. Read our Safeguard Global review.

How to Choose a Payroll Provider in the United States

The questions below separate a provider that genuinely runs US payroll from one that handles the federal layer and leaves the state detail to you. Ask them before you sign, not after the first run.

Can They File Form 941 and Year-End W-2s?

Confirm the provider prepares and files Form 941 each quarter, makes the federal deposits on your schedule, and issues year-end W-2s that reconcile to it. Ask who files and deposits, and by when.

Do They Handle Multi-State Payroll Tax Registration?

Check that the provider registers you for payroll tax and unemployment insurance in every state your employees work in, and files each state’s returns on time. A provider that handles only the federal layer leaves you to manage the state registrations yourself, which is where US payroll gets heavy.

Can They Model Gross-to-Net Accurately?

A capable provider models gross-to-net both ways, including the federal brackets, the standard deduction and the relevant state income tax, and helps you frame offers rather than just processing whatever number you hand over. Ask to see a sample calculation for an employee in a state with income tax and one without.

How Do They Update for Tax-Law Changes?

Federal brackets, the standard deduction and the Social Security wage base change every year, and state rules shift on their own timetables. Ask how the provider tracks IRS and state changes and how quickly updates reach your payroll runs.

Who Is Liable for Payroll Errors?

The statutory liability stays with you as employer, but the contract should set out what the provider is accountable for if a miscalculation or late filing is their fault. Get the indemnity and correction process in writing.

Can They Support Multi-Country Reporting?

If the US is one of several markets, confirm the provider can consolidate reporting across them in a single view, so your finance team is not stitching country files together by hand.

What Support Do They Offer During Terminations or Audits?

Terminations and IRS or state audits are where weak providers show their limits. Ask what support you get during a termination calculation or an audit, and whether a named contact handles it or you are routed through a ticket queue.

What Does Terminating an Employee Cost in United States?

Severance: There is no federal statutory severance pay requirement in the United States; any severance is by contract or employer policy.

Statutory leave: 0 days of paid annual leave plus 11 public holidays a year.

Sources: dol.gov (severance), dol.gov (notice periods), dol.gov (leave).

United States Payroll Checklist Before Hiring

• Confirm whether you need payroll or an EOR
• Check your local entity status
• Model gross-to-net salary for your offers
• Confirm employer contribution rate (employer FICA)
• Confirm employee deductions (Social Security, Medicare)
• Confirm income tax treatment
• Check who files Form 941 and by when
• Confirm new-hire reporting registration is handled
• Confirm the payslip process
• Check leave, sick pay and termination workflows
• Ask who carries liability for calculation errors
• Confirm provider pricing and any extra fees

Work through this before your first hire. The state side at points six and eight is where foreign employers slip, because federal payroll is uniform but every state your team lives in adds its own registration and pay-statement rules.

FAQs About Payroll in the United States

Methodology and Disclosure

The FICA rates, Social Security wage base, federal income tax brackets, standard deduction, filing deadlines and penalty figures on this page come from Whichapp’s US statutory dataset, grounded in IRS 2026 payroll and Form 941 rules and Social Security Administration figures, and refreshed as rates change. The worked example is federal-only and is calculated from those rates and reconciles by construction; state income tax, SUTA and FUTA are excluded and vary by state.

Provider assessments reflect our independent editorial view of payroll fit for the US; we do not sell payroll, EOR or contractor services. Some provider links may carry affiliate referrals, which never affects our editorial judgement or the figures above.

Already hiring contractors instead of employees? See contractor management in the United States, or start from the United States hiring hub for the full picture.

Primary sources

• Income tax and employee contributions: taxsummaries.pwc.com
• Employer contributions: ssa.gov
• Minimum wage: dol.gov
• Payroll filing deadlines: irs.gov
• Notice periods and leave: dol.gov
• Severance rules: dol.gov
• Entity setup benchmark: deloitte.com