What You Need to Know About Workers’ Comp, Payroll Taxes & Benefits in the U.S.
Expanding into the U.S. is exciting—but if you’re hiring employees, you’ll quickly discover that American employment compliance comes with a maze of obligations. Between workers’ compensation, payroll taxes, and employee benefits, it’s easy to feel overwhelmed.
Here’s a straightforward guide to help you understand the essentials—and the penalties if you get it wrong.
🛡️ Workers’ Compensation: Protecting Employees (and Employers)
What it is:
Workers’ compensation (“workers’ comp”) is state-mandated insurance that covers employees who get injured or become ill due to their job. It typically pays for medical expenses, lost wages, and rehabilitation.
Key things to know:
- It’s required in nearly every state. Some states exempt very small employers, but most require coverage from the first hire.
- Rules vary by state. Premiums, coverage rules, and exemptions differ depending on where your employees are located.
- Employer benefit: Workers’ comp usually prevents lawsuits from employees related to workplace injuries.
⚠️ Penalties for non-compliance:
- Fines that can reach thousands of dollars per employee
- Stop-work orders (your business can be legally shut down)
- Civil lawsuits from employees if you lack coverage
💡 Real-life example: In 2022, a small construction company in California was fined $50,000 for not carrying workers’ comp after an employee injury. The business was temporarily shut down until coverage was secured.
💰 Payroll Taxes: Shared Responsibility
What they are:
Payroll taxes are mandatory contributions withheld from employees’ wages and matched by employers. They fund key federal programs and, in some cases, state programs.
Federal payroll taxes include:
- Social Security – 6.2% paid by employer + 6.2% paid by employee
- Medicare – 1.45% paid by employer + 1.45% paid by employee
- FUTA (Federal Unemployment Tax Act) – Employer-only tax that funds unemployment benefits
State-level payroll taxes may include:
- State Unemployment Taxes (SUTA) – Rates and requirements vary by state
- Disability Insurance contributions (required in states like California, New York, and New Jersey)
⚠️ Penalties for mistakes:
- IRS penalties of 2–15% of unpaid tax for late filings or deposits
- Interest charges that accrue daily until taxes are paid
- Risk of being personally liable (yes, directors and officers can be held accountable)
💡 Real-life example: A tech startup in New York failed to remit payroll taxes for six months. The IRS assessed $80,000 in back taxes, penalties, and interest—and held the founder personally liable under the “Trust Fund Recovery Penalty.”
🎁 Employee Benefits: Beyond Salary
Why benefits matter:
In the U.S., benefits aren’t just “nice to have”—they’re critical to attracting and retaining talent.
Core benefits to consider:
- Health Insurance – The cornerstone of U.S. benefits packages; often expected even at small companies.
- Retirement Plans (401k) – Employer-sponsored savings plans with tax advantages.
- Paid Time Off (PTO) – Vacation, sick leave, and holidays; not federally mandated but highly competitive.
- Other perks – Wellness stipends, parental leave, learning budgets—these can help you stand out.
⚠️ Penalties for mistakes:
- Failure to provide health insurance (if required under ACA rules) can mean $2,000–$3,000 per employee per year in fines
- Incorrect benefits administration can expose companies to ERISA penalties and employee lawsuits
- Lack of competitive benefits can cost you talent before you even make the hire
💡 Real Life Example:
In 2020, Indian Mills Contracting, Inc. failed to remit both employee and employer contributions to its 401(k) plan. The Department of Labor intervened; ultimately, in Scalia v. Indian Mills Contracting, the court ordered repayments and other corrective actions
Additionally, in cases like RadioShack, companies continued investing retirement plan assets in company stock even as the value plummeted—leading to massive losses for employees (up to 80% of their investments) and raising concerns about fiduciary violations under ERISA
🚀 Putting It All Together
For international companies, navigating U.S. compliance around workers’ comp, payroll taxes, and benefits can be daunting. Each state has its own rules, penalties for mistakes can be severe, and employee expectations are high.
That’s where partners like In2America come in. Whether you need fast hiring via EOR, entity setup via PEO, or help building a competitive benefits package, we make U.S. expansion simpler and safer—so you can focus on growth.
✅ Key Takeaways
- Workers’ comp protects both sides, but failure to comply can shut your business down (and cost tens of thousands in fines).
- Payroll taxes are mandatory, and the IRS can hold founders personally liable.
- Benefits are essential in the U.S.—fail to provide them, and you risk both penalties and losing talent.
Expanding in the U.S.? Let us help you stay compliant and competitive from day one.