Running payroll in the United States isn’t a single system you learn once. It’s a layered framework where federal rules set the floor and 50 states each add their own requirements on top. For employers hiring across multiple states, that complexity compounds quickly. This guide covers how US payroll works, what you’re required to calculate and withhold, the compliance filings you can’t miss, and how to simplify the whole process when you’re operating at scale.
How payroll works in the us
US payroll sits at the intersection of federal law, state law, and in some cases local law. Federal statutes like the Fair Labor Standards Act (FLSA) and the Internal Revenue Code establish baseline obligations for every employer in the country. But the states layer significant additional requirements on top, covering everything from pay frequency and minimum wage to additional payroll taxes and employer registration.
Before you can run payroll, you need a federal Employer Identification Number (EIN) from the IRS, and you’ll need to register separately in every state where your employees work. If you have employees in five states, that means five separate state registrations, five sets of remittance schedules, and potentially five different minimum wage rates to track.
Pay frequency requirements
There’s no single federal mandate on how often you must pay employees. Federal law requires wages to be paid regularly, but it leaves the specifics to the states. In practice, biweekly pay (every two weeks, totalling 26 pay periods per year) is the most common schedule in the US.
State law governs the minimum pay frequency, and requirements vary. Some states require at least semi-monthly payment; others allow monthly pay for certain employee categories. Before setting your payroll schedule, you’ll need to check the rules in each state where you employ people. A schedule that’s compliant in one state may not meet the minimum frequency requirement in another.
Calculating gross pay: minimum wage and overtime
Federal and state law both set floors for what you must pay, and overtime rules add another layer of calculation to every pay period.
Minimum wage
The federal minimum wage is $7.25 per hour, but most states have set their own minimums well above that floor. You’re required to pay whichever rate is higher. For 2026, some state minimums include Washington at $17.13 per hour, California at $16.90 per hour, and New York at $16 to $17 per hour depending on employer size and location. Washington DC’s minimum is $17.95 per hour. If you’re hiring in multiple states, you’ll need to track the applicable rate for each location.
Overtime
The FLSA requires you to pay non-exempt employees at 1.5 times their regular rate for any hours worked beyond 40 in a single workweek. This is a federal floor, and some states go further. California, for example, requires daily overtime for hours worked beyond 8 in a single day, not just weekly overtime beyond 40 hours. Knowing where your employees are located matters for every overtime calculation you run.
Payroll taxes and withholding
As an employer, you’re responsible for both withholding taxes from employee pay and contributing your own share. Federal and state obligations run in parallel.
Federal income tax withholding
You withhold federal income tax from each employee’s wages based on the elections they make on Form W-4. The amount varies by individual. You remit withheld taxes to the IRS through the Electronic Federal Tax Payment System (EFTPS). Your deposit schedule, either monthly or semi-weekly, depends on your lookback period: the total taxes reported in the 12-month period ending June 30 of the prior year. Higher-volume employers deposit more frequently.
Fica taxes
The Federal Insurance Contributions Act (FICA) covers Social Security and Medicare. For 2026, the breakdown is:
- Social Security: 6.2% employee share on wages up to $184,500 (the annual wage base); you contribute a matching 6.2% as the employer
- Medicare: 1.45% employee share with no wage cap; you contribute a matching 1.45%
- Additional Medicare Tax: 0.9% on employee wages above $200,000; this is withheld from the employee only, with no employer match
You’re required to withhold the Additional Medicare Tax once an individual employee’s wages from your company exceed $200,000 in a calendar year, regardless of their total income from other sources.
State income tax withholding
Most states levy their own income tax, and you’re required to withhold and remit it separately from federal withholding. Each state has its own registration requirements, withholding tables, and remittance schedules. A handful of states, including Texas, Florida, and Nevada, have no state income tax, but that’s the exception rather than the rule.
401(K) and retirement contributions
You’re not federally required to offer a retirement plan, but if you do, the IRS sets annual contribution limits that determine how much employees can defer and how much you can contribute.
For 2026, the 401(k) employee contribution limit is $24,500, up from $23,500 in 2025. Employees aged 50 and older can make catch-up contributions of up to $8,000 on top of that limit. There’s a higher catch-up limit for employees aged 60 to 63: they can contribute up to $11,250 as a catch-up amount, rather than the standard $8,000.
If you match employee contributions, those employer contributions count toward separate IRS limits. You’ll need to ensure your plan documents and payroll system reflect the current year’s limits, since they’re adjusted periodically for inflation.
Payroll compliance: forms and filings
Several federal forms carry mandatory deadlines. Missing them triggers penalties, so these dates need to be on your compliance calendar.
Form w-2
You must furnish a completed Form W-2 to each employee by January 31 each year, showing their total wages and all withholding for the prior tax year. You must also file copies with the Social Security Administration (SSA) by the same date: January 31. This dual deadline, to both the employee and the SSA, applies regardless of your pay frequency or workforce size.
Form I-9
Every new hire requires a completed Form I-9 to verify their identity and work authorization. You must complete Section 1 on or before the employee’s first day, and verify their documents within 3 business days of their start date. You’re required to keep I-9 records for three years after the date of hire or one year after employment ends, whichever is later.
New hire reporting
Federal law requires you to report every new hire to the state’s new hire reporting agency within 20 days of their start date. The information is used by state child support enforcement agencies to locate parents who owe support. Each state administers its own reporting system, so you’ll file separately in each state where you bring on employees.
Payroll record retention
The FLSA requires you to retain payroll records for at least 3 years. Records that support wage calculations, such as time cards and work schedules, must be kept for at least 2 years. These retention rules apply on top of any additional state requirements.
State payroll obligations
Federal compliance is the baseline, but state obligations are where the real complexity lives for multi-state employers. You’ll need to register as an employer in every state where your workers are located, and the requirements differ significantly.
States like California, New York, and New Jersey have extensive additional payroll obligations that go beyond simply withholding state income tax. California requires employers to withhold State Disability Insurance (SDI) from employee wages and pay State Unemployment Insurance (SUI) and Employment Training Tax (ETT). New York has its own Unemployment Insurance, disability benefits requirements, and in New York City, an additional local income tax. New Jersey administers its own Family Leave Insurance and Temporary Disability Insurance programs.
On payslip requirements, there’s no federal mandate specifying a format, but most states require you to provide employees with written wage statements each pay period. What must appear on the statement, and in what format, varies by state.
The practical implication: before hiring in a new state, confirm which employer registrations you need, what additional taxes apply, and what your payslip obligations are. Getting this right from the first pay period is significantly easier than correcting it retroactively.
How an Employer of Record (EOR) handles us payroll
For companies hiring across multiple states, or entering the US market without an established legal entity, an EOR takes on the payroll and compliance obligations that would otherwise require internal teams and multi-state registrations.
The EOR becomes the legal employer of your US workers. They handle federal and state tax registration, payroll calculations, FICA contributions, federal income tax withholding, Form W-2 filing, new hire reporting in each relevant state, and compliance with state-specific payroll rules. You direct the day-to-day work; the EOR handles the compliance infrastructure.
This is particularly valuable when you’re scaling quickly across states, since each new state would otherwise require its own registration and ongoing compliance management. With EOR services, your team can hire in a new state without waiting to complete the registration process or building expertise in that state’s specific requirements.
RemotePass supports employers hiring US-based teams as part of a broader global workforce, so you can manage domestic and international payroll from a single platform. If you’re expanding your US hiring or managing compliance across multiple states, book a demo at remotepass.com/request-demo to see how RemotePass handles the complexity for you.
