Contractor Payroll in USA

Positioning a candidate internationally means navigating unfamiliar tax and payroll systems. Not only does this generally mean more work for you, but even small missteps can have serious financial or even legal consequences.

If you want to successfully place a contractor, you should first familiarize yourself with the contractor payroll process in USA, as well as how you can make the situation simpler.

Contractor Payroll in USA

Payroll options in USA

There are several different options for payroll in USA:

  • The client can provide payroll for the contractor, but not all clients offer this for temporary workers.  
  • The contractor can do it on their own, but this creates serious risk for the end client and possibly your agency, as well. Like most people, many contractors do not specialise in USA’s tax system, nor do they always have the time or means to pore over complex tax returns.
  • Your contractor can use a local payroll company.

The third option is the simplest and quickest. An even simpler and quicker option is to use an Umbrella Company, as they offer the same services as a local payroll provider in addition to other services that simplify international assignments (such as Work Permit sponsorship).

Check out our FAQ for specific quotes on payroll providers and Umbrella Companies. 

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Questions and Answers about Payroll in United States

Q: How does payroll work in United States?
A: Your employer (the company sponsoring your visa) pays the candidate on a monthly basis. They deduct social security - which is 7.75% for employers and 7.75% for employees. This reduces for earnings over USD 106,800 per year as OASDI (Old Age, Survivors and Disability Insurance) is only due on the first USD 106,800. They also deduct income tax - which is progressive and varies from 10-35% (plus local or state taxes which run from 0-11%) pendant on salary level and region. These deductions are made at source and paid to the United States tax authorities. Candidates are able to offset their taxable income with relevant business expenses. The World Bank estimates it takes employers in United States 55 man days to ensure compliance with payroll and labour taxes each year.

Q: What is the monthly cost to outsource payroll in United States?
A: If it’s straight pay-roll administration (so calculations only) it would be $30 per person per month.

Q: What is the estimated net retention for a contractor in United States earning USD 1000 per day?
A: It really depends on which state and which city the contractor is working in. If the Living Away from Home Allowance is applicable for the candidate an estimate would be 70%.

Q: What is the minimum salary required per month in United States when a candidate is sponsored on an Work Permit?
A: $6,000 USD per month but it is skill set dependent.

Client comment

"Great advice and excellent service on contracting and immigration solutions in the UK. I would highly recommend Tim and the team to assist you with accurate, clear and concise contracting advice in the UK or any other country for that matter."

Prishen Pillay,Global DBA Operations Lead

Shell International Trading & Shipping