US Workforce Solutions

A PEO is an organization to which companies can outsource their HR administration, transferring the employer status from the company to the PEO in an arrangement known as co-employment. As the employer of record for the company’s employees, the PEO becomes responsible for performing employee administration tasks such as processing and paying payroll, managing benefits and withholdings, reporting and paying taxes under the PEO’s federal employer identification number (EIN), ensuring compliance of HR processes, and keeping appropriate records.

Beyond the advantages for the companies, employees also gain from co-employment through access to high quality and cost-effective benefits such as health and dental insurance, as PEOs are often able to negotiate better deals with benefits providers.

While the PEO participates in a co-employment agreement and typically shares liability with the employer company, the EOR employs on behalf of a company and becomes fully liable for tax and legal purposes. See this for more details on EoR vs PEO

US payroll is unique in its structure and requirements when compared to other countries. Some of the factors that contribute to its distinctiveness are the US’ complex tax system, varying state and local labor laws, employment classification, “at-will” employment, and document retention guidelines.

For more information, check out our How Leading Firms Manage US Hiring webinar.

In the US, there are strict regulations regarding the classification of workers as either employees (also known as W-2 employment) or independent contractors (also know as 1099 employment), and each classification has its own specificities. Misclassification can lead to significant legal and financial consequences, making proper classification a crucial aspect of payroll management.

The key difference between having employees in your payroll or working with a PEO is that in the first scenario, you are the employer, and are therefore responsible for all payroll operations.

In the PEO model, you and the PEO are co-employers. The PEO becomes the employer of record for your employees and is therefore responsible for processing and paying payroll, benefits and withholdings, reporting and paying taxes under its own federal employer identification number (EIN), ensuring compliance of HR processes, and keeping appropriate records.

Most US employment is “at-will”, meaning that an employer or employee can end the employment relationship at any time for any reason, if the termination is not illegal or discriminatory.

The employment contracts of executives and other highly skilled individuals often incorporate a “just-cause termination clause,” which mandates that termination may only take place for “cause” and lists the permissible grounds. In such cases, the parties negotiate a “termination and release agreement” to outline the terms of termination, including a “just cause”.

For more information on termination in each of the US states, check out our CountryPedia.

The most common benefits expected by US employees are the following:

Health and dental insurance: Full-time employees typically expect to be provided access to health and insurance coverage, which can be provided through group health insurance plans. In many states, these benefits are mandatory. According to Forbes Advisor, 67% of employees believe this to be the most important benefit.

Life insurance: 45% of employees name life insurance as a top benefit, which can also be provided through group health insurance plans.

Retirement plans: Offering retirement benefits such as a 401(k) plan can be attractive to full-time employees and help with talent retention. In certain states, the 401(k) is mandatory.

Paid time off (PTO): Although not mandatory in every state, full-time employees often expect paid vacation, sick leave, and holidays. The company should determine the appropriate PTO policies in compliance with US labor laws.

For more details visit our US countrypedia page.

The selection of a benefits provider is no easy task, especially considering rising vendor choices. Some of the key considerations when selecting a benefits provider are:

• The range of benefits and the range of the network offered by the provider
• The cost structure of the benefits packages
• Customer service and support towards employer and employees
• Tech infrastructure, reflected through automated, adaptable, scalable, and easy-to-use benefits platforms
• Data insight features for benefits-related decision making
• Compliance and data security

When structuring your company’s benefits packages for US employees, you must consider a combination of legal requirements and optional components to ensure an attractive, comprehensive, and compliant offering. Some of those elements are:

Tax Implications: Be sure you understand the tax implications of different benefits, whether they’re taxable, pre-tax, or tax-deductible. Be prepared to handle tax withholding accurately to prevent issues for both employees and the company.

Mandatory Benefits: Some benefits, such as Social Security, Medicare, and workers’ compensation are required by law. Compliance with these mandatory benefits is essential to avoid legal penalties.

Non-Discrimination: Benefits packages must be non-discriminatory and accessible to all eligible employees regardless of factors like age, gender, or other protected characteristics. They must also pass the IRS’s non-discrimination testing which ensures all employees are receiving fair compensation.

Papaya’s payment platform supports payroll payments in all 50 states.

As a cross-border payment provider, it is critical for us to make sure your employees receive their salary in the currency of their choice. Papaya is licensed to accept funds in over seven different currencies including EU and USD, and can pay out in any currency your worker prefers.

Papaya offers a comprehensive yet efficient KYC process that is streamlined and owned by a dedicated team – and completed in one to seven days.

Papaya Global is a regulated financial institution and its acquisition of payment remittance technology company Azimo provided access to an extensive payroll payments coverage network in more than 160 countries.

Our partnership with J.P. Morgan and Citibank’s payments processing solutions powers Papaya Global’s fully automated, regulated, and transparent software solution.