Foreign investors must know labor regulations before opening a shop in the United States. Below are a few things that foreign investors should know before hiring US employees.
- Equal Opportunity: U.S. law prohibits discrimination based on race, color, sex, religion, or national origin. Additionally, sexual harassment in the workplace is considered discriminatory and is, therefore, illegal. Discrimination against workers between the ages of 40 and 70 is prohibited. Equal pay must be provided to workers performing identical jobs regardless of sex.
- The U.S. Department of Labor (DOL) oversees working conditions, retirement and healthcare benefits, collective bargaining, unemployment insurance, workplace safety, wage and hour regulations, and the collection of economic statistics. DOL programs are administered by component agencies and offices, including regional offices network; field, district, and area offices; and grantees and contractors. The Internal Revenue Service oversees the taxation and collection of compensation and social taxes.
- Occupational Safety and Health Administration: The Occupational Safety and Health Act (OSHA) of 1970 addresses workplace safety and health threats, such as toxic chemical exposure, excessive noise levels, mechanical dangers, heat or cold stress, and unsanitary conditions. The act also provides for workplace safety research, information, education, and training. The Occupational Safety and Health Administration issues and enforces standards to prevent work-related injuries, illnesses, and deaths.
- Minimum Wage: Most employers are subject to the minimum wage provisions of the federal Fair Labor Standards Act (the Act). The federal minimum wage is currently $7.25 per hour and is mandatory for all employees covered by the Act. Most of the states establish their own, usually higher, minimum wage requirements.
- Payroll Taxes: The federal government imposes payroll taxes, including Social Security and Unemployment Insurance taxes. Employers are responsible for paying the employer’s share of payroll taxes, withholding and depositing tax dollars withheld from the employees’ paychecks, and preparing and filing payroll tax returns. Most of the states and some of the localities also impose payroll taxes (school district taxes, state disability, or unemployment insurance). When hiring non-resident aliens, knowing that the United States has entered into Totalization Agreements with several nations to avoid double income taxation concerning social security taxes is essential.
For more information about setting up a US company or hiring US employees, contact LSL CPAs at 714.569.1000.
By Summer Zhu, CPA
