Expanding to the US: Take a Look at Key US Payroll Impacts (Clayton & McKervey)

Business Opportunities
July 27, 2021 - Clayton & McKervey PC

This is a Thought Leadership article by North American PrimeGlobal member firm Clayton & McKervey. In this article Clayton & McKervey take a look at the key U.S payroll impacts when expanding in the U.S.

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Expanding to the U.S. is both exciting and daunting. Whether becoming compliant with unique legal standards or satisfying the cultural expectations of the U.S. workplace, executing a successful U.S. expansion can present challenges to even the most empowered businesses. Reviewing these key U.S. payroll considerations and related human resource matters is a great place to start.

Payroll from an accounting perspective

We have been working with foreign companies expanding to the U.S. for decades but leave payroll solutions to experts in the field. However, we do have plenty to say on the topic due to the tax and accounting impacts. As international expansion consultants, we see how operational decisions like payroll impact the business in the short and long term. In early stage expansion, owners need guidance to avoid costly mistakes and lost time. We have relationships with payroll providers and can help you determine the best solution.

Why is payroll so crucial to your expansion plan?

Here are some reasons why payroll should be a priority when planning a U.S. expansion.

1. Attraction of workforce

Whether starting your U.S. expansion with a sole employee sales office or with many employees for a manufacturing or distribution operation, you need to attract the best workforce. Offering competitive compensation and benefit packages is a key factor. The level of compensation and expected benefits could vary from what you would offer to employees in your home country. Failing to understand this at the beginning of your recruiting process could cost you valuable time or top candidates.

2. Different U.S. requirements

U.S. employer requirements will always be different from your home country. There will be legal requirements from various governmental agencies in addition to customary practices which will be important to understand to attract and retain employees. It will be difficult to know and meet all U.S. requirements by relying on the human resources department in your foreign company. You also cannot assume your accountant or payroll provider will handle your U.S. human resource needs unless they specifically offer those services. Therefore, it is important to understand and plan for the resources needed as a U.S. employer.

3. Expatriate employees

Many foreign companies expanding to the U.S. need to utilize employees from their home country to successfully establish their U.S. operations. Even before the travel restrictions of COVID-19, you needed to factor in time to obtain a visa for expatriate employees to live and work in the U.S. Additionally, a comprehensive five-year business plan is needed for a visa application which many companies do not have readily available. For shorter term utilization of foreign employees in the U.S., there are still tax consequences and exceptions to protect them from U.S. taxation for the period they are working in the U.S. The ability to attract U.S. employees and the time it takes to utilize expatriate employees in the U.S. requires knowledge and planning to establish and grow your U.S. operation.

Planning a U.S. expansion is exciting, but it requires a lot of work. Understanding U.S. payroll and related HR matters is a great place to start. Seeking information and advice from U.S. providers during the planning stage of your expansion will help you avoid unnecessary mistakes, while saving you time and money as you establish your U.S. operations.

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Clayton & McKervey PC

Headquartered near the international border of the U.S. and Canada, Clayton & McKervey is a Detroit-based, full-service accounting and business advisory firm focused on global business. The firm’s clientele includes closely held, middle-market, growth-oriented companies. Since 1953, Clayton & McKervey has created a strong reputation, both domestically and internationally, with four types of clients, U.S. entities with operations in other countries, foreign entities expanding to the U.S., businesses with international growth plans and clients in need of transfer pricing service.

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