Foreign food manufacturers and distributors expanding into the U.S. market face complex employment regulations that often differ widely from their home countries.
Here’s a summary of the most common employment and payroll compliance laws we’ve found foreign entities must navigate:
Employment authorization. U.S.-based employees must provide you with original documents proving identity and work authorization within the U.S. Employers must then complete a Form I-9 for each employee within three business days of hire.
As part of the authorization process, the E-Verify system is used to compare an employee’s I-9 information with their records at the Social Security Administration and Department of Homeland Security.
Federal and state payroll and tax obligations. Before hiring employees, foreign food companies must obtain an employer identification number (EIN) — a federal tax number for businesses and other entities. Federal tax requirements include income tax withholding, FICA taxes and Federal Unemployment Tax (FUTA) at 6% on first $7,000 of wages.
Employers must also provide file a Form W-2, Wage, and Tax Statement with the SSA and the IRS showing wages paid and taxes withheld from the employee. Each U.S. state maintains separate registration requirements for income tax withholding, unemployment insurance and disability insurance where applicable, so be alert for any multi-state pitfalls.
Workers’ compensation insurance. Workers’ compensation coverage requirements vary by state. Food operations, in general, may face elevated risks from industrial equipment, on-the-job hazards and cold storage environments, resulting in higher premiums.
Coverage typically includes medical expenses, lost wages and disability benefits for work-related injuries. Coverage thresholds depend on state requirements.
Workplace safety. Food manufacturing operations often trigger specific Occupational, Safety and Health Administration (OSHA) compliance requirements. Requirements may include machine guarding for food processing equipment and personal protective equipment for employees operating machinery.
Companies must also establish safety training programs, maintain injury and illness records, and post required OSHA notices at all worksites.
Wage and hour compliance. Food operations may involve irregular schedules and extended peak-season hours. The Fair Labor Standards Act (FLSA) requires overtime pay at 1.5 times regular rates for non-exempt employees exceeding 40 hours weekly.
Employers must also adhere to the federal minimum wage rate (currently $15/hr), but many states and localities set higher minimum rates. Proper classification of exempt versus non-exempt employees is also crucial, as misclassification can result in significant liability and penalties.
Benefits administration. Companies with 50+ full-time equivalent employees must provide ACA-compliant health insurance or pay penalties. Several states mandate additional benefits beyond federal requirements, including paid sick leave, paid family leave and temporary disability insurance.
While not legally required in all states, retirement benefits — like 401(k) plans, SIMPLE IRAs and SEP-IRAs — can help attract and retain skilled employees. Foreign companies should understand that U.S. retirement plans operate differently. For example, employer contributions may be tax-deductible and plans require annual testing to ensure compliance.
When your business crosses international borders
Compliance with these myriad requirements can be complex, to say the least — especially because they’re changing all the time. Many foreign entities find that partnering with U.S.-based tax and business advisory professionals helps them navigate these regulations more efficiently while avoiding costly missteps.
Whether you choose to build internal expertise or work with external specialists, staying current with federal and state requirements will help ensure your U.S. expansion gets off to a strong start.
To learn more, contact Magone & Company’s international food industry advisors today.
This document is for informational purposes only and should not be considered tax or financial advice. Be sure to consult with a knowledgeable financial or legal advisor for guidance that is specific to your unique circumstances.