There are two main ways to compensate service providers in the U.S.: as employees and as independent contractors.
The employees receive wages subject to payroll taxes. Employer’s expense on top of the wages is roughly 8%. Employee’s share of payroll taxes is 7.65% on the first $160,200 (for 2023, adjusted for inflation) and 1.45% each thereafter. The federal and state income tax withholdings are also made from the payment. Companies usually offer various benefits, such as health insurance and pension plans. The tax is paid on the gross wages without any additional deductions. If an employee makes business-related expenses on behalf of the company, such expenses are reimbursed separately. The popular ones are the auto expenses, home office, travel, and meals and entertainment.