U.S. Compensation and Benefits: How to Build a Competitive Offer

How U.S. pay is quoted

In the United States, salaries are quoted as an annual gross base salary in U.S. dollars, before federal, state and local income taxes and before the employee's share of Social Security and Medicare (FICA). Nothing else is folded into that number, and everything else is discussed separately: annual bonus or commission target, long-term incentives, benefits, paid time off and any sign-on or relocation payment.

Payroll is usually biweekly (26 pay periods) or semi-monthly (24). Your payroll provider or PEO sets this up (see Payroll).

What does not exist in the U.S.

• No 13th or 14th month. There is no tredicesima or quattordicesima. An Italian RAL paid in 14 installments simply becomes one annual figure, paid in 24 or 26 equal installments. A "year-end bonus" in the U.S. is a performance or discretionary bonus, not deferred salary.
• No TFR. There is no mandatory severance accrual. The closest equivalents are the employer 401(k) contribution (retirement savings) and any severance you choose to offer on termination (see Exits).
• No CCNL minimums. Outside unionized workplaces, there are no sector wage tables or automatic increases. The only floors are federal, state and city minimum wages and the salary thresholds for overtime exemption (section 6).

2026 salary benchmarks by role and region

The table below shows indicative 2026 base salary ranges (excluding bonus, commission and benefits) for the roles Italian manufacturers, machinery and technology companies most often hire when opening a U.S. subsidiary. Ranges assume a mid-market employer (a subsidiary of roughly 10 to 250 U.S. employees) and a hire with the experience the title normally implies. They are Cygic estimates that triangulate the Bureau of Labor Statistics Occupational Employment and Wage Statistics (OEWS) for May 2025, released on May 15, 2026, with survey data such as the Robert Half 2026 Salary Guide and current placement data, then adjusted for each metro area's labor market.

Useful BLS anchors (national annual mean wages, May 2025): sales managers $164,350; marketing managers $177,770; general and operations managers $134,940; customer service representatives $46,590. BLS means include very large employers, so marketing and sales manager figures run above what a 30-person subsidiary usually pays. Robert Half's 2026 national range for an HR generalist is $66,000 to $88,500 with a midpoint of $74,000.

How to read the table

• Total cash is higher. Add a bonus target of 20% to 40% for a country manager, 10% to 20% for plant managers, controllers and marketing managers, and commission for sales roles (section 4). A sales director at $190,000 base typically has an on-target earnings (OTE) figure of $260,000 to $320,000.
• New York metro includes northern New Jersey and Fairfield County, Connecticut. Manhattan headquarters roles sit at the top of the range; plant and service roles in New Jersey usually sit in the middle.
• Houston pays a premium for engineering and field service talent because it competes with energy and petrochemicals. Atlanta is generally the most cost-effective of the five for commercial and back-office roles.
• Field service engineers and customer service staff are often non-exempt (entitled to overtime), so actual earnings can exceed base by 10% to 25% in busy years. Budget for it.

Salary increase budgets for 2026 and 2027

U.S. employers set an annual "merit budget" as a percentage of payroll and distribute it according to performance. The three major surveys converge on a stable picture:

• WTW: U.S. salary increase budgets averaged 3.5% in 2026 (actual), with 3.4% projected for 2027 (Salary Budget Planning Report, July 2026).
• Mercer: projected 2026 merit increases of 3.2% and total increases (merit plus promotions and adjustments) of 3.5%, matching 2025 actuals (December 2025). Its August 2026 QuickPulse projects the same 3.2% merit and 3.5% total for 2027.
• The Conference Board: median budgets of 3.5% in 2026 (actual) and 3.5% projected for 2027 (September 2026).

In practice, a 3.5% budget is often split into about 3.0% to 3.2% for merit and 0.5% for promotions and market adjustments. Top performers commonly receive 5% to 7%, average performers about 3%, and low performers zero.

Bonuses, commissions and sales compensation design

Annual bonus (short-term incentive)

Most professional and managerial roles have an annual bonus target expressed as a percentage of base. Typical mid-market targets: country manager 25% to 40%; directors 15% to 30%; managers 10% to 15%; professionals 5% to 10%. Payout is usually based on a mix of company results (U.S. revenue, EBIT or contribution margin) and individual goals, with a threshold (for example no payout below 80% of target), and a cap (often 150% to 200% of target).

• Discretionary vs. nondiscretionary. A bonus promised on the basis of objective criteria is "nondiscretionary". For non-exempt employees, it must be added to the regular rate used to calculate overtime. A truly discretionary bonus is not.
• Timing and 409A. Pay annual bonuses by March 15 of the year after the performance year to stay within the "short-term deferral" exception to Section 409A (see section 5).

Sales compensation: OTE, pay mix and accelerators

Sales roles are quoted as OTE (on-target earnings): base salary plus target incentive at 100% of quota. The split between base and variable is the pay mix.

• 50/50 is common for pure new-business "hunters" with short sales cycles (for example, a $150,000 OTE made of $75,000 base and $75,000 target commission).
• 60/40 or 70/30 is typical for account managers who grow an existing customer base, and for capital equipment sales with 6 to 18 month cycles.
• 75/25 to 85/15 suits technical sales, applications engineers and sales directors whose influence on individual deals is indirect.

Accelerators raise the commission rate above 100% of quota, for example 1.5x the base rate between 100% and 125% and 2x above 125%. Decelerators or a threshold (no commission below 50% or 70% of quota) protect the company. Uncapped plans are the norm and a strong recruiting argument; if you cap, say so up front. New hires often receive a draw (guaranteed minimum commission) for 3 to 6 months, either non-recoverable or recoverable against future commissions.

• Put it in writing. California (Labor Code 2751) and New York (Labor Law 191) require written commission agreements that explain how commissions are calculated and paid. Many other states have similar rules or sales representative statutes.
• Define "earned". Specify whether commission is earned at order, shipment, invoice or cash receipt, and what happens on termination, returns and credit notes. Unpaid earned commissions can trigger penalties, including double or treble damages in some states.

Equity and long-term incentives at subsidiaries of foreign parents

Senior U.S. candidates, especially those from American corporations or venture-backed companies, expect a long-term incentive (LTI). A U.S. subsidiary of a private Italian group usually has no tradable shares, and a listed parent may not want to extend its plan across the Atlantic. There are three main options.

1. Parent share plan. If the parent is listed (for example on Euronext Milan), U.S. employees can join the group plan. You will need a U.S. securities law exemption or registration and a U.S. tax sub-plan; stock options must be granted at no less than fair market value to avoid Section 409A problems.
2. Phantom stock or stock appreciation rights (SARs). Units that track the value of the parent or the U.S. subsidiary and pay in cash. No dilution, no shareholders' agreement, and no foreign securities issues. Payouts are taxed as ordinary income, and the plan must specify how value is measured (formula, EBITDA multiple or an independent valuation).
3. Cash LTIP. A three-year performance plan (for example U.S. revenue growth and EBIT margin) with a target of 20% to 50% of base for the country manager and 10% to 25% for other leaders, paid at the end of the cycle. It is simple to explain and easy to link to the business plan.

Section 409A in one paragraph

Internal Revenue Code Section 409A governs "nonqualified deferred compensation": any right earned in one year and paid in a later year. Non-compliant arrangements trigger immediate taxation of vested amounts, a 20% additional federal tax and interest, all on the employee. The two common safe harbors are: (1) the short-term deferral rule, paying within two and a half months after the end of the year in which the award vests; and (2) a plan that pays only on fixed dates or 409A-permitted events (separation from service, change in control, death, disability). Stock options and SARs are exempt only if the strike price is at least fair market value at grant, which is why U.S. companies obtain a "409A valuation".

Exempt salary thresholds in 2026

Under the Fair Labor Standards Act (FLSA), employees are non-exempt (entitled to 1.5x pay for hours over 40 per week) unless they pass both a duties test (executive, administrative, professional, certain computer and outside sales roles) and a salary test. The Department of Labor's April 2024 rule, which would have raised the federal threshold to $1,128 per week from January 2025, was vacated nationwide by a federal court in Texas in November 2024. The operative federal threshold is again the 2019 level: $684 per week ($35,568 per year), and $107,432 for the highly compensated employee test. Watch for any new DOL rulemaking.

Several states set much higher thresholds, and the higher standard always applies:

Practical consequences: in California and Washington, a customer service coordinator or junior HR generalist paid $65,000 cannot be exempt, whatever the title. Field service engineers who mainly install and repair equipment frequently fail the duties test even when well paid, and should be treated as non-exempt with time tracking. Misclassification claims are among the most common and expensive lawsuits in the U.S. (see Compliance).

Benefits and total rewards cost

Health insurance

Employer-sponsored health insurance is the centerpiece of any U.S. package. According to the KFF 2025 Employer Health Benefits Survey, average annual premiums reached $9,325 for single coverage and $26,993 for family coverage, up 5% and 6%. Workers contributed on average $1,440 (16%) and $6,850 (26%), so employers paid about $7,885 and $20,143 respectively. The average single deductible was $1,886. Employers with 50 or more full-time equivalents face Affordable Care Act penalties if they do not offer affordable coverage; smaller subsidiaries are not obliged but will struggle to hire without it. Many first-time entrants access large-group rates through a PEO (see Benefits).

Retirement: 401(k)

2026 IRS limits: employee deferrals up to $24,500; catch-up of $8,000 at age 50 and over; "super catch-up" of $11,250 for ages 60 to 63 if the plan allows; combined employee and employer contributions up to $72,000. From 2026, catch-up contributions by employees whose prior-year FICA wages exceed about $150,000 must be made as Roth (after-tax) contributions (verify the indexed figure with your provider). Common match formulas are 100% of the first 3% to 4% of pay, or 50% of the first 6%; Vanguard's How America Saves 2026 reports an average employer contribution of about 4.7% of pay.

Paid time off, holidays and parental leave

• PTO. There is no federal vacation entitlement. Market practice for professionals is 15 to 20 days of vacation or combined PTO, 20 to 25 for senior managers, plus 10 to 11 paid holidays. Many states and cities (CA, NY, NJ, IL, MA, WA, CO and others) require paid sick leave, usually about 40 to 56 hours per year.
• Parental leave. The federal FMLA provides 12 weeks of unpaid job-protected leave for employers with 50 or more employees. Paid family leave comes from state programs in 14 states plus D.C. (including CA, NY, NJ, MA, WA and CO), funded by payroll contributions. SHRM's 2026 Employee Benefits Survey finds that 46% of employers offer paid parental leave; competitive employers top up to 100% of pay for 8 to 16 weeks for birthing parents and 4 to 8 weeks for other parents.

Other benefits and perks

Dental and vision, life and disability insurance, an employee assistance program, HSA or FSA accounts, commuter benefits (mandatory in New York City for employers with 20 or more employees), phone and car allowances for field roles, and tuition assistance (up to $5,250 per year tax-free).

Typical package and employer cost

Illustrative annual employer cost for an employee on a $100,000 base salary with family health coverage:

Total rewards multipliers

The Bureau of Labor Statistics Employer Costs for Employee Compensation (June 2026) shows that for private-industry full-time workers, wages and salaries are 68.5% of total compensation and benefits 31.5% ($54.00 per hour in total). That implies total cost of about 1.46x wages, although the BLS benefit figure includes paid leave and supplemental pay such as bonuses. For budgeting, Cygic suggests these rules of thumb on top of base salary (excluding bonus): 1.20x to 1.25x for a single employee with lean benefits; 1.35x to 1.45x for a family-covered professional; and 1.25x to 1.30x for executives above the Social Security wage base, where health costs are a smaller share.

Pay equity and pay transparency

The federal Equal Pay Act (1963) requires equal pay for men and women doing substantially equal work in the same establishment, and Title VII prohibits pay discrimination based on race, color, religion, sex, national origin, and other protected traits. States go much further:

• California, New York, New Jersey, Massachusetts, Illinois, Washington and Colorado require equal pay for "substantially similar" or "comparable" work, often across all protected characteristics and, in some cases, across locations. New Jersey's Diane B. Allen Equal Pay Act allows a six-year lookback and treble damages.
• Pay data reporting: California (100+ employees), Illinois (Equal Pay Registration Certificate for 100+ employees) and Massachusetts (100+ employees) require periodic reporting of pay by job category, sex and race or ethnicity.
• Salary history bans: many states and cities, including CA, NY, NJ, MA, IL, WA and CO, prohibit asking applicants about current or past pay.
• Pay range disclosure in job postings: in force in 13 states plus D.C. as of 2026, including California (15+ employees), Colorado (all), Illinois (15+), Massachusetts (25+, since October 2025), Minnesota (30+), New Jersey (10+), New York (4+), Vermont (5+), Washington (15+), and Virginia and Maine (since July 2026). Delaware follows in September 2027.

Cost-of-living differentials and relocation packages

Compensation varies considerably by location. U.S. companies distinguish cost of labor (what the local market pays for a role) from cost of living (prices, above all housing). Salary structures should follow cost of labor. As a rule of thumb, compared to the national average, the New York and San Francisco Bay areas pay 15% to 30% more; Los Angeles, Boston and Seattle 10% to 20% more; Chicago about 5% more; Houston and Atlanta around the national level; and smaller Southeast and Midwest markets 5% to 15% less.

Domestic relocation packages

• Mid-level professionals: a lump sum of $5,000 to $15,000 is common.
• Managers and executives: managed relocation with household goods shipment, 30 to 90 days of temporary housing, a house-hunting trip and sometimes home sale or purchase closing costs; $30,000 to $100,000 or more for a homeowner family.
• Tax: moving reimbursements are taxable income for the employee under federal law (the former exclusion was suspended in 2018 and the suspension was made permanent in 2025). Companies often "gross up" to cover the tax.
• Repayment: prorated repayment if the employee leaves within 12 to 24 months was common, but check state restrictions (for example California's 2026 rules) with counsel.

Sending Italian staff to the U.S.

For expatriates, typical elements include a cost-of-living or housing allowance, school fees, home leave, tax equalization and a U.S. health plan. The U.S.-Italy Social Security totalization agreement can keep an Italian national posted by an Italian employer in INPS with a certificate of coverage, without the five-year limit found in other U.S. agreements, avoiding double contributions. Visa strategy drives timing: Cygic does not provide immigration or tax advice but can connect you with immigration attorneys and cross-border CPAs (see Immigration and Tax treaty).

Practical guides

Frequently asked questions