This is a translation of the French article published by Maddyness. Click here to read the original version.
Expanding to the United States means adapting to a new environment. Understanding salary differences, anticipating hidden costs, and optimizing taxation are crucial steps to maximize your chances of success.
Establishing a presence in the U.S. is a major turning point for a French startup, particularly when it comes to defining salary policies. From the cost of living to the structure of compensation packages and local taxation, the differences with France are significant and often underestimated.
When a founder or employee relocates, their salary is often adjusted using the COLA (Cost of Living Abroad). "This adjustment compensates for differences in the cost of living between France and the United States. In New York City, for instance, a family man earning €100,000 to €150,000 in France might need $500,000 to maintain the same standard of living," explains Jacques Corre, Senior Manager at Orbiss.
Founders are Often Underpaid at the Start
Unlike in France, where a minimum salary is typically set from the beginning, U.S. founders often start with very low or even no compensation. "It’s a matter of priorities—the funds raised are first allocated to recruiting strategic talent. The founder, meanwhile, may begin with equity only," explains Jacques Corre.
In the early stages, it’s not uncommon for key employees to be better compensated than the founders. This is especially true for critical roles like Chief Technology Officer (CTO) or Vice President of Sales. "These talents are rare and expensive; they’re hard to recruit and retain," emphasizes Thibault Lunardelli, Senior Manager, Tax, at Orbiss.
However, this initial underpayment of founders evolves over time. As the startup raises more funds, founders adjust their salaries to align with market standards. "In France, this adjustment is often capped. In the U.S., it can be much more substantial," notes Jacques Corre. "In the U.S., salaries are primarily meant to ensure a comfortable daily life. For founders, real wealth comes from the value created when their company is sold," adds Thibault Lunardelli.
U.S. Taxation: Subtleties Not to be Overlooked
U.S. taxation poses a significant challenge for foreign companies. "The system is more complex than it seems," points out Thibault Lunardelli. In addition to federal taxes (ranging from 10% to 37%), each state applies its own taxes. In California, this additional tax can reach 12%. "This dual layer of taxation can surprise French founders accustomed to a unified system," he continues. However, some states, such as Texas or Florida, impose no income tax, offering a more favorable fiscal environment.
Taxation isn’t the only variable that changes by state; the cost of living is another crucial factor to consider when setting salaries. In Austin, Texas, the cost of living is nearly half that of Los Angeles or New York. "Family situations must also be taken into account. For example, a year at the French school in New York costs $50,000, while in Austin, it’s $25,000. These major differences must be factored in when determining salaries," stresses Jacques Corre.
Rigorous Planning to Avoid Pitfalls
Faced with these challenges, proper preparation is essential. "We always advise startups to conduct detailed simulations before expanding," shares Jacques Corre. These simulations should include salary package estimates that take into account cost of living, tax benefits, and social charges specific to each state.
The most common mistakes? Underestimating actual costs and ignoring local disparities. "Some founders aim to establish themselves simultaneously in New York, Chicago, and California without evaluating the necessary budget. However, unless significant funds have been raised, expanding in these regions simultaneously is often out of reach," warns Thibault Lunardelli.
Finally, beyond base salaries, companies need to develop comprehensive salary policies. In this context, benefits play a crucial role, as in the U.S., base salary is just one part of the overall compensation package. "Health insurance, for example, is a must-have for any competitive company. Without it, attracting talent will be nearly impossible," emphasizes Thibault Lunardelli. Here again, costs vary depending on family circumstances.