Paper Trails

Temporary Foreign Workers: H-2B and J-1’s

Maine is one of many states that relies heavily on the influx of temporary foreign workers during the tourist season. These workers help staff seasonal businesses such as restaurants, hotels, fisheries, landscapers and more. Foreigners can apply for different types of visas to enter and work in the United States for a specific period of time. The most common visas for foreign workers are H-2B and J-1 visas. Let’s compare these types of temporary foreign workers and take a look at what businesses need to do to stay compliant.

Temporary work visas

There are many different types of work visas provided by the U.S. Department of Homeland Security each year. The two visas that seasonal businesses in Maine deal with most frequently are H-2B and J-1 visas.

H-2B Visa

A H-2B visa is provided to a “skilled” or “unskilled” worker. This type of visa is required by an employee to perform a job that is temporary or seasonal in nature and for which there is a shortage of U.S. workers. The employment of this foreign worker must be temporary in nature and the person cannot be looking for immigration status.

The United States makes 66,000 H-2B visas available to employers each year. Due to the labor shortages that many industries are currently facing, the U.S. Department of Homeland Security added an additional 35,000 H-2B visas for 2022.

Additional H-2B visa requirements include:

  • The employer has requested and been granted H-2B Registration by DOL.
  • Workers must be paid at least federal or state minimum wage, whichever is greater.
  • Job opportunities must be a full-time, temporary position of at least 35 hours per workweek.
  • The employer must make all deductions from workers’ paychecks required by law.
  • Accurate records of workers’ earnings, hours of work offered, and hours actually worked must be kept.
  • Employers must either advance all visa, border crossing, and visa-related expenses to H-2B workers, pay for them directly, or reimburse all such expenses in the first workweek.
  • A DOL-provided poster detailing H-2B workers’ rights must be posted at each worksite.
  • Retain all documents pertaining to the Application and Registration, the recruitment-related documents, the payroll records, and related documents for 3 years.
  • The maximum period of stay in H-2B classification is 3 years.

J-1 Visa

J-1 Visa, also known as the Exchange Visitor Program, is used to facilitate scientific, cultural, and educational exchange.  Anyone looking to apply for a J-1 visa must have prearranged employment, training, or research established. Consequently, these visas cannot be used for ordinary seasonal employment as the applicant must have previous training and experience in the field.

The main category of J-1 visas that seasonal businesses take advantage of comes from the Summer Work and Travel program. This program allows full-time college or university students to come to the U.S. to receive this additional training and work experience.

The United States issues approximately 300,000 J-1 visas each year.

Additional J-1 visa requirements include:

  • Employers must develop a Training/Internship Placement Plan, Form DS-7002.
  • Workers must be paid at least federal or state minimum wage, whichever is greater.
  • Provide a minimum of 32 hours of work per week.
  • Must notify the sponsor organization if there are any changes to the program such as pay, training, supervisors, etc.
  • The maximum period of stay in the Summer and Work Travel program is 4 months.

How businesses stay compliant with H-2B and J-1 visas

As an employer, it is important to know the rules surrounding foreign workers for your business to stay compliant. From a payroll standpoint, employers must pay at least minimum wage to foreign workers with either type of visa. In addition, foreign employees must also receive overtime pay for any hours worked over 40 hours in a given 7 day period.

Foreign workers are also subject to certain payroll tax requirements. In terms of taxes, H-2B and J-1 workers are treated differently. Let’s take a look.

Taxes for H-2B visas

Employers must withhold and match certain taxes for these visa holders.

  • Federal income tax
  • State income taxes where applicable
  • FICA taxes, which is divided up between Social Security and Medicare
  • Employers must match FICA taxes for H-2B workers
  • Employers also pay FUTA and SUTA taxes on each H-2B worker

To summarize, H-2B workers pay the same taxes as U.S residents but cannot collect company benefits.

Taxes for J-1 visas

J-1 workers are categorized as resident or nonresident based on the Substantial Presence Test. Generally, a J-1 alien who spends 122 days in the U.S. in each year of the 3-year period will meet the Substantial Presence Test for the current calendar year and be considered a U.S. resident. Most Maine employers employ nonresident J-1 workers and they are not subject to FICA taxes.

Resident J-1’s

  • Federal income tax
  • State income taxes where applicable
  • FICA taxes, which is divided up between Social Security and Medicare
  • Employers must match FICA taxes for resident J-1’s
  • Employers also pay FUTA and SUTA taxes on resident J-1’s

Nonresident J-1’s (the majority of Maine businesses deal with these visas)

  • Federal income tax
  • State income taxes where applicable
  • DO NOT pay FICA
  • Employers DO NOT match FICA or pay FUTA or SUTA

Paperwork requirements

Since both H-2B and J-1 workers are required to pay federal and state income taxes, they must complete the Form W-4. In addition to the W-4, these employees must complete a Form I-9. As with other employees, employers should be sure to maintain records of these documents in case of audit.

At year end, employers must provide a Form W-2 to each H-2B and J-1 worker. Additionally, employers must report the wages paid to these employees on Form W-3 no later than January 31st of the following year.