An Employer of Record (EOR) is the legal employer for workers. It handles HR responsibilities like payroll, taxes, and compliance while the company directs the employees’ day-to-day tasks. This setup allows businesses to hire globally without establishing a local entity.
Hiring workers from the United States offers benefits due to their high level of education, technical skills, and innovation capabilities. The US is recognized for its strong technology, finance, and entrepreneurship talent.
According to the US Bureau of Labor Statistics, employment in the United States has grown, reaching 60.4% in April 2023. However, there are still challenges in hiring talent due to skills gaps in certain industries and geographic areas.
To use an EOR in the United States, there are 6 basic steps to ensure you are set up properly.
- Find talent to hire in the United States
- Compare using an EOR to setting up a legal entity in the United States
- Get the information needed from your talent
- Choose an EOR provider with expertise in the United States
- Communicate your hiring needs to the EOR
- Have the EOR set up the contracts and hiring procedure
An EOR manages payroll, taxes, and benefits administration, ensuring compliance with local laws and regulations, thus simplifying the employment process for companies.
Different labor laws in the United States, such as those governing work hours, termination processes, and employee benefits, must be considered when hiring remotely. The hiring process in the US involves identifying talent, ensuring compliance with local employment laws, and executing contracts, typically facilitated by an EOR for companies without a local presence.
1. Find talent to hire in the United States
Businesses should leverage a mix of online platforms, professional networks, and recruitment agencies to find talent to hire in the United States. LinkedIn remains a crucial tool for talent acquisition in the US, allowing companies to search for candidates actively seeking opportunities and to headhunt passive candidates.
Job boards like Indeed, Glassdoor, and Monster are popular among American job seekers and offer extensive listings across various industries. With its AI-powered matching technology, ZipRecruiter is another effective platform for connecting employers with suitable candidates.
For tech talent, specialized platforms like Dice or Stack Overflow Jobs can be particularly useful. Industry-specific job boards and professional associations can also be valuable resources for finding specialized talent.
Recruitment agencies with expertise in the US market, such as Robert Half or Adecco, can provide tailored solutions for companies seeking to navigate the complexities of the American job market.
2. Compare using an EOR to setting up a legal entity in the United States
When working with employees in the United States, you need to consider working with an EOR to set up your own legal entity. An Employer of Record offers a quicker, less complex route to hiring local staff, bypassing the need for a formal company presence. This approach suits companies looking to test the US market or expand quickly without significant upfront investment.
An EOR manages all local employment laws, tax, and compliance issues, assuming responsibility for hired employees. This setup allows companies to start operations in weeks, compared to the months required to establish a legal entity.
On the other hand, setting up a legal entity in the United States offers greater control and the ability to customize business operations and policies. However, establishing a legal entity involves complex registration processes, significant upfront fees, and a deeper understanding of local laws and tax regulations.
Here’s a comparison of key factors:
| Factor | Employer of Record | Setting Up Legal Entity in USA |
|---|---|---|
| Setup Time | 1-2 weeks | 2-3 months |
| Initial Cost | Low (typically only employee costs) | High ($5,000 – $10,000+) |
| Ongoing Cost | Moderate (EOR fees + employee costs) | Variable (operational costs, compliance, etc.) |
| Complexity | Low (EOR handles most administrative tasks) | High (requires understanding of US business laws) |
| Control over Operations | Limited (company directs daily work, EOR handles employment) | Full (complete control over all aspects of business) |
| Compliance Management | Handled by EOR (payroll, taxes, social security) | Company Responsibility (requires local expertise) |
| Scalability | Highly Flexible (easy to add or remove employees) | Less Flexible (changes may require legal procedures) |
| Local Expertise Required | Minimal (EOR provides guidance) | Extensive (need for local legal and tax advisors) |
| Suitable for | Market entry, testing US market, short to medium-term projects | Long-term presence, full operations, strategic expansion |
| Risk | Lower (EOR assumes employer liabilities) | Higher (company bears all legal and financial risks) |
3. Get the information needed from your talent
To hire employees in the United States you need some information about them. Typically, you’ll need the following essential personal information:
- Employee’s full name
- Social Security Number (SSN)
- Address
- Date of birth
- Bank account details for direct deposit
Additionally, you’ll need a comprehensive job description, including title, duties, and place of work. Employment contracts in the US should detail the contract type, start date, salary, work hours, and other employment conditions.
Employers must also collect Form I-9 to verify the employee’s identity and employment authorization and Form W-4 for federal income tax withholding.
4. Choose an EOR provider with expertise in the United States
When choosing an EOR provider to work within the United States, selecting one with deep expertise in the US market and a strong understanding of federal and state labor laws to ensure compliance and smooth business operations is crucial.
Evaluate the provider’s experience managing employee onboarding, payroll, and legal compliance across different states in the US. Look for a provider with a proven track record of working successfully with companies similar to yours, and check their reputation through client case studies or reviews.
Assess the range of services offered to see if they align with your needs, such as multi-state compliance, employee benefits management, and payroll processing. It’s important to choose a provider that offers comprehensive employment services and is flexible enough to adapt to changes in US labor laws, which can vary significantly by state.
Consider the provider’s technology and platforms, ensuring they offer secure, user-friendly systems with strong data protection measures. Evaluate their pricing models, look for transparency in fees, and assess the cost-effectiveness of your business.
What are the best EOR providers to use in the United States?
When considering EOR providers for hiring in the United States, several companies stand out for their comprehensive services and expertise in navigating the complex U.S. labor market. Here’s a table of top EOR providers and why they’re well-suited for operations in the United States:
| EOR Provider | Why It’s a Good Fit for the United States |
|---|---|
| Deel | – Extensive experience in the U.S. market – Offers tailored solutions for different states’ regulations – Provides robust compliance support for federal and state laws |
| Remote | – Comprehensive coverage across all 50 states – Strong focus on tech industry needs – Offers competitive benefits packages tailored to U.S. standards |
| Rippling | – Integrated HR, IT, and Finance platform – Specializes in multi-state compliance – Provides advanced payroll features for U.S. tax complexities |
| Oyster HR | – User-friendly platform for managing U.S. employees – Offers detailed state-by-state compliance guidance – Provides support for equity compensation, crucial for U.S. startups |
| Remofirst | – Competitive pricing structure – Offers specialized support for hiring in multiple U.S. states – Provides dedicated account managers familiar with U.S. employment laws |
These EOR providers offer services tailored to the unique challenges of hiring in the United States, including multi-state compliance, competitive benefits administration, and navigating the complex U.S. tax system.
5. Communicate your hiring needs to the EOR
Communicating your hiring needs to the EOR to ensure the process aligns with your company goals and legal requirements is important. Provide a detailed job description, including the title, responsibilities, required qualifications, and skills.
Specify the job’s expected start date, location (including whether it’s remote or onsite), and any state-specific requirements. Outline the proposed salary, bonuses, commission structures, and other compensation benefits, considering variations in living costs and wage laws across US states.
Clarify the contract terms, including whether it’s a full-time or part-time position, and detail the working hours, including any flexibility or shift requirements. Discuss your company culture, growth plans, and how the position fits into future expansion.
By accurately representing these aspects, the EOR can find the right talent and ensure legal and administrative compliance across different US states.
6. Have the EOR set up the contracts and hiring procedure
Once you have chosen which provider to work with and communicated your hiring needs, the EOR will set up the contracts and hiring procedure, ensuring compliance with federal and state labor laws and employment practices.
The EOR drafts employment contracts that adhere to US labor laws, including specific terms regarding job details, working hours, and termination procedures. They’ll manage the necessary documentation for tax, social security, and payroll setup, adhering to mandatory withholdings and reporting requirements.
The EOR assists in obtaining work visas for foreign employees if necessary, collects personal and bank account information for payroll, and outlines the onboarding procedures under US employment laws. They’ll ensure your company complies with federal and state-specific regulations and adjust contracts and practices as laws change.
Additionally, the EOR administers benefits and handles formal onboarding, including the introduction to company systems and culture, ensuring a smooth start for your new US-based employees.
What help does an EOR provide in US payroll, taxes, and benefits administration?
The EOR will support all United States payroll, taxes, and benefits administration, ensuring compliance with complex federal and state laws. It calculates and processes employee salaries, withholds the correct tax amounts, and handles social security contributions.
For payroll, the EOR manages regular pay periods (typically bi-weekly or semi-monthly in the US), calculates overtime pay according to the Fair Labor Standards Act (FLSA), and ensures compliance with state-specific wage and hour laws. They handle year-end tax forms like W-2s for employees and 1099s for contractors.
In terms of taxes, the EOR withholds federal income tax, Social Security, and Medicare contributions. They also manage state and local taxes, varying significantly across US jurisdictions. The EOR files necessary tax returns and reports with the IRS and state tax authorities.
For benefits, the EOR typically administers health insurance plans, which are a crucial part of US employment packages. They may also manage 401(k) retirement plans, paid time off accruals, and other benefits like life insurance or disability coverage. The EOR ensures compliance with laws like the Affordable Care Act (ACA) and ERISA (Employee Retirement Income Security Act).
What labor laws do you need to consider when hiring in the United States?
When hiring in the United States, a few key labor laws must be considered. The US approach to labor laws balances employee protections with employer flexibility, with significant variations at the state level.
Employment contracts
Federal and state laws govern employment contracts in the US. Unlike many countries, written agreements are not always required, as most employment is “at-will,” meaning either party can terminate the relationship without cause or notice. However, written contracts are standard for executive positions or when specifying unique terms of employment.
Key elements often included in US employment contracts are:
- Job title and description
- Compensation details
- Benefits information
- At-will employment status (if applicable)
- Non-compete and confidentiality clauses (where legal)
- Dispute resolution procedures
Working hours and paid holidays
The Fair Labor Standards Act (FLSA) sets the standard workweek at 40 hours, beyond which non-exempt employees must receive overtime pay at 1.5 times their regular rate. There is no federal requirement for paid vacation or holidays, though many employers offer these benefits to remain competitive.
The Family and Medical Leave Act (FMLA) provides eligible employees up to 12 weeks of unpaid, job-protected leave per year for specific family and medical reasons.
Taxes
US tax laws are complex, with federal, state, and sometimes local obligations. Employers must withhold federal income tax, Social Security, and Medicare contributions from employee paychecks; state income tax withholding is required in most states.
The Federal Insurance Contributions Act (FICA) mandates that employers match employee contributions to Social Security and Medicare.
Termination and severance pay
As most employment in the US is at-will, termination can occur without notice or cause, barring discriminatory reasons or contract violations. There’s no federal requirement for severance pay, though some employers offer it as part of their policies or negotiated agreements.
The Worker Adjustment and Retraining Notification (WARN) Act requires employers with 100+ employees to provide 60 days’ notice for mass layoffs or plant closings.
| Labor Law | Key Features |
|---|---|
| Fair Labor Standards Act (FLSA) | Establishes minimum wage, overtime pay, recordkeeping, and youth employment standards |
| Occupational Safety and Health Act (OSHA) | Sets and enforces standards for workplace safety and health |
| Family and Medical Leave Act (FMLA) | Provides eligible employees with up to 12 weeks of unpaid, job-protected leave per year for specified family and medical reasons |
| Title VII of the Civil Rights Act | Prohibits employment discrimination based on race, color, religion, sex, and national origin |
| Americans with Disabilities Act (ADA) | Prohibits discrimination against individuals with disabilities in all areas of public life, including jobs |
| Age Discrimination in Employment Act (ADEA) | Protects workers 40 years of age and older from age-based discrimination |
| National Labor Relations Act (NLRA) | Protects employees’ rights to form, join, and assist labor organizations |
| Equal Pay Act | Requires equal pay for equal work, regardless of gender |
| Worker Adjustment and Retraining Notification (WARN) Act | Requires employers to provide 60 days notice of covered plant closings and mass layoffs |
| Employee Retirement Income Security Act (ERISA) | Sets minimum standards for pension plans in private industry |
How does the hiring process work in the United States?
Employers typically follow a structured process when hiring staff in the United States while adhering to federal and state labor laws. The process usually involves:
- Defining the job requirements and creating a job description
- Advertising the position through various channels
- Reviewing applications and resumes
- Conducting initial screenings, often via phone or video calls
- Holding in-person or virtual interviews with shortlisted candidates
- Performing background checks and contacting references (with the candidate’s permission)
- Making a job offer to the selected candidate
- Negotiating terms and finalizing the employment agreement
- Completing necessary paperwork, including I-9 and W-4 forms
- Onboarding the new employee
Throughout this process, employers must ensure compliance with anti-discrimination laws, such as those enforced by the Equal Employment Opportunity Commission (EEOC).
Is the United States a relatively easy country to hire employees remotely through an EOR?
Yes, the United States is a relatively easy country to hire employees remotely through an Employer of Record (EOR). Its well-established legal framework for employment and business-friendly environment make it conducive to remote hiring arrangements.
Here are five pros and three cons for hiring employees in the United States:
Pros
Cons
Despite these challenges, the benefits of accessing the US talent market often outweigh the complexities, especially when working with an experienced EOR provider who can navigate the intricacies of US employment laws and practices.
