Employer of record in the United States: costs, rules and how to hire
Everything you need to know about hiring employees in the United States through an employer of record.
At-will employment is the single rule that reshapes every assumption a foreign employer brings to the United States. In almost every state, either party can end the employment relationship at any time, for any lawful reason, with no statutory notice period and no statutory severance. That is not a gap in the law; it is the law. The practical consequence is that your termination exposure here looks nothing like what you manage in Europe or Latin America, but your discrimination and retaliation exposure is far more significant than most foreign employers expect.
The U.S. labour market is large and expensive. Average annual wages sit at $82,933 (in PPP terms), and the federal minimum wage translates to a monthly floor of $1,257, though many states and cities set higher floors. The total tax wedge on employment is 29.3%, which is low by OECD standards, and employer social contributions add roughly 8.1% on top of gross salary. There is no statutory annual leave, no thirteenth salary, and no federal paid parental leave, so competitive compensation packages are built almost entirely from market practice rather than legal minimums.
That combination, low statutory floors and high market wages, means the real cost of hiring here is driven by what you offer, not what the law requires. It also means that an Employer of Record (EOR) operating in the U.S. is managing a genuinely different compliance surface than in most other markets: less about mandatory benefits administration and more about classification, overtime rules, and a patchwork of state and local obligations that vary by where your employee sits.
How should you hire in United States?
| Employer of Record (EOR) | Your own legal entity | Independent contractor | |
|---|---|---|---|
| Time to first hire | Days | Months | Immediate |
| Upfront cost | None | Incorporation, registrations, local counsel | None |
| Ongoing cost | From $99–$699/employee/month | Payroll, accounting, filings, benefits administration | Contractor invoices only |
| Best when | You want 1–5 hires fast, without a local entity or in-house payroll expertise. | You are building a long-term team (roughly 10+ employees) and want full control. | Genuinely project-based, independent work. Misclassifying an employee as a contractor carries real penalties. |
- Time to first hire
- Days
- Upfront cost
- None
- Ongoing cost
- From $99–$699/employee/month
- Best when
- You want 1–5 hires fast, without a local entity or in-house payroll expertise.
- Time to first hire
- Months
- Upfront cost
- Incorporation, registrations, local counsel
- Ongoing cost
- Payroll, accounting, filings, benefits administration
- Best when
- You are building a long-term team (roughly 10+ employees) and want full control.
- Time to first hire
- Immediate
- Upfront cost
- None
- Ongoing cost
- Contractor invoices only
- Best when
- Genuinely project-based, independent work. Misclassifying an employee as a contractor carries real penalties.
Rule of thumb: an EOR wins on speed and simplicity for the first handful of hires; once a team in United States passes roughly ten people, running your own entity usually starts to win. Treat that as a risk-adjusted rule of thumb rather than a calculation. Registration and accounting are the cheap part; the costs that decide it are payroll software, local employment-law advice, pension administration and the statutory sick-pay and termination exposure you take on directly once you are the employer. 67 EOR providers currently offer employment in United States. See our independent ranking.
EOR pricing in United States: providers covering United States publish base fees from $99 to $699 per employee per month, before statutory employer costs. How EOR pricing works.
Companies that should think carefully before defaulting to an EOR here are those hiring at scale or building a permanent U.S. commercial presence. The U.S. is the world's largest economy, and if you are hiring more than a handful of people, the economics of entity setup shift quickly. A U.S. LLC or C-corp can be incorporated in a matter of weeks in most states, not the three to six months typical in many other jurisdictions, and the corporate tax rate is 21%. At meaningful headcount, the per-employee fee of an EOR adds up faster here than in markets where entity setup is genuinely slow or legally complex. If you already have a U.S. sales operation, a registered agent, or any existing legal presence, the marginal cost of adding a payroll entity is often lower than it looks.
The contractor route deserves a direct word. The U.S. has its own misclassification risk, enforced through the IRS and the Department of Labor, and several states apply stricter tests than the federal standard. California's ABC test, for example, is among the most demanding anywhere. For a foreign employer placing a single person in a directed, ongoing role, classifying that person as an independent contractor is a real legal exposure, not a paperwork formality. In my experience, the companies that get this wrong are usually those copying a contractor arrangement that worked in their home market without checking where the worker is actually based.
An EOR makes the most sense for foreign employers hiring one to a few employees in the U.S. for the first time, particularly when those employees are spread across multiple states. State-level employment law, paid sick leave mandates, and tax registration requirements vary significantly by location, and an EOR that already holds registrations in those states removes a genuine administrative burden. It is also the right structure for companies testing a U.S. market before committing to an entity, or for roles that may not be permanent. The providers listed below operate across all fifty states, and the market here is crowded enough that pricing is competitive. Speed is a real advantage: an EOR can have someone on payroll in three to five days, compared with the weeks or months needed to establish your own entity and payroll infrastructure from scratch.
United States employment facts at a glance
Statute adds relatively little on top of salary here: the United States ranks #158 of 192 in the Burden Index.
Average salary in United States by occupation
Gross monthly earnings of employees per ISCO-08 occupation group, in USD, from the ILO's official labour statistics. These are the latest published survey figures for United States(reference year 2025), refreshed automatically when the ILO releases newer data. Survey earnings, not the statutory minimum wage above. Use them to benchmark an offer before an EOR quote turns it into total employer cost.
Source: ILOSTAT, the International Labour Organization's statistics database (average monthly earnings of employees, both sexes), reference year 2025.
What it costs to employ in United States
Worked example: at the average United States wage of $86,977/year (OECD, 2025), mandatory employer contributions add $7,034/year, bringing the true cost of employment to $94,011/year, or $7,834/month.
Based on OECD 2025 aggregate data for a single earner at average wage.
Termination and severance in United States
The United States operates under an at-will employment system where employers can terminate employees without notice or cause, except in cases of discrimination or violation of public policy. There are no federal statutory requirements for notice periods or severance pay for most private sector employees. Employment protections are primarily limited to anti-discrimination laws and specific circumstances like mass layoffs under the WARN Act.
The United States is one of the few countries where statute requires nothing on dismissal, a pattern the Termination Cost Index tracks across the full dataset.
Source: Employ Borderless research · 2024. Statutory minimums; collective agreements and contracts can set higher terms. During the probation period (up to 90 days) shorter or no notice may apply.
What catches employers out in United States
The U.S. has fewer statutory floors than almost any other developed market, but it compensates with a dense layer of federal, state, and local rules that catch foreign employers off guard in specific, costly ways. These are the ones that come up most often.
At-will employment does not mean fixed-term contracts are safe to ignore
Foreign employers accustomed to fixed-term contracts often assume a written agreement for a defined period gives both sides certainty. In the U.S., courts in most states will still treat the relationship as at-will unless the contract explicitly and clearly displaces that presumption. A loosely drafted fixed-term agreement may not protect either party the way it would in a civil-law jurisdiction. If you need true fixed-term protection, the drafting has to be deliberate and state-specific.
Paying a salary does not automatically exempt an employee from overtime
Under the Fair Labor Standards Act (FLSA), overtime at 1.5 times the regular rate applies to all non-exempt employees working more than 40 hours in a workweek. Exemption depends on both a salary threshold and a duties test covering executive, administrative, or professional roles. Many foreign employers assume that putting someone on a fixed salary resolves the question. It does not. Employees who do not meet both tests must have their hours tracked and must be paid overtime, and back-pay liability can accumulate quickly before anyone notices the misclassification.
There is no federal paid sick leave, but many states and cities have their own rules
The U.S. record shows zero days of statutory annual leave at the federal level, and the same is true for paid sick leave. However, California, New York, and a growing number of cities have enacted their own accrual requirements, carryover rules, and notice obligations. A single U.S.-wide leave policy designed to the federal floor will be non-compliant in multiple jurisdictions. The only way to manage this correctly is to map each employee's location and apply the local rule that applies there.
At-will termination does not reduce discrimination liability; it may increase it
The freedom to terminate without cause does not insulate employers from claims under Title VII of the Civil Rights Act or its state-law equivalents. Because terminations do not require documented cause, employers who lack consistent practices, written performance records, and anti-discrimination training can find it harder to defend against claims that a protected characteristic influenced the decision. Foreign employers sometimes assume that at-will status simplifies termination risk. In practice, the anti-discrimination framework is enforced aggressively, and the documentation burden falls entirely on the employer.
Form I-9 compliance is mandatory from day one and carries its own penalty structure
Every U.S. employer must verify each employee's identity and work authorization using Form I-9, with strict rules on timing, which documents are acceptable, how they must be examined, and how long records must be kept. The rules also prohibit over-documentation of non-U.S. citizens, which can itself constitute discrimination. Foreign employers setting up U.S. payroll for the first time frequently underestimate how procedural this requirement is and how quickly civil penalties accumulate for technical violations.
Your next step
Our current top-rated EOR providers for United States:
67 EOR providers can employ for you in United States. Compare them independently, or tell us about your hire and get a shortlist matched to your situation.
Common questions about hiring in United States
What does it cost an employer to hire someone in the United States?
Is there a statutory notice period or severance requirement in the United States?
Does the United States require a thirteenth salary or annual bonus?
How long does it take to hire through an EOR versus setting up a local entity?
What are the minimum paid leave entitlements for employees in the United States?
Can I hire a U.S. worker as an independent contractor to avoid payroll obligations?
What is the standard payroll cycle in the United States?
Can I use a PEO in the United States?
Yes. A PEO (professional employer organization) is a US co-employment arrangement: you keep an entity and hire the staff, the PEO runs payroll, benefits and HR compliance under its own tax IDs. It only works if your company already has a US entity. If you have no US entity, the equivalent route is an employer of record, which is what this guide covers. EOR vs PEO sets out the difference.