United States of AmericaDiscover an employer’s guide to employment laws, regulations, and Employer of Record (EOR) services in the USA.
Looking to hire in the USA? An EOR can help
Employer of Record (EOR) services can be crucial for companies aiming to establish a presence in the USA. With no need to set up a local entity, you can seamlessly hire, onboard, and manage your staff ensuring compliance with local laws.
An EOR serves as the formal employer for your American team, while you maintain full oversight of their daily work and tasks. EORs handle HR functions such as payroll, taxes, benefits administration, and more.
How to hire in the USA
Step 1: Choose between a local entity and an EOR
When planning to hire in the USA, you’ll need to decide whether to set up a local entity or engage an Employer of Record (EOR) service.
Creating a local entity provides you with complete control over your HR function. This route is often ideal for companies intending to employ a significant number of staff. However, it requires a substantial investment in time and resources. You’ll need to navigate US regulations, establish your business entity, and ensure compliance with various legal requirements.
On the other hand, using an EOR can streamline the process by managing all the legal and administrative aspects of employment. This allows you to enter and exit the market with greater flexibility and lower risk. While the EOR handles legal responsibilities and HR tasks, your company keeps operational control over its employees.
Step 2: Finding the right EOR
Selecting the right EOR for your US operations is crucial for a smooth and compliant employment process. Choosing an unsuitable provider can lead to legal issues, unexpected costs, and dissatisfaction among your employees. Here’s what to consider:
- Legal compliance. Make sure the EOR is well-versed in US labor laws, employee rights, tax regulations, and benefits. Review their history and inquire about their experience with your specific industry.
- Customer service. Evaluate their support structure. Multiplier offers 24/5 help and dedicated account managers, for example.
- Transparent pricing. Watch out for EORs with low initial fees but hidden costs or convoluted pricing. Confirm all costs upfront to avoid surprises later.
- Total cost of ownership. Opting for the cheapest solution may not always be the best choice. Consider the overall value and effectiveness of the service.
Step 3: Employing and onboarding in the USA
Send over the contract
Once you’ve selected a candidate, the next step is to prepare an employment contract that complies with US labor laws. Your EOR can handle this process in minutes leaving you to customize the contract with job responsibilities, salary, working hours, and termination conditions.
They will securely send the contract to the candidate for electronic signing, streamlining the process and ensuring compliance.
Enhance compensation with competitive benefits
To attract top talent in the US, offer a comprehensive benefits package as part of your employment contract. Rather than managing benefits independently, utilize your EOR. They can provide competitive benefits and even assist with delivering necessary equipment to your new hires.
Get all your documentation in order
During onboarding, you’ll need to collect the new hire’s tax and banking information. An EOR can automate this process, efficiently setting up payroll and reducing administrative tasks. With streamlined systems from providers like Multiplier, you can complete the onboarding process quickly and easily.
Step 4: Run payroll for employees based in the USA
The US has a complex tax system, including federal and state income taxes, Social Security, and Medicare contributions. Managing payroll for employees in the USA requires a good understanding of federal and state tax laws and mandatory contributions.
Employers are responsible for withholding federal income tax from employees’ wages, as well as contributions to Social Security and Medicare.
Social Security provides retirement, disability, and survivor benefits, while Medicare offers health insurance for individuals 65 and older and those with certain disabilities.
You also need to account for state-specific taxes and unemployment insurance, which vary by state. Each state has its own regulations and rates, making payroll management more complex for businesses operating across multiple states.
EORs ensure accurate and timely salary payments while managing all federal and state tax withholdings, Social Security, Medicare contributions, and unemployment insurance. Visit our Global Payroll services page for details.
Employment laws and regulations in the USA
Employers in the USA must adhere to a variety of regulations concerning workforce operations. These regulations cover aspects such as working hours, overtime, mandatory benefits, and termination procedures.
For example, the standard workweek in the USA is typically 40 hours, with a maximum of 8 hours per day. Any hours worked beyond this are considered overtime and must be paid at a rate of at least 1.5 times the regular hourly wage. The Fair Labor Standards Act (FLSA) governs these requirements, but individual states may have additional regulations.
Check out our guide on employment law in the US for more comprehensive details on how these laws affect hiring and managing employees in the USA.
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Employee benefits and compensation
In the USA, the federal minimum wage is $7.25 per hour, though many states and cities have established higher minimum wages. For example, California and New York have minimum wages that exceed $15 per hour.
Employee benefits are a key component of the compensation package in the USA; federal and state regulations set minimum standards such as Social Security and Medicare contributions and unemployment insurance.
Health insurance is mandatory under the Affordable Care Act (ACA) for businesses with 50 or more full-time employees. Federal regulations also govern family and medical leave, including up to 12 weeks of unpaid leave under the Family and Medical Leave Act (FMLA).
EOR services like Multiplier provide a range of benefits solutions tailored to the needs of your team in the USA. These can include comprehensive health and dental insurance, retirement plans, and additional perks to support your employees.
Termination and offboarding procedures
When terminating employment in the USA, employers must adhere to specific regulations regarding notice periods and severance pay.
Although “at-will” employment allows either party to end the employment relationship at any time without cause, certain regulations and company policies may still apply.
Federal law does not mandate a specific notice period for termination, but some states have regulations requiring notice or severance pay, especially in cases of mass layoffs or plant closures. Employers must follow the terms outlined in employment contracts or company policies, which may include notice periods or severance packages.
Severance pay is not federally required but is often provided based on the terms specified in employment contracts or company policies. It typically includes a calculation related to the length of service.
For layoffs or company restructuring, the Worker Adjustment and Retraining Notification (WARN) Act requires employers with 100 or more employees to provide a 60-day notice for mass layoffs or plant closures, helping employees prepare for the transition.
Navigating these procedures can be complex, especially with varying regulations across different states.
An Employer of Record (EOR) can simplify the termination and offboarding process. By managing the necessary paperwork and ensuring compliance with local and federal regulations, an EOR ensures a smooth transition for both the employer and the departing employee.
Visa and work permit assistance
When hiring foreign workers in the USA, securing the appropriate visas and work permits is essential. The type of visa required depends on factors such as the job role, duration of employment, and the employee’s nationality.
Here are some key visa categories for working professionals in the USA:
- H-1B Specialty Occupation Visa: For workers in specialized fields requiring a bachelor’s degree or higher. Commonly used for roles in technology, engineering, and healthcare.
- L-1 Intra-Company Transfer Visa: For employees transferred from a foreign branch of a company to a US branch. This visa is suitable for managers, executives, or employees with specialized knowledge.
- O-1 Visa for Individuals with Extraordinary Ability or Achievement: For individuals with exceptional skills or achievements in their field, such as science, arts, education, business, or athletics.
- E-2 Treaty Investor Visa: For investors or employees of a treaty investor who will be managing or developing an investment enterprise in the USA.
- TN Visa (Trade NAFTA) Visa: For Canadian and Mexican professionals working in specific fields such as science, engineering, and teaching, under the USMCA agreement.
- J-1 Exchange Visitor Visa: For individuals participating in exchange programs, including internships, training programs, and research activities.
- H-2B Temporary Non-Agricultural Worker Visa: For temporary, seasonal, or peak-load work in non-agricultural industries such as hospitality and construction.
Navigating visa applications and renewals can be complex, and professional assistance is often beneficial. An Employer of Record (EOR) can provide comprehensive support with work permits and visa applications, ensuring compliance with US immigration laws and simplifying the process for both employers and employees.
For detailed information on handling global immigration challenges, please consult our page on Global Immigration.
Get started with Multiplier’s EOR services
Multiplier offers a comprehensive solution for expanding your workforce in the USA.
With our EOR service, you can hire employees without needing to establish a local entity, allowing you to streamline HR functions and focus on your core business operations.
We take care of all employment aspects, including creating compliant contracts, managing payroll and taxes, and providing a range of customizable benefits that meet US standards.
Book a demo to learn more.
