With 134.56 million full-time employees in the United States, accessing talent within the country is crucial for businesses to thrive and grow. So how can employers tap into this talent pool without getting bogged down by the legal complexities of hiring in the United States?
Fortunately, there is a solution that can streamline this process for businesses of any size - using services from an employer of record (EOR) in the United States. In this article, we will discuss what an EOR is and how it can help you unlock top talent for your business in the United States.
Snapshot of the United States
The United States has the world's largest economy, with a gross domestic product (GDP) worth 25.46 trillion US dollars in 2022. This makes it a prime location for businesses looking to expand their operations and tap into a diverse talent pool. With a low unemployment rate of 3.8% in 2022, finding skilled employees can be quite competitive.
The United States has highly educated professionals, with approximately 37% of its population holding a bachelor's degree or higher. This allows employers to access a skilled workforce, making it an attractive destination for businesses looking to grow and scale up.
Key factors contributing to the United States' thriving economy include its robust infrastructure, technological advancements, and a business-friendly environment. With several top-ranked universities producing highly skilled professionals every year, it's no surprise that businesses are looking to hire in this country.
The United States at a Glance
Things you should know before hiring an EOR in the United States?
Employers of record (EOR) are third-party companies that handle all aspects of employment for a business. This includes payroll, taxes, employee benefits, and compliance with local laws and regulations. EORs act as the legal employers of your workers, allowing your business to tap into talent without having to deal with complex legal procedures.
Here are some key things you should know before hiring an EOR in the United States:
Employment standards
Understanding the employment standards in the United States is crucial when working with an EOR. This includes knowing the minimum wage, overtime laws, and anti-discrimination laws. It's important to ensure that your EOR is compliant with these standards to avoid any legal issues.
Some of the more important employment standards in the United States include:
- Federal minimum wage: $7.25 per hour (2022)
- Overtime laws: 1.5 times the regular rate for hours worked beyond 40 hours per week
- Anti-discrimination laws: Title VII of the Civil Rights Act and the Americans with Disabilities Act (ADA)
- Paid leave entitlements: American workers are entitled to up to 12 weeks of unpaid vacation via the federal Family and Medical Leave Act, with some states also having paid leave laws in place.
Employment contracts
Employment contracts are mandatory in the United States, and it's essential to ensure that your EOR has a solid understanding of local contract laws. This includes knowing what information must be included in an employment contract, such as the employee's role, compensation, and benefits.
How taxes work for employers
Another important consideration when hiring an EOR in the United States is tax compliance. This includes understanding federal and state taxes, as well as any additional payroll taxes that may apply.
Some of the critical taxes to consider include:
- Federal income tax: Ranges from 10% to 37%, depending on the employee's income and tax bracket
- State taxes: Vary by state, with some states having no income tax.
- Payroll taxes: Include Social Security and Medicare, as well as state-specific payroll taxes.
Compliance with tax laws is crucial, and mistakes can lead to costly fines and penalties for your business.
Healthcare and benefits
The United States does not have a universal healthcare system, and employers are responsible for providing health insurance to their employees. This can be a significant expense for businesses, especially smaller ones. When working with an EOR in the United States, they will handle all employee benefits, including health insurance.
Some key things to know about employee benefits in the United States include:
- Employers with 50 or more full-time employees must provide health insurance for full-time employees (30 hours or more per week).
- Employers must contribute towards employee premiums under the Affordable Care Act (ACA).
- Employees can also opt for a Health Savings Account (HSA) to save money on healthcare expenses.
- Other expected benefits include retirement plans, life insurance, and disability insurance. For example, 401k matching plans are a common retirement benefit employers offer.
Vacation
Paid vacation is not required by federal law in the United States, but many companies offer it as part of their employee benefits package. The average paid vacation time for full-time employees after one year of service is 10 days, with some companies providing more.
When working with an EOR, they will handle all employee vacation time and leave entitlements.
List of federal statutory holidays
While paid leave and vacation are not legally mandated in the United States, ten federal holidays are considered non-working days for most businesses. These include:
- New Year's Day (January 1)
- Birthday of Martin Luther King Jr. (third Monday in January)
- Presidents' Day/Washington's Birthday (third Monday in February)
- Memorial Day (last Monday in May)
- Independence Day (July 4)
- Labor Day (the first Monday in September)
- Columbus Day (the second Monday in October)
- Veterans Day (November 11)
- Thanksgiving Day (the fourth Thursday in November)
- Christmas Day (December 25)
Working Hours
Federally, there are no limitations on how many hours an employee can work per week in the United States. However, some states have their regulations in place. For example, California has a daily overtime limit of 8 hours and a weekly limit of 40 hours.
When working with an EOR, they will ensure that all employees' working hours comply with state laws to avoid any legal issues.
Termination laws
The United States uses an 'at will' employment structure, which means that an employee can be terminated at any time for any reason or no reason at all. However, there are some exceptions to this rule, such as termination based on discrimination or retaliation.
Of the 52 states, only Montana does not follow an at-will employment structure. Instead, Montana defaults to a probationary period, after which termination is only lawful if for good cause.
Any EOR you work with should know these laws and ensure that all termination procedures follow legal requirements.
The Affordable Care Act (ACA)
A key piece of legislation related to employment in the United States is the Affordable Care Act (ACA). This law requires employers with 50 or more full-time employees to provide health insurance that meets specific requirements. Employers must also contribute towards employee premiums, and failure to comply can result in significant penalties.
Working with an EOR can ensure that your business stays compliant with ACA regulations, as they will handle all aspects of employee benefits, including healthcare.
Family and Medical Leave Act (FMLA)
The Family and Medical Leave Act (FMLA) is another crucial legislation to consider when hiring in the United States. This law requires employers with 50 or more employees to provide up to 12 weeks of unpaid, job-protected leave for qualifying reasons, such as the birth or adoption of a child, caring for a family member's serious health condition, or an employee's serious health condition.
FMLA regulations can be complex, but working with an EOR can help ensure that your business complies with the law and avoids any legal issues.
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Why use an EOR in the United States?
An employer of record United States provides many benefits for businesses looking to hire employees in the country. Unlike a PEO (Professional Employer Organization), an EOR will be the legal employer of record for your employees, handling all payroll, benefits, and compliance matters. This means you can focus on running your business without worrying about the complexities of employment in the United States.
In addition, working with an EOR can help you save time and money on administrative tasks, as they will handle all payroll taxes and benefits for your employees. They also have expert knowledge of employment laws in the United States, ensuring that your business stays compliant and avoids legal issues.
Benefits of using an EOR for US employment
Using an EOR for your United States employment needs can provide numerous benefits, including:
Compliance with federal and state employment laws
An EOR will handle all compliance aspects, ensuring that your business stays in line with federal and state regulations. This includes laws related to employee benefits, working hours, termination, and more. Since EORs specialize in employment, they have a deep understanding of these laws and can help your business avoid any legal issues.
Simplified payroll and benefits administration
EORs take care of all aspects of payroll and benefits for your employees, relieving you of the administrative burden. This includes calculating and withholding taxes, processing paychecks, managing employee benefits enrollment, and more. This can save you time and resources, allowing you to focus on growing your business.
Access to expert knowledge and support
EORs have extensive experience in employment matters and keep up with any changes in laws or regulations. This means they can provide expert advice and support for your US employment needs. Additionally, many EORs offer HR support services, guiding employee relations, performance management, and more.
Flexibility to scale your business
Working with an EOR allows you to scale your business in the United States easily. Since they handle all aspects of employment, from hiring to termination, you can quickly add or remove employees as needed without worrying about compliance or administrative tasks.
No need for physical presence in the country
By using an EOR, you can hire employees in the United States without having a physical presence in the country. This can save you time and resources in establishing a legal entity or office space.
Cost savings
Outsourcing employment tasks to an EOR can save your business money. This includes avoiding penalties for non-compliance with employment laws, saving time on administrative tasks, and reducing the need for in-house HR personnel.
Cost transparency
In addition to cost savings, working with an EOR also offers cost transparency. You will know exactly how much you spend on employment in the United States without unexpected fees or expenses.
Access to top talent
Using an EOR can also help your business attract top talent in the United States. Since they handle all employment matters, including benefits and compliance, your business can provide a competitive employment package to potential employees.
American work visas and global immigration
America is a diverse country, and many businesses may need to hire employees from other countries. An EOR can also assist with global immigration and work visas, ensuring that your international hires have all the necessary documentation to work in the United States legally.
Some of the more common work visas in the United States include:
- H-1B visas for highly skilled workers
- L-1 visas for intra-company transfers
- E visas for investors and traders
Working with an EOR can help streamline obtaining work visas for your international employees, allowing them to start working for your business on time.
Getting started with an EOR in the United States
Hiring in the United States can be complex, with various federal and state laws to navigate. Working with an employer of record United States provides many benefits for businesses looking to hire employees in the country.
They can ensure compliance with employment laws, simplify payroll and benefits administration, provide expert knowledge and support, offer flexibility for scaling your business, and save you time and resources.
Knit's EOR services can help your business successfully hire and manage employees in the United States, allowing you to focus on growing your business.
Contact us today to learn more about our EOR solutions.
Disclaimer: This article provides general information and should not be construed as financial or tax advice. Since tax rules may change over time and vary by location and industry, please consult a CPA or tax advisor for advice specific to your business.
The Employer of Record is responsible for:
- Facilitate payroll and tax compliance
- Manage employee benefits
- Handle HR administration
- Provide legal compliance
- Assist with work permits and immigration
- Offer risk management
- Support employee relations
- Maintain confidentiality
- Stay updated on employment regulations
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