Employer of Record in the USA
The United States employment laws vary widely from state to state, with modifications made to the general federal laws. Hence, the paperwork and compliance needs in the US are vast.
Skuad’s USA EOR solutions are tailor-made to handle all aspects of employment in the USA. Be it onboarding of your remote team, managing their payroll, benefits, adhering to compliance or providing assistance of an international network, Skuad does it all and more. Call us to learn more about our automated solutions.
If you are looking to expand your business to the United States, collaborating with a trusted Employers of Record (EOR) can go a long way.
The USA At A Glance
Capital: Washington, D.C.
National Language: English
Population: 335.9 million (2024 estimate)
Total land area: 3,531,905 square miles
Currency: United States Dollar (USD) ($)
GDP: USD 22.49 trillion (1.5% growth in 2024)
Employment in the USA
The last measured Employment Cost Index in the United States stood at 0.90. The U.S. Department of Labor’s Bureau of Labor Statistics calculates the change in the cost of labor four times annually. It signifies the cost of hiring new candidates for any company in the country. With a population of more than 330 million and the last measured employment rate at 57.90, local and international companies have access to a resourceful knowledge pool in the country through hiring companies in the United States.
| Entitlement
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Explanation
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| Statutory Working Hours
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8 hours a day and 5 days a week
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| Federal minimum wage
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$7.25 an hour
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| Rest period
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Paid 10 minutes rest period for every 4 hours of work in a 7 to 8 hours workday (Across many states)
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| Public Holidays
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- New Year’s Day
- Martin Luther King Jr. Day
- Washington’s Birthday
- Memorial Day
- Juneteenth
- Independence Day
- Labor Day
- Columbus Day
- Veterans Day
- Thanksgiving
- Christmas Day
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| Parameters
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Information
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| Weekly working hours
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40 hours
Average: 8 hours a day for five days a week
However, a part-time employee works for less than 40 hours a week.
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| Overtime
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At the rate of 1.5 times the average pay rate, an employee must be paid if he/she works more than eight hours a day, according to the Fair Labor Standards Act (FLSA).
For instance, an employee working at $20 per hour would receive $30 per hour as overtime.
Full-time employees in managerial or executive positions are exempted from overtime laws because they receive salaries instead of hourly payments.
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| Public Holidays
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In the United States, employers have the flexibility of deciding the working status of their employees on a public holiday. If the employer desires, they can instruct their employees to work on holidays without paying them a holiday or overtime fee.
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| Sick Leave
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Employees in the United States are not permitted to take extended leaves in a year like other countries. While this comes as a benefit for employers, employees are unsatisfied with the lack of federal policies in this regard. A study observed that 52% of American employees had unused leaves by the end of the year.
The basic federal law governing the sick leave policies across the country is the Family and Medical Leave Act (FMLA). According to this, the selected categories of full-time employees are entitled to an annual leave of up to 12 weeks for family or medical emergencies, including pregnancies. Many states like California and New Jersey have different laws for maternity leave.
A company chooses to provide paid, or unpaid FMLA leaves according to their convenience. The federal government does not have any strict regulations on that matter.
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| Personal Information |
The Health Insurance Portability and Accountability Act protects employees’ personal information, such as their medical history or social security number. The state governments can have separate acts for protecting employee privacy. However, the common Federal Act along with the information they protect are listed below.
- Fair and Accurate Credit Transactions Act - Credit information
- Genetic Information Non-discrimination Act - Genetic information
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Skuad’s user-friendly interface with customer service experts and technicians provide the best-in-class facilities. From drafting employment contracts to managing employee health benefits, Skuad as your EOR in the USA handles every HR-related legal responsibility for businesses. Learn more.
Contractors vs Full-Time Employees
Employers of record companies in the USA appoint contractors and full-time workers based on the company’s requirements. Many companies choose to hire a contract worker instead of a full-time employee because it releases them from providing the following benefits.
- Health insurance
- Vacation time
- 401(k) matches
A contractor or a contract worker is also known as a freelancer or independent employee in different countries. Companies appoint them for a specific project or time instead of providing permanent jobs with perks. These contractors can be individuals, limited liability companies, or limited liability partnerships appointed by businesses for a short or long period. Unlike a full-time employee, a contractor is not legally bound to one company. They can work with multiple companies provided that their work gets completed within the assigned deadlines. The labor laws in the United States are different for full-time employees and contract workers.
Here are some of the differences between a contract and a full-time employee in the United States.
| Parameters |
Contractors |
Full-time Employee |
| Benefits and Taxation
|
Contractors have a fixed wage decided upon at the time of their interview. This wage is paid to them without excluding any taxes. As a contractor, separated from the company’s payroll, it becomes the task of a contractor to pay their self-employment and federal income tax.
The company is not liable to provide any additional perks to a contract employee, such as health insurance or Flexible Spending Account (FSA). However, contractors can pay for these perks individually.
|
Since a full-time employee works on business payroll, the company has the authority to withhold the required taxes as per federal and state laws before disbursing the remaining payment.
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Some of these taxes are
- Social Security tax
- Federal income tax
- Medicare tax
Additionally, the company deducts the required charges for additional benefits like health savings accounts (HSAs), flexible spending accounts (FSAs), and health insurance.
|
| Goals of Hiring |
Employers understand that most contract workers are usually in search of other job opportunities that provide short-term returns. Accordingly, the employer expects different outcomes from a contractor in terms of productivity and work commitment.
A company looks for a contractor who has the required expertise and skills for working on a particular assignment or a project for a short duration. However, an employer can ask a contractor to become a full-time employee if both parties agree.
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An employer expects dedication, commitment, and loyalty to the organization from a full-time employee. They ensure employee engagement to instill company values and practices because their services are required in the long run. |
| Level of Independence |
The nature of a contractor’s job makes it easy to understand the high level of independence offered by their professional lifestyle. When compared to full-time employees, they have fewer financial perks but more autonomy in the job.
Unlike full-time employees, contractors have the independence to choose their method of working and hours, as long as they make their required submissions within the stipulated timeline.
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A full-time employee is paid more than a contract employee because their nature of work is different. However, they also have less independence at work. This is because their managers or bosses instruct and direct them to perform the required tasks. |
| Flexibility
|
Contractors work for multiple companies at once. They have the liberty to balance their work and life at their convenience while juggling different clients. At the cost of not getting paid for their holidays, contractors can take their breaks any time as needed. |
A full-time employee is compelled to follow the discipline and rules set by the employer. As they work for one company only, the expectation of loyalty and productivity is higher from them. |
| Training
|
As contractors are expected to be professionals and experts in their niche, most companies do not work on any specific onboarding or training procedures with them as done for full-time employees. The employer provides these employees with the required information to complete their assignments at the start of their job.
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Full-time employees are expected to be team players who understand the dynamics of a company. They are hired for a long duration, and that is why the companies design elaborate onboarding and training programs for them to understand the company culture, values, goals, and teams. |
According to a recent study, more than 99 million adults over the age of 18 have a graduate or postgraduate degree in the United States. Over the last decade, the rate of graduation at colleges has increased by 15%. Moreover, 41% of these graduates have earned their degrees within four years of college study. A business can expand its international reach by employing out of 4 million graduates who earn a degree every year in the United States. Skuad provides you with the opportunity to leverage the country’s knowledge base while helping you work on the legal and technical procedures for your business.
Hiring in the USA
If you’re looking to hire employees in the USA, Skuad employs state-of-the-art resources and unlimited access to a professional team that handles the legal requirements for your business. From hiring the right candidates to drafting the employment agreement, the USA team of Skuad advisors, lawyers, and HR professionals perform all these essential tasks for you. As explained in the table below, the hiring companies in the USA must take care of these employee entitlements while keeping them on their payroll.
Probation & Termination
Many companies in the United States hire employees ‘at-will.’ Unless the employment contract says otherwise, there is no specific period for which an employer hires an employee in his organization. In such a case, the employer has the right to terminate the employee without any reason or notice. Montana is a state in the US that has a particular set of rules for deciding the termination of an employer-employee relationship. Generally, the probationary period in the USA is six months unless the contract says otherwise. If an employer in Montana decides to terminate an employee after the probationary period, they must do it on reasonable grounds done for a good cause.
For termination of employment in the USA, the federal or state governments don’t require advance notice from the employer or employee. However, suppose the company is terminating an employee based on the terms mentioned in the WARN (Worker Adjustment and Retraining Notification) Act. In that case, they must send an advance notice to the employee. Mass lay-offs are an example of the terms in the act.
There is no general severance pay law in the USA that determines the exact severance pay by an employer. Based on the details agreed upon by the employer and employee in the collectively bargained agreement or the employment contract, the severance pay is decided. Many American states demand the employers provide information relating to the unemployment insurance benefits and medical insurance perks to their employees before dismissing their employees.
EOR Solution
Every company looking to expand its pool of resources in the United States or leveraging the knowledge base in the country can either invest its internal resources or work with Skuad for managing the responsibilities of payroll and hiring. An Employee of Record Solution by Skuad saves you from the paperwork and financial strain of investing in a physical location.
While choosing the DIY approach of HR management in a foreign country, it becomes difficult and expensive for a business to manage and comply with every law and regulation of a country. By assigning your HR and legal responsibilities to an EOR service like Skuad, your company will have the time to focus on other responsibilities while Skuad delivers highly efficient and reliable EOR services for you. Connect with us to experience our services.
Types Of Visas in the USA
For working in the United States, a work visa is required for every employee. There are different types of work visas for allowing an international employee to work in the United States for a specific duration. Check out the list below for US work visa requirements and details.
| Type of visas
|
Explanation
|
|
Employment-based green cards
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Based on employment preferences, thousands of job-seekers in the USA apply and obtain their green cards or permanent resident status. The categories of these visas are EB-1 to EB-5.
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| Temporary work visa |
Temporary work visas are categorized based on the employee or business person's experience and employment type. Individuals can choose from business visitor visas, investor visas, or temporary skilled worker visas.
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| NAFTA-based visa |
The citizens of Mexico or Canada with a job offer from the United States are eligible to get a visa for temporary work. The North American Free Trade Agreement (NAFTA) allows the residents of these countries to obtain a visa quickly with minimum documentation.
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|
L-1 visa
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This is an employer visa for the USA that can be obtained to transfer a business in the country. |
Skuad takes care of the visa requirements that need to be checked and maintained from the employer’s end. You can book a demo to find out more.
Work Permits
A work permit in the United States is issued by USCIS (U.S. Citizenship and Immigration Services). It is an identity card that proves the right of an individual to work in the United States. Depending on the place of processing and the type of work permit, it could take several days for processing a USA work permit for foreigners. It is also possible to get a USA work permit without a job offer through EB-5, O-1, and EB-1 visas. Skuad, through a network of resourceful agents and professionals and as the local partner of a remote company in the USA, ensures your work authorization in the United States by providing employment sponsorship.
Payroll & Taxes in the USA
Skuad is one of the US payroll companies that manage the technicalities of payroll and taxes for employers. The employer has the right to define USA payroll, deductions, earnings, and taxes for their employees depending on their business model. Through Skuad’s payroll services in the USA, the four types of taxes in the US - social security, federal employment, federal income, and medicare - are handled on the employer’s behalf.
Talk to us and know more about payroll and taxes in the USA.
Employer Taxation
| Tax
|
Explanation
|
| Corporate Income Tax
|
21%
|
|
Payroll Tax |
Social security taxes must be deducted from an employee’s salary, federal income tax, and state unemployment tax.
|
| Withholding Tax |
30% tax is applicable on gross amounts of royalties, interest, and dividends |
| Employer Social Security |
Employers pay 6.2% when the base wage is USD137,700 |
Employee Taxation
| Tax |
Explanation |
| Sales Tax |
45 states in the US collect sales tax at varying rates.
|
| Employee Social Security |
6.2% |
US payroll is calculated by the HR professionals of the local company by considering the services rendered by a part-time or full-time employee. The Internal Revenue Service (IRS) penalizes approximately 1 in 3 entrepreneurs for errors in payroll management. Skuad ensures compliance with the USA payroll taxes to save your business from hefty annual penalties.
Bonuses
Bonuses aren’t very common in the US. But some employers pay bonuses in terms of holiday pay, vacation pay, etc.
Incorporation
The different ways of setting up a company in the USA by a foreigner are listed below:
- Sole Proprietorship
- S-Corp
- C-Corp
- Limited Liability Companies
- Partnerships
Limited Liability Companies (LLC) or C-Corp are the popular routes chosen by a business in the USA. These methods provide limited liabilities to business owners operating locally. Startups that are searching for investments opt for C-Corporations while the small business owners set up an LLC.
The first step to incorporating a holding company in the USA is to register your LLC with the help of a Registered Agent. This process takes three days to complete. Once the company is registered, entrepreneurs must seek a physical business address to ensure a smooth relationship with payment processors and banks. All professional letters and credit cards will be redirected to this physical location of your company.
The next step is to set up a bank account for your business, but the company needs an Employer Identification Number (EIN) to complete this step. Skuad saves your time and efforts required at this stage by becoming your local partner.
PEO
Professional Employer Organization (PEO) manages a range of HR functions like compliance and payroll for your company as a co-employer. However, the scope of PEO services is limited as all the major employee decisions lie with the employer only. Whereas Employer of Record (EOR) service is entirely a third-party organization that becomes the legal employer of your employees and holds all liabilities of recruiting, employee benefits, employee taxes, and employment contracts that employers in the USA need to comply with.
Conclusion
You do not want to miss out on leveraging the competitive talent pool in the USA yet complying with the stringent employment policies of the country can be gruelling. Do you believe you need help? Allow Skuad’s USA EOR (Employer of Record) solutions to help you build a brilliant remote team without setting up a local entity. Let Skuad do all the heavy lifting while you can focus on core other areas of your business.
Our cloud-based HR platform removes the hassles of creating entities, managing taxes, and local laws. And we aim to eradicate every roadblock that comes in the way of your business expansion process.
Visit www.skuad.io/demo to get your professional team of employees in the shortest time.
FAQs for Employer of Record in the US
1) What is an Employer of Record in the US?
An Employer of Record (EOR) in the US is a third-party organization that legally employs staff on behalf of another company. The EOR, like Skuad, handles all HR-related tasks such as payroll, tax compliance, employee benefits, and ensures adherence to federal and state labor laws. This service is especially beneficial for companies looking to hire in the US without establishing a legal entity, as the EOR acts as the official employer for tax and legal purposes while the employees perform work for the client company.
2) What is the meaning of EOR?
EOR stands for Employer of Record. It refers to a service where a third-party organization takes on the legal responsibilities of employment, acting as the official employer for tax, legal, and HR purposes. The EOR manages all HR functions including payroll, benefits, and compliance, while the employee works for the client company, facilitating seamless workforce management.
3) What are the benefits of Employer of Record?
Utilizing an Employer of Record in the US offers numerous benefits. It allows companies to quickly and legally onboard employees without establishing a local entity. The EOR ensures compliance with complex federal and state employment laws, reducing legal risks. It streamlines HR processes such as payroll and benefits administration, saving time and resources. Additionally, the EOR provides expertise in local employment practices, helping companies navigate the US labor market effectively.
4) How do I choose an employer of record?
To choose an Employer of Record (EOR), research its reputation and experience in your industry, compliance expertise, range of services offered, and cost. Check reviews and references for more information. Ensure the EOR has a strong technology platform for reporting and analytics. Compare multiple EOR service providers to find a cost-effective and reliable solution that matches your requirements.
5) How much does it cost to use the employer of record in the US?
The cost of using an Employer of Record (EOR) in the US generally ranges from 10% to 20% of the employee's salary. Some providers may offer flat-rate fees or customized pricing based on the number of employees and specific services required. For example, Skuad starts at just $199 per employee.
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