The United States of America (USA) is one of the most advanced nations in the world. Therefore, it is unsurprising that this country also has one of the most advanced economies worth trillions of dollars. In fact, its GDP rank in 2023 is 1st, amounting to $26.95 thousand billion.
The US has a predominantly English-speaking workforce. When you hire employees in the USA, you need to enroll them on your payroll. You must withhold their taxes and make contributions under Social Security. Employee benefits in the USA are complicated as several labor laws regulate them.
If you, too, are looking to hire in the USA, you must first be aware of the laws in the country and all your hiring options. Keep reading to know more.
Labor Laws in the USA
To hire employees in the USA, the following laws should be kept in mind:
Conditions of Service
- Unlike other countries, the employment laws in the USA are governed by legislation passed at local, state, and federal levels.
- While federal laws deal with all employers operating in the country, state, and local laws are aimed towards restricted areas and cannot be implied nationwide.
- Overall, the US Department of Labor implements federal labor laws that form the basis of employment in the country.
- Often, state and local laws are created to provide more employee protection, in addition to what is already mentioned in the federal laws.
Working Hours
- Working hours in the USA do not have any legal mandatory limit per the country’s federal laws.
- However, a standard workweek consists of 40 hours.
- Employees usually work eight hours per day for five days.
Equality
- USA labor law comprises the Equal Pay Act of 1963, the Pregnancy Discrimination Act of 1978, the Age Discrimination in Employment Act of 1967, the Fair Labor Standards Act of 1938, the Equal Pay Act of 1963, and so on.
- In 2020, the US Supreme Court upheld the decision that the LGBTQIA+ community should not be discriminated against in the workplace.
Statutory Benefits
Health and Safety
Payroll and Taxes in the USA
The payroll frequency in the USA is weekly, bi-monthly, semi-monthly, or monthly. Some other important facts to be kept in mind about payroll in the USA are:
Minimum Wage
- However, some state regulations mandate a higher minimum wage. For instance, in New York, the minimum wage is set at $15 per hour.
Overtime Pay
- Hourly employees get 1.5 times their regular pay for working over 40 hours a week.
- Exempt salaried employees don’t receive overtime pay. However, some states may have laws guaranteeing overtime pay for full-time workers.
Employer and Employee Contributions
|
Employer’s contribution |
Employee’s contribution |
| Social Security Tax Rate |
6.2% |
6.2% |
| Medicare Tax Rate |
1.45% |
1.45% |
| FUTA (unemployment tax rate) |
6% (on the first $7000 paid to the employee) |
|
- Employees must pay an additional Medicare Tax of 0.9% on wages exceeding $200,00 a year.
Income Tax
- US employees pay income taxes based on seven brackets ranging from 10% to 37%.
- Employers are required to pay the corporate income tax, which is 21%.
Dates of Taxation
- Usually, April 15 is considered the Tax Day in the US.
- However, the date can be extended in case April 15 is on a weekend or holiday.
Taxation Forms
- The US requires various tax forms to be submitted by employers and employees based on their conditions or the purpose of their taxation.
Employee Benefits in the USA
Employee benefits in the USA ensure employees are protected, and their needs are handled. The following regulations are in place for the same:
Leave Policy in the USA
Learn about leave policy in the USA before hiring in the country:
Paid Time Off:
- There are no federal laws in the USA that mandate paid time off.
- The FMLA specifies when certain employees can take up to 12 weeks of unpaid leave each year.
Public Holidays:
- There are 11 public holidays in the USA.
| January 1 |
New Year’s Day |
| Third Monday in January |
Martin Luther King Jr. Day |
| Third Monday in February |
President’s Day |
| Last Monday in May |
Memorial Day |
| June 19 |
Juneteenth National Independence Day |
| July 4 |
Independence Day |
| First Monday in September |
Labor Day |
| Second Monday in October |
Columbus Day |
| November 11 |
Veteran’s Day |
| Fourth Thursday in November |
Thanksgiving Day |
| December 25 |
Christmas Day |
Maternity Leave:
- Private sector employees are eligible for unpaid maternity leave for the same duration.
- The rules for maternity leave in the USA often vary from one state to another. For instance, as per the state laws in California, mothers are granted eight weeks of paid maternity leave, at 60-70% of their income.
Paternity Leave:
- There is no legal provision for paternity leave in the USA.
- Fathers can take 12 weeks of unpaid leave as per FEPLA.
Sick Leave:
- The Family and Medical Leave Act allows 12 weeks of unpaid sickness leave to employees who are unable to work due to some serious health condition.
- Various states have paid sickness leave provisions in place.
Pension
- There are no legal mandates requiring employers to pay pensions to their employees.
- Several companies provide retirement benefits, like a retirement savings plan.
Workers’ Compensation
- Employers contribute a portion of their payroll towards workers’ compensation insurance.
- This insurance pays employees who are sick or injured because of their jobs.
Cost of Hiring an Employee in the USA
As per a study, an average US employer spends about $4,000 to hire an employee. However, the cost of hiring in the USA can greatly vary based on the following factors:
- Size of the business
- Location of the business
- Industry
- Job posting
- Background checks
- Compensation
- Training
- External recruiters
Establishing a Subsidiary vs. Employer of Record (EOR) in the USA
| Criteria |
Establishing a subsidiary |
Partnering with Skuad |
| Initial Cost |
Higher due to legal fees, setting up fees, and so on. |
Much lower due to Skuad’s established presence. |
| Duration for setup |
Could be months due to the several intricate operational steps. |
Almost instant since Skuad already has an established infrastructure |
| Employment liabilities |
The subsidiary is liable for all employment-related issues, which can put the parent company at risk. |
The parent company has no employment liabilities since Skuad will carry out all employment processes. |
| Operational overhead |
Quite high, consisting of HR, payroll management, compliance, etc. |
Minimal due to Skuad’s all-encompassing services. |
| Flexibility |
Mandates longer commitments. |
Can be effective in handling short-term projects as well. |
| Local compliance |
Since the subsidiary has the responsibility, the parent company needs to have a thorough understanding of all relevant US laws to ensure compliance. |
Skuad is already well-versed with the US federal and state laws and hence, no non-compliance issues. |
| Criteria |
Partnering with Skuad |
Establishing a subsidiary |
| Initial Cost |
Much lower due to Skuad’s established presence. |
Higher due to legal fees, setting up fees, and so on. |
| Duration for setup |
Almost instant since Skuad already has an established infrastructure |
Could be months due to the several intricate operational steps. |
| Employment liabilities |
The parent company has no employment liabilities since Skuad will carry out all employment processes. |
The subsidiary is liable for all employment-related issues, which can put the parent company at risk. |
| Operational overhead |
Minimal due to Skuad’s all-encompassing services. |
Quite high, consisting of HR, payroll management, compliance, etc. |
| Flexibility |
Can be effective in handling short-term projects as well. |
Mandates longer commitments. |
| Local compliance |
Skuad is already well-versed with the US federal and state laws and hence, no non-compliance issues. |
Since the subsidiary has the responsibility, the parent company needs to have a thorough understanding of all relevant US laws to ensure compliance. |
Overall, establishing a subsidiary in the USA can be rather complicated. On the other hand, partnering with Skuad as your Employer of Record (EOR) can help save you time and resources, while boosting efficiency and minimizing risks.
Top Job Listing Sites in the USA
- CareerBuilder: With 125 million candidates making up its database, CareerBuilder is one of the largest job listing sites in the country. Employers are provided with a separate applicant tracking system on this portal.
- Indeed: This is one of the most popular sites, globally. Indeed attracts nearly 250 million visitors each month and hence, can be the ideal place to shortlist eligible and talented candidates.
- FlexJobs: This site provides 50 different job categories and hence, makes it easier for employers to post vacancies.
- Simply Hired: This job listing site functions as a search engine as well, making it easier for applicants to find their desired candidates.
- Dice: This site has 2.7 million resumes, ensuring employers can easily find suitable candidates for their vacancies.
Compliance Risks of Hiring Employees in the USA
Fully understanding the laws to hire in the USA can prove to be a tricky task. Each provision is governed by different federal, state, and local labor laws making it complicated. Here are some key concern areas you need to take care of:
- Compliance with Compensation Laws: Various jurisdictions have their unique minimum wage laws. When hiring employees in the USA, ensure that you comply with these compensation laws.
- Incomplete documentation: Ensure that all your employees have submitted Form I-9 and provide documents that support their employment eligibility.
- Union Interference: Comply with the National Labor Relations Act (NLRA) rules. It ensures employers do not interfere with employees’ right to collectively bargain employment terms and conditions.
How to Hire Talent in the USA
You can opt for one of the following ways to hire in the USA:
Option 1: Establishing a subsidiary
- A subsidiary is a great option for companies who want greater control over their hiring operations.
- However, establishing a subsidiary in the USA can be quite tricky, given its different overlapping regulations.
Option 2: Hiring on a contractual basis
- This is a great way for companies to recruit top talent for short-term projects.
- The only drawback is that businesses would be responsible for creating the contracts strictly adhering to the laws.
Option 3: Hire an Employer of Record (EOR)- Skuad
- Hiring an EOR like Skuad is the perfect solution for businesses that want to work with the best in the US, without the complicated hiring steps.
- Skuad also helps with every aspect of employee management and compliance in the USA.
Hiring Trends in the USA in 2024
The job market in the US witnessed some major fluctuation last year, with several companies resorting to mass layoffs. Consequently, the hiring trends have also evolved this year, based on the current needs of employers and employees, alike.
One major trend is the continual presence of remote work. Many individuals have received remote work certifications to improve their chances of landing a job they can pursue in hybrid mode. On the other hand, facilitating remote work allows companies to hire from anywhere in the world, thus, giving them a bigger candidate pool.
Technology also plays a major role in influencing the hiring trends in the USA. Around 70% of recruiters in the US have shifted at least half of their recruitment and onboarding procedures to online mode.
Partner With Skuad For Seamless Hiring in the US
The USA boasts an advanced economy attractive to business owners everywhere. However, given the long list of labor regulations in the country, businesses might find it daunting to hire employees in the USA. This is where Skuad can be of help.
Skuad has a seamless framework in place that allows businesses from all over to hire remote talent in the US. In addition to hiring in compliance with all local laws, we facilitate efficient business operations through payroll and tax management, employee management, and much more. Book a demo today.
FAQs
How do I hire an employee in the USA?
In the USA, businesses can:
- Establish a Local Entity: This involves setting up your business within the US and directly managing the recruitment and hiring process, adhering to US employment laws and regulations.
- Partner with an Employer of Record (EOR): An EOR handles employment responsibilities on your behalf, ensuring compliance with US employment laws without establishing a local entity.
What is the average cost of hiring an employee in the US?
The cost of hiring an employee in the US varies widely depending on factors like location, industry, and job role. In addition to the salary, consider employer taxes, benefits, and training costs. The minimum wage in the US varies by state and sometimes by city, with the federal minimum wage being $7.25 per hour (as of April 2023). Local state laws may mandate a higher minimum wage.
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