Employer of Record in United States of America

Hiring employees in the United States of America for 2025 involves navigating a complex landscape of federal, state, and sometimes local regulations. Unlike many other countries, employment laws and tax requirements can vary significantly from one state to another, making it challenging for foreign companies to establish a compliant hiring process. Understanding the available avenues for engaging talent is crucial for successful expansion into the US market.

When considering hiring in the United States, companies typically have several options for employment:

• Establishing a Local Entity: This involves setting up a legal business entity in the US, such as a subsidiary or branch office. This path grants full operational control but requires significant time, legal expense, and ongoing administrative effort to manage registration, payroll, benefits, and compliance across various states.
• Utilizing an Employer of Record (EOR): An EOR service, such as Rivermate, acts as the legal employer for your team members in the US. This allows your company to manage the day-to-day work of your employees without needing a local entity or bearing the direct responsibility for employment compliance.
• Hiring Independent Contractors: Engaging individuals as independent contractors avoids direct employment obligations. However, misclassifying an employee as an independent contractor can lead to severe penalties from federal and state authorities, making it a high-risk option if not carefully managed.

How an EOR works in the United States of America

An Employer of Record (EOR) in the United States handles all the legal and administrative complexities associated with employment on your behalf. This partnership allows your company to focus on business operations while the EOR ensures compliance across diverse state regulations.

The EOR typically takes care of:

• Onboarding and offboarding: Managing all necessary documentation and legal procedures.
• Payroll processing: Ensuring accurate and timely payment of salaries.
• Tax withholding and filings: Handling federal, state, and local income taxes, Social Security, Medicare, and unemployment taxes.
• Employee benefits administration: Providing and managing health insurance, 401(k) plans, and other standard employee benefits.
• Workers' compensation: Arranging and managing workers' compensation insurance.
• Compliance with labor laws: Adhering to federal and state-specific employment laws, including minimum wage, overtime, leave policies, and anti-discrimination laws.

Benefits for companies looking to hire in the United States of America without establishing a local entity

For companies aiming to hire talent in the US without the overhead of establishing a local legal entity, an EOR offers substantial advantages:

• Rapid Market Entry: Hire employees in any US state much faster than setting up your own entity, often within days.
• Reduced Administrative Burden: Delegate complex HR, payroll, tax, and legal compliance tasks to experts, freeing up internal resources.
• Cost Efficiency: Avoid the significant costs and time associated with entity formation, ongoing legal counsel, and maintaining an in-house HR department for a small team.
• Guaranteed Compliance: Mitigate the risks of non-compliance with the patchwork of federal, state, and local employment laws and tax regulations.
• Access to Top Talent: Recruit and retain US-based employees without geographical limitations or the need for a physical office presence.
• Operational Flexibility: Easily scale your US workforce up or down as business needs evolve, without the complexities of managing a full legal entity.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in United States of America includes comprehensive HR support, benefits administration, compliance management, and access to our proprietary dashboard for real-time workforce analytics. No hidden costs, no setup fees—just straightforward pricing that scales with your business needs while ensuring full legal compliance in United States of America.

U.S. employers have key payroll tax responsibilities, including withholding and remitting Social Security (6.2% up to $168,600 in 2025), Medicare (1.45% with no wage base limit, plus an additional 0.9% for wages over certain thresholds), and unemployment taxes (FUTA at 0.6% after credits on the first $7,000 per employee, plus state unemployment taxes). Employers must deposit these taxes either monthly or semi-weekly based on their prior liabilities. Additionally, they are responsible for withholding federal income tax via Form W-4 and, where applicable, state income tax, with deadlines aligned to quarterly filings.

Employees can reduce taxable income through standard deductions (e.g., $14,600 for singles, $29,200 for married filing jointly in 2025), itemized deductions (medical expenses, SALT up to $10,000, mortgage interest, charitable contributions), and above-the-line deductions (IRA contributions, student loan interest, HSA contributions). Employers and employees must meet specific reporting deadlines: Form W-2 by January 31, Form 941 quarterly, Form 940 annually, and individual returns (Form 1040) by April 15. Foreign workers and companies face additional rules, including visa classifications, tax treaties, and transfer pricing, with specific forms like W-8BEN used to claim treaty benefits and certify foreign status.

The U.S. salary landscape varies significantly by industry, role, and location, with high-demand sectors like technology and finance offering notably higher compensation. For example, software engineers earn between $90,000 and $160,000, while data scientists can make $110,000 to $180,000. Healthcare roles such as registered nurses typically earn $75,000 to $110,000, whereas manufacturing and marketing roles range from $40,000 to $140,000 depending on the position.

Minimum wage regulations differ across states, with California and New York setting rates at $16.00 per hour, and Washington at $16.28. Employers must comply with the highest applicable wage law, considering local variations and rules for tipped employees, where federal minimums are $2.13 per hour if tips meet the federal minimum wage threshold.

Compensation packages often include bonuses such as performance, sign-on, retention, profit sharing, and stock options, along with allowances for housing, transportation, meals, and education. Payroll is typically processed bi-weekly via direct deposit, with deductions for taxes, Social Security, Medicare, and other benefits.

Salary trends in 2025 are driven by inflation, labor shortages, remote work adjustments, and a skills gap in tech and data fields. Experts forecast continued salary increases in high-demand sectors, prompting companies to enhance compensation packages to attract and retain talent.

In the United States, vacation leave policies are primarily determined by employer discretion and vary by state and locality, as there are no federal mandates for paid vacation or sick leave. Many employers offer paid vacation benefits, often increasing with tenure, but some states and cities have enacted laws requiring paid time off (PTO) with specific accrual and usage rules. Use-it-or-lose-it policies are common but are subject to state regulations, and some employers provide rollover options or floating holidays for additional flexibility.

Public holidays are observed nationally, with federal holidays listed in the table below. While private employers are not required to pay for these days, many do as part of benefits packages. Additionally, sick leave is not federally mandated, but numerous states and localities have laws requiring paid sick leave, allowing employees to accrue days for illness or caregiving. For parental leave, the federal Family and Medical Leave Act (FMLA) grants eligible employees up to 12 weeks of unpaid, job-protected leave for childbirth, adoption, or family care, with some states offering paid family leave programs.

Other leave types include bereavement, study, sabbatical, military, and jury duty leave, often provided at employer discretion or under specific legal provisions.

In the U.S., employer-provided benefits are vital due to limited national social security, making benefits packages key for attracting and retaining talent. Employers face complex regulations and significant costs, especially for health insurance and retirement plans. Mandatory benefits include Social Security, Medicare, unemployment insurance, workers' compensation, FMLA leave, and health coverage for large employers, while optional benefits often encompass PTO, health, dental, vision, life, disability insurance, 401(k) plans, EAPs, wellness programs, tuition reimbursement, and FSAs/HSAs.

Health insurance is predominantly employer-sponsored, with employees sharing costs through premiums and out-of-pocket expenses. The ACA mandates coverage standards, and compliance with regulations like HIPAA and COBRA is essential. Retirement benefits mainly consist of 401(k) plans, with some offering pension plans and IRAs, governed by ERISA. Benefit offerings vary widely by company size and industry, with large firms and tech companies typically providing more comprehensive packages. Costs for benefits, especially health insurance, are significant, and rising employee expectations necessitate competitive, well-communicated benefits strategies.

Employment agreements in the U.S. primarily operate within an "at-will" framework, allowing either party to terminate employment at any time unless restricted by specific contracts or laws. Employers increasingly use written agreements for executive, managerial, or specialized roles to clarify expectations and mitigate disputes. These agreements must comply with federal and state laws, covering compensation, benefits, termination conditions, and intellectual property rights.

Types of employment contracts include fixed-term, indefinite-term, at-will, and collective bargaining agreements (CBAs). Key clauses typically required are those addressing compensation, termination, confidentiality, non-compete, and intellectual property rights, with specific requirements varying by state. Properly drafted agreements help protect employer interests, ensure legal compliance, and foster a stable working environment.

Understanding these elements is vital for employers to ensure legal compliance, protect business interests, and establish clear employment relationships.

Remote work in the U.S. has grown significantly, offering benefits like increased productivity, cost savings, and access to broader talent, but also posing challenges in compliance, security, and engagement. Legally, remote workers are protected under laws such as FLSA, OSHA, ADA, and Title VII, with some states enacting additional regulations like right to request remote work and expense reimbursement. Employers must develop clear policies on eligibility, safety, data security, and communication, ensuring compliance across federal, state, and local laws.

Flexible work options include telecommuting, compressed workweeks, flextime, job sharing, part-time, and hybrid models. Successful implementation involves assessing suitability, establishing policies, providing technology, and ongoing monitoring. Data protection is critical, requiring security policies, access controls, employee training, and compliance with privacy laws like CCPA. Employers should also have clear reimbursement policies for equipment, internet, and office supplies, supported by documentation and understanding tax implications.

A reliable technology infrastructure is vital, including high-speed internet, collaboration tools, VPNs, cloud services, and technical support. Ensuring connectivity and security measures, such as backup internet options, helps maintain productivity and data safety. Overall, proactive management of legal, technological, and logistical aspects enables sustainable remote work programs aligned with business goals.

Employment termination in the U.S. primarily follows the "at-will" principle, allowing employers to dismiss employees for any legal reason and employees to leave without notice. Exceptions include protections against discrimination, retaliation, and breach of contract. Employers must consider factors such as employee status, reason for termination, and applicable laws to avoid legal liability and reputational damage.

Notice requirements vary: at-will employees typically have no statutory notice obligation, but contracts, collective bargaining agreements, or state laws (like WARN) may specify notice periods, often 60 days for mass layoffs. Severance pay is not mandated federally but may be required by contracts, policies, or agreements, with common calculation methods including fixed sums, service-based formulas, or salary continuation. Terminations can be "for cause" (e.g., misconduct, poor performance) or "without cause," but must comply with anti-discrimination and retaliation laws. Procedural steps include documentation, legal consultation, final pay, benefits management, property return, and confidentiality.

In the evolving U.S. work landscape, independent contracting and freelancing are gaining traction across numerous industries, offering businesses flexibility and access to specialized skills. For employers, understanding legal distinctions between employees and contractors is crucial to avoid misclassification, which can lead to penalties. The IRS uses a three-factor test focusing on behavioral control, financial control, and relationship type to classify workers. Contracts with independent contractors should clearly define scope, payment terms, intellectual property rights, and termination conditions to ensure compliance and protect both parties.

Independent contractors handle their own tax obligations, including estimated quarterly taxes and self-employment tax, and can deduct business expenses. Employers must issue Form 1099-NEC for payments over $600. Insurance, such as general liability and professional liability, is often required to protect both parties. Key sectors utilizing independent contractors include technology, creative services, consulting, healthcare, and professional services, where they provide niche expertise and project-based work flexibility.

The U.S. work permit system involves various visa categories tailored to different employment needs, with common types including H-1B (specialty occupations), L-1 (intracompany transferees), E-2 (treaty investors), O-1 (extraordinary ability), and TN (NAFTA professionals). Employers must sponsor foreign workers through petitions filed with USCIS, often requiring labor condition applications (LCA) from the Department of Labor to ensure wages and conditions are fair. The application process includes employer sponsorship, submission of necessary documentation, visa interview, and entry to the U.S. upon approval.

Key data points for employers:

Many foreign workers aim for permanent residency via employer-sponsored Green Cards or categories like EB-1, EB-2, and EB-3, with pathways for self-petition in extraordinary cases. Dependent visas (e.g., H-4, L-2, E) allow spouses and children to accompany workers, with some eligible for work authorization. Both employers and employees must adhere to strict compliance obligations, including wage laws, record-keeping, and reporting changes, to avoid penalties or deportation.