Employer of Record in United States of America

An Employer of Record (EOR) is a third-party organization that legally employs workers on behalf of another company. This entity takes on the responsibility for all formal employment tasks, including payroll processing, tax withholding and filing, benefits administration, and ensuring compliance with complex labor laws and regulations. The client company retains control over the employee's daily tasks and management, while the EOR handles the administrative and legal burdens of employment.

For companies looking to expand or hire talent in the United States without establishing a local legal entity, navigating the diverse and complex landscape of federal, state, and local employment laws can be challenging. An EOR provides a streamlined solution, allowing businesses to quickly and compliantly hire employees across different states, each with its own unique regulations regarding wages, benefits, leave, and termination.

How an EOR Works in the USA

When a company partners with a US-based EOR, the EOR becomes the legal employer of the designated workers in the United States. The client company identifies the candidate, and the EOR then hires them under the EOR's legal entity. The EOR manages all aspects of the employment relationship from a compliance standpoint, including drafting compliant employment agreements, running payroll according to state and federal requirements, managing benefits enrollment (such as health insurance and retirement plans), handling workers' compensation, and processing unemployment claims. The client company directs the employee's work and performance.

Benefits of Using a US EOR

Utilizing an EOR offers significant advantages for companies hiring in the United States without a local presence:

• Rapid Market Entry: Hire employees quickly in any US state without the time and expense of setting up a local legal entity, registering with state authorities, and establishing payroll systems.
• Ensured Compliance: Navigate the intricate web of federal, state, and local employment laws, tax regulations, and labor requirements without needing in-house expertise for each jurisdiction. The EOR assumes the legal responsibility for compliance.
• Reduced Risk: Minimize the risk of misclassification errors (e.g., incorrectly classifying employees as independent contractors) and avoid potential penalties, fines, and legal challenges associated with non-compliance.
• Focus on Core Business: Offload administrative burdens like payroll, benefits administration, and HR compliance, allowing your team to concentrate on strategic initiatives and business growth.
• Access to Talent: Hire the best candidates regardless of their location within the US, overcoming geographical barriers without needing to establish multiple state registrations.

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.

The US recruitment landscape in 2025 is competitive, driven by demand in technology, healthcare, renewable energy, and specialized manufacturing. Employers must understand regional labor dynamics, candidate preferences for work-life balance and professional development, and compliance requirements. Hiring timelines vary, with entry-level positions taking 4-6 weeks and specialized roles potentially extending to 8-12 weeks or longer. A multi-channel approach using online job boards, networking sites, social media, and employee referrals is most effective.

Key challenges include competition for skilled workers, navigating state-specific labor laws, and managing diverse candidate expectations. Solutions involve optimizing the candidate experience, leveraging technology like ATS, offering competitive compensation and benefits, building a strong employer brand, and ensuring legal compliance. A structured recruitment process includes defining the role, developing a job description, determining compensation, posting the job, sourcing and screening candidates, conducting interviews, performing background checks, extending an offer, and onboarding. Partnering with a specialized recruitment agency can be beneficial, especially for companies lacking internal HR resources or hiring in unfamiliar regions.

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.

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.

The U.S. workforce is protected by laws covering termination, anti-discrimination, working conditions, safety, and dispute resolution. Most employment is "at-will," allowing employers to terminate employees for any lawful reason, with some states requiring notice or just cause. Wrongful termination claims can arise from discrimination, retaliation, or breach of contract.

Key protections include anti-discrimination laws (e.g., Title VII, ADEA, ADA, GINA), enforced primarily by the EEOC. Employers must avoid discrimination based on protected classes such as race, age, disability, and others. Workplace standards under the FLSA set minimum wage ($7.25/hour federally, higher in many states), overtime, and recordkeeping requirements. OSHA mandates safe working conditions, hazard communication, PPE, and injury reporting.

Dispute resolution options include internal procedures, mediation, arbitration, agency investigations, and litigation. Employers should stay compliant with evolving federal and state laws to ensure fair treatment and avoid liabilities.

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.

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.

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.