Are you an international company looking to hire employees in the United States? An Employer of Record (EOR) solution can help. A United States EOR is an HR company that becomes the legal employer of your US workforce, taking care of payroll and employment compliance, so you can focus on core business. 

Here are the key things you need to know about United States Employer of Record services. 

What Is a United States Employer of Record?

A United States Employer of Record (EOR) is a professional HR provider that legally employs workers in the U.S. on behalf of foreign or domestic companies, allowing these businesses to operate without setting up their own U.S. entity or navigating multiple layers of compliance on their own. Through an EOR arrangement, the provider manages essential HR and administrative tasks—such as payroll processing, tax withholdings, benefits administration, and employment contracts—so the client company can concentrate on its core business priorities. This model offers a quick path to hiring talent in the U.S. while staying compliant with federal, state, and local employment regulations.

One of the biggest challenges of employment in the U.S. is the complexity of regulations, which can vary substantially across different states and cities. On top of abiding by federal laws like the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act (FMLA), companies also face distinct requirements around minimum wage, overtime pay, workers’ compensation, and unemployment insurance in each jurisdiction. A U.S. EOR ensures that employees receive the correct statutory benefits and entitlements, taking care of tasks like state-by-state tax registrations, maintaining compliance with anti-discrimination laws, and issuing W-2 forms at year-end.

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Fifty states, fifty sets of rules: FICA, FUTA, state unemployment insurance, at-will variations, and state-specific wage-and-hour regulations.

We handle employment contracts, payroll, social contributions, and full US compliance.

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How Does a U.S. Employer of Record Work?

A U.S. Employer of Record (EOR) steps in to legally employ your U.S.-based team members, so you don’t have to set up a company in every state. You still manage the day-to-day assigning tasks, setting schedules, overseeing performance, but the EOR takes care of all the behind-the-scenes work that makes the hire official and compliant.

Once you choose a candidate, the EOR handles onboarding, offer letters, background checks, and ensures everything aligns with federal and state employment laws. From there, they run payroll, withhold the correct taxes, administer employee benefits, and manage things like workers’ comp, unemployment insurance, and HR compliance.

If you’re hiring across multiple states – or don’t yet have a U.S. entity – this model helps you skip the paperwork, cut the risk, and hit the ground running. A U.S. EOR gives you a fast, flexible way to grow your team while staying fully compliant and focused on your business.

United States Employer Of Record EOR vs Legal Entity in the United States

If your business wants to recruit a labor force in the U.S., you’ll need to establish a legal right to do so. The most common route to this is through establishing a local entity such as a subsidiary corporation. In doing this, you will be granted the freedom to conduct business so long as you remain compliant with all federal and state regulations. Establishing a subsidiary in the U.S. requires filing Articles of Organization with the relevant office, obtaining an Employer Identification Number (EIN) for tax purposes, and completing several other administrative steps. The process can be finalized in as little as four weeks but often takes much longer due to complications and delays.

In the United States, the majority of corporations are registered in Delaware, due to its business-friendly tax and compliance regime. 

Another option is to work with a U.S. EOR service. As part of a package of services, Employer of Record companies can act as proxy entities and allow you to begin recruiting immediately. It can also handle the hiring process, contracting, and employee management while taking responsibility for ensuring legal compliance is maintained throughout. While there are costs and other factors to consider when choosing to work with an EOR, it can offer significant benefits for anyone beginning to operate in the U.S.

Is Employer of Record Legal in the United States?

Yes, so long as it remains fully compliant with all legislation and obligations, working with an EOR to recruit and manage your U.S. employees is perfectly legal. Do be aware that if your activities stray into co-employment, your business may become liable under state PEO or employee leasing legislation which requires that the PEO be registered and follow certain statutory requirements. For example, New York State requires that PEOs be registered. 

How Much Do Employer of Record Services Cost in the United States?

How much you pay to work with an EOR company in the United States will depend on the scope of services, the size of your company, and several other factors. Every arrangement is unique, and the costs should be fully negotiated to ensure there are no surprises or disputes at any stage. As a rough guide, you should expect to pay either monthly fees of around $599 and $1200 per employee or somewhere between 5% and 15% of each worker’s gross salary.

How Does a USA Employer of Record Help with Payroll and Taxes?

In any U.S. business, administering payroll and taxation is a complex process that requires skilled calculations, specialist knowledge, and rigorous adherence to the regulations and requirements of both the federal and state authorities. The USA EOR will process payroll by calculating gross and net wages, deducting applicable federal, state, and local taxes, and ensuring employees receive their paychecks on time.

The United States EOR provider ensures compliance with the Fair Labor Standards Act (FLSA), which governs federal wage and hour requirements like minimum wage and overtime, as well as any specific state and local wage laws. This process requires collaboration with the IRS, which oversees federal tax collection, state revenue departments, and the Department of Labor (DOL), which enforces wage and hour regulations.

In addition to processing payroll, the EOR is responsible for withholding and filing payroll taxes. This includes managing federal income tax, Social Security, Medicare, and any applicable state and local income taxes. The EOR ensures that both employer and employee contributions to Social Security and Medicare are accurately deducted and filed under the Federal Insurance Contributions Act (FICA). They also handle unemployment taxes, adhering to the Federal Unemployment Tax Act (FUTA) for federal requirements and state-specific unemployment taxes as required by individual State Unemployment Tax Acts (SUTA). The IRS plays a central role in overseeing these tax-related obligations, while state tax agencies manage local compliance.

By handling these payroll and tax-related responsibilities, a U.S. EOR ensures that businesses remain compliant with complex employment laws and regulations while freeing the client from administrative burdens. With the IRS, Department of Labor, and various state and local agencies governing different aspects of payroll and taxation, the EOR effectively manages the relationship between the employer, employee, and government authorities. This comprehensive service allows businesses to focus on their core activities without worrying about the intricacies of payroll management.

How Does a USA Employer of Record Help with Benefits Administration?

Compensation packages for employees in the U.S. combine salaries with a collection of contractual and legally required benefits. A US EOR firm must administer these alongside its payroll and taxation responsibilities. This includes arranging deductions for health insurance premiums and retirement plan contributions while also managing paid and unpaid leave and any other benefits in full compliance with the law.

What Labor Laws Apply to Hiring in the United States?

U.S. employment is regulated by a collection of laws, including the 1938  Fair Labor Standards Act (FLSA), which sets standards for minimum wages, overtime, record keeping, and many other areas. Some of the most notable areas of U.S. labor law include:

Employment Contracts

While employment contracts in the U.S. are less concerned with defining the length of employment or terms of termination than in most countries, they are vital to determining the specifics of a working relationship. This includes everything from responsibilities to compensation and dispute resolution. It is also common to see clauses relating to intellectual property ownership, non–disclosure, and confidentiality.

Until their ban in April 2024, non-compete clauses were also regular features in U.S. contracts. This significant shift in employment law highlights the benefits of working with an EOR that is diligent about staying up to date with the evolving regulatory landscape.

Working Hours and Paid Holidays

The FLSA states that a standard working week in the U.S. is 40 hours and anything over this is overtime which must be compensated at a rate of at least 150% of standard pay. However, there are several exemptions to this, particularly for high earners, something that changed significantly when revised overtime rules were released in April 2024.

Unlike the majority of the developed world. Private employers in the U.S. are not required to offer any paid annual leave to employees, even for public holidays. Some provisions are made for sick leave and family medical leave but, in general, any paid leave is considered a benefit and must be negotiated and detailed in the contract.

Social Security and Medicare Taxes

Employers in the U.S. are responsible for withholding Social Security and Medicare taxes from employees’ paychecks. Currently, Social Security payments account for 6.2% of gross wages, while Medicare accounts for 1.45%. Both these amounts must be deduced from the employee’s wages and matched by the employer. Some additional requirements are also imposed on high earners.
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Workers’ Compensation

While the U.S. Department of Labor oversees compensation programs for federal workers, most private schemes are overseen by individual states. Almost all employers in the U.S. are required to carry workers’ compensation insurance to ensure the medical needs of employees who have become sick or injured due to their work can be covered.

Taxes

Employees in the U.S. are subject to several mandatory taxes administered primarily by the Internal Revenue Service (IRS). This includes federal income tax, Social Security and Medicare, state and local income taxes, 401(k) retirement plans, and more.

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Parental Leave

The U.S. has no mandatory maternity or paternity leave entitlement. However, it does afford some benefits and protections to parents. For example, the Family and Medical Leave Act (FMLA) allows parents to take up to  12 weeks of unpaid leave in each 12-month period for birth and/or childcare without putting their jobs at risk. This is backed up by the Pregnant Workers Fairness Act, which requires employers to provide reasonable accommodations to employees affected by pregnancy, childbirth, or related medical conditions.

At-Will Employment

In contrast to many countries, regulations regarding probationary periods are unnecessary in the U.S. due to the overriding principle of “at-will” employment, which allows working relationships to be terminated without reason or notice unless otherwise stated by contract or exemption.

Union Membership

Freedom to form or join unions has been protected in the U.S. since 1935 by the National Labor Relations Act (NLRA). Employers are prohibited from interfering with these freedoms or from punishing employees for their union membership, or their participation in union activities.

Employment Termination

In general, the ‘at-will’ employment principle means there are no mandatory termination processes for U.S. workers. Exceptions occur when specific state laws or contractual agreements say otherwise.

Pensions and Retirement

Most U.S. employees receive some retirement funding through Social Security schemes, but this is rarely enough to maintain a comfortable lifestyle. As a result, several employer-sponsored retirement plans have been created to offer greater levels of protection. The most common is the 401(k), but other options exist, including the 403(b). From 2026, the recently introduced SECURE Act 2.0 will make it mandatory for most U.S. companies to enroll all eligible employees in a retirement plan.

The main function of an EOR is to streamline the process of hiring and managing employees in the U.S. by acting as the official employer for tax purposes. This arrangement is especially beneficial for international companies who want to enter the U.S. market without the difficulties and costs of setting up a local office or subsidiary. Using an EOR, companies can quickly onboard employees, manage human resource functions, and efficiently comply with U.S. employment regulations. Some EORs even provide recruitment agency services. 

In a market as regulated and competitive as the United States, taking advantage of an EOR service can help create an easier entry, with minimal risk and reduced administrative burden. This allows businesses to focus on strategic activities like expanding their market and optimizing their operations rather than getting bogged down by legal and procedural complications.

How Does a USA Employer of Record Work?

An EOR service in the USA simplifies the employment process for companies that are not based in the country or those that don’t have a local entity. Here’s how an EOR operates step-by-step:

1

Analyze Organizational Needs

The first step is to select a reputable EOR service provider. Once chosen, both parties will sign an agreement that outlines the EOR’s roles, responsibilities, and expectations, including handling legal compliance, payroll, and employee benefits.

2

Employee Onboarding

The EOR takes over the onboarding process for new hires. This involves collecting necessary employee documents, setting up payroll, and ensuring employment contracts meet local legal standards.

3

Compliance and Administration

The EOR manages all employment compliance, including adherence to federal and state labor laws. This includes income tax withholding, social security contributions, and any other statutory requirements.

What are the Benefits of a United States Employer of Record Service?

Using an Employer of Record in the USA provides many different advantages for companies that are looking to hire and manage employees without the hassle of having to establish a local entity. Here are the main benefits of using a USA EOR:

  • Quick Market Entry: An EOR allows companies to hire employees quickly without the need for a physical presence or a local entity in the USA. This speeds up the process of entering the U.S. market, making it perfect for companies that want to start operations immediately.
  • Compliance with Employment Laws: The EOR is responsible for ensuring all employment practices comply with both federal and state laws. This includes managing complicated issues such as employment taxes, workers’ compensation, and unemployment insurance.
  • Cost Efficiency: Managing payroll, benefits, and compliance in-house can be very expensive, especially when a business is trying to navigate the tax system and employment legislation in a foreign country. An EOR can reduce these overhead costs significantly.
  • Flexibility: Companies can quickly scale their operations up or down without the long-term commitments or complexities that are involved in hiring or laying off staff directly. This flexibility is crucial for adapting to changing business conditions

What are the Downsides of a USA Employer of Record?

Engaging a US Employer of Record comes with both pros and cons. Here are the main drawbacks of using an EOR in the USA:

  • Limited Control Over Employees: When using an EOR, companies may face challenges in maintaining direct control over their workforce. The EOR handles all legal and HR aspects, which can sometimes distance the parent company from its employees.
  • Dependence on the EOR’s Competence: The effectiveness of an EOR heavily relies on its ability to competently manage HR tasks. Any shortcomings in the EOR’s service delivery can impact employee satisfaction and operational efficiency.
  • Cost Considerations: While using an EOR can save on the costs of setting up a legal entity, it is not necessarily cheaper than other employment options. The fees for EOR services may be quite hefty and must be weighed against the potential benefits.

How to Choose a United States EOR

Choosing the right Employer of Record in the USA requires careful consideration to ensure it completely aligns with your business needs. First, evaluate the EOR’s expertise and experience in the industry and region in which you plan to operate. An EOR with a strong track record in your sector can offer invaluable insights and a more tailored service. Next, consider the range of services that are being offered. Ensure the EOR can handle all your specific HR tasks, from payroll to compliance with local labor laws.

It is also important to assess customer service quality; responsive and proactive customer support is crucial for quickly and effectively addressing issues. Finally, review their pricing structure to ensure complete transparency and that it will fit into your budget. Avoid providers with hidden fees that could inflate your costs unexpectedly. By carefully taking the time to vet potential EORs based on these criteria, you can find a partner that meets your operational requirements and supports your overall strategic business objectives.

Engage a United States Employer of Record, with Remote People

Taking advantage of an Employer of Record in the United States is a great way to enhance your business’s operational efficiency significantly. An EOR simplifies the often complex compliance, payroll, and HR management processes, allowing you to focus on growth and core business activities. This partnership provides the ability to adapt to changing market demands swiftly and without the burdens of legal and administrative hassles. 

If you’re unsure how to navigate Employer of Record options in the United States, Remote People is here to help. We provide expert EOR services tailored to your business needs—ensuring compliance, smooth onboarding, and scalable support across the U.S.

Frequently Asked Questions

A USA Employer of Record becomes the legal employer for compliance purposes, handling all employment responsibilities. In contrast, a Professional Employer Organization (PEO) co-employs staff, sharing responsibilities with the client company, but does not fully take over as the employer.

Yes, you can outsource a USA employer of record service. Outsourcing to an EOR allows a company to legally employ staff in the USA without establishing their entity, and managing all related legal, HR, and compliance responsibilities externally.