Employer of Record in USA
Hiring in USA at a glance
- This guide explains how an Employer of Record in the USA serves as the sole legal employer, handling payroll, taxes, and compliance across all 50 states.
- The article compares four US hiring paths EOR, own entity, PEO, and contractor—across setup time, compliance ownership, cost structure, and ideal use cases.
- Key compliance obligations covered include employer FICA at 7.65%, FUTA, state unemployment insurance, ACA-compliant benefits, Form I-9, and state-specific termination deadlines.
- Recent regulatory developments addressed include the NLRB joint-employer rule, the FTC non-compete rule, California SB 616, and the contested FLSA salary threshold changes.
An Employer of Record in the USA serves as the legal employer for US-based staff, handling payroll, taxes, and compliance across all 50 states so that companies can hire American workers without setting up a US entity. Gloroots operates as an EOR in the USA, covering hiring options, employment law, payroll, benefits, onboarding, and termination for US-based employees.
US employment law varies significantly at the state level, with each of the 50 states establishing its own rules on minimum wage, paid leave, overtime, and worker classification. This state-by-state variation represents the primary compliance challenge for employers operating across multiple US jurisdictions, while the federal framework adds further obligations, including an employer FICA rate of 7.65% of gross wages and a Social Security wage base of $176,100 for 2025.
What Is an Employer of Record in the United States?
An EOR is the sole legal employer under US federal and state law. It is not a co-employer like a Professional Employer Organization (PEO). The client company directs the work; the EOR holds all employment liability.
The EOR issues a W-2 under its own Employer Identification Number (EIN). Payroll runs with federal and state withholdings, and the EOR administers benefits and manages HR compliance. The client retains full control over the employee's work and performance.
This arrangement is fully legal and distinct from worker misclassification. The employment relationship is transparent, documented, and compliant with applicable federal and state law. No federal statute prohibits it. To understand the full mechanics, see how does EOR work.
Your Hiring Options in the United States: EOR vs. Entity vs. PEO vs. Contractor
Four main paths exist for hiring in the USA: an Employer of Record, your own US legal entity, a Professional Employer Organization, or an independent contractor engagement. Each suits a different scale, timeline, and compliance profile.
EOR is the right fit when you have no US entity, a small or test-market team, and a fast time-to-hire requirement. EOR market fees typically run $199 to $1,000 per employee per month, with most providers pricing between $499 and $699. For a full breakdown, see employer of record cost. Gloroots has no stated minimum headcount requirement for US hires.
When your US headcount reaches 50 to 100 employees, transitioning to a direct entity is worth evaluating. A PEO requires an existing US entity and operates as a co-employer, not a sole legal employer. Contractor arrangements apply only to genuinely independent, project-based work. To explore Gloroots EOR services for the US market, review the full offering before selecting a path.
Path | Setup Time | Compliance Ownership | Cost Structure | Best For |
|---|---|---|---|---|
EOR | 2 to 4 weeks | EOR owns all compliance | Flat monthly fee per employee ($199 to $1,000; typically $499 to $699) | No US entity; small or test-market teams |
Own Entity | 4 to 8 weeks plus state registrations | Employer owns all compliance | Setup costs plus ongoing overhead | 50 or more employees; long-term US presence |
PEO | 2 to 4 weeks | Shared co-employer model | Percentage of payroll or per-employee fee | Companies with an existing US entity |
Contractor | Days | Contractor manages own taxes | Project or hourly rate | Genuinely independent, project-based work |
How to Hire in the United States Through an EOR: Step by Step
Hiring employees in the United States through an Employer of Record (EOR) follows a structured process, from selecting a candidate and preparing a state-specific employment agreement to running payroll and managing ongoing compliance. Because US employment requirements vary by state and locality, the EOR must account for both federal and state obligations.
Step 1: Decide Between an EOR and a US Entity
An EOR allows a company to hire US employees without establishing its own legal entity in the country. It can be useful when entering the US market, hiring a small or distributed team, or testing demand before committing to an entity setup.
There is no universal employee-count threshold at which a company should switch from an EOR to its own entity. The decision depends on factors such as hiring volume, expected growth, operating model, tax considerations, and the long-term cost of maintaining an EOR versus an entity.
Step 2: Select and Vet Your EOR Provider
Choose an EOR with strong US compliance capabilities and coverage in the states where you plan to hire. Confirm how the provider structures its US employment model, who serves as the legal employer, and whether it relies on third-party partners for employment and payroll.
Evaluate the provider's ability to manage state-specific payroll, employment agreements, tax registrations, benefits, workers' compensation, onboarding, and termination requirements.
For a broader evaluation framework, see best employer of record.
Step 3: Issue a State-Specific Employment Agreement
Once you select a candidate, the EOR prepares the required employment documentation based on the employee's state of employment. The agreement and onboarding documents should reflect applicable federal, state, and local requirements.
Depending on the role and hiring arrangement, documentation may also include confidentiality, intellectual property assignment, restrictive covenant, or other employment-related provisions. Any background-check authorization must comply with applicable federal and state requirements.
Step 4: Complete Form I-9, E-Verify, and Background Checks
Form I-9 is required for verifying an employee's identity and authorization to work in the United States. The employee generally must complete Section 1 by their first day of employment, while the employer or authorized representative must complete Section 2 within three business days of the employee's first day of work for pay.
E-Verify requirements vary by employer, state, contract, and other circumstances, so the EOR determines whether an E-Verify case must be created.
If a background check is conducted through a consumer reporting agency, the process must comply with the Fair Credit Reporting Act (FCRA). State and local fair-chance or ban-the-box rules may also restrict when and how employers can ask about criminal history.
Step 5: Set Up Benefits and Workers' Compensation
The EOR arranges required employment-related coverage and benefits based on the employee's location and applicable eligibility rules.
Workers' compensation requirements vary by state, and coverage may also depend on factors such as the employer's industry and workforce. The EOR is responsible for ensuring the employee is covered under the applicable workers' compensation arrangement.
For health benefits, employers subject to the Affordable Care Act (ACA) employer mandate generally must offer affordable, minimum-value coverage to eligible full-time employees or face potential penalties. The commonly referenced 90-day waiting-period limit applies to group health plans that impose a waiting period; it is not a universal requirement to offer health insurance to every employee within 90 days of hire.
Step 6: Run Compliant Payroll and Remit Taxes
The EOR runs payroll according to the agreed pay schedule and handles applicable federal, state, and local payroll obligations.
This can include federal income-tax withholding, Social Security and Medicare (FICA) taxes, federal unemployment tax (FUTA), state unemployment insurance (SUI), state income-tax withholding where applicable, and other state or local payroll taxes.
FUTA is generally 6% on the first $7,000 of wages per employee, with employers typically eligible for a credit of up to 5.4% for qualifying state unemployment taxes, resulting in an effective federal rate of 0.6%. The EOR also handles required payroll filings and provides the employee with a Form W-2 after the end of the tax year.
Step 7: Manage Ongoing Compliance, Termination, and Offboarding
US employment compliance continues after onboarding. The EOR monitors applicable changes to federal, state, and local employment requirements and manages payroll, benefits, required filings, and employment documentation throughout the employee lifecycle.
When employment ends, the EOR handles applicable final-pay requirements, benefits termination or continuation, required notices, and other offboarding obligations. COBRA continuation coverage may apply to employees of employers and group health plans subject to COBRA, although certain state continuation requirements can also apply.
For qualifying plant closings and mass layoffs, the federal Worker Adjustment and Retraining Notification (WARN) Act can require 60 days' advance notice. WARN coverage and notice requirements depend on factors including employer size, the number of affected employees, and whether the employment action qualifies as a covered event. Some states also have their own WARN or similar requirements.
Example: Hiring an Employee in California Through an EOR
Suppose a company wants to hire a product manager who will work in California. The EOR must account for California-specific employment, payroll, tax, workers' compensation, wage-and-hour, and leave requirements in addition to applicable federal obligations.
The EOR handles the employment relationship, onboarding documentation, payroll, applicable benefits, tax filings, and ongoing compliance according to the requirements that apply to the employee's work location.
This illustrates why state-level compliance capability matters when choosing a US EOR. A provider that can manage employment across multiple states can help companies avoid having to build separate administrative processes for each location.
How to Choose the Right EOR in the United States
Choosing a US EOR requires evaluating legal structure, coverage depth, pricing model, and support quality. The criteria below apply regardless of which provider you consider. For a comparative view of top providers, see best employer of record.
For a technology-layer perspective, review employer of record software options alongside these criteria.
Own US entity vs. partner network. An EOR that holds its own US entity bears direct legal liability. A partner-network model introduces an intermediary, which adds contractual and compliance risk.
State-level coverage depth. Confirm the provider covers all 50 states. California, New York, Washington, Texas, and Florida carry the most complex employment laws.
In-house compliance team. Verify whether compliance staff are employees of the EOR or outsourced. In-house teams carry direct accountability and respond faster to state law changes.
Benefits tiers and ACA compliance. Confirm the provider offers ACA-compliant health plans. Check whether 401(k), short-term disability, and long-term disability are included or available as add-ons.
Pricing transparency. Market EOR fees run $199 to $1,000 per employee per month. A flat monthly fee per employee is preferable to a percentage-of-payroll model. Confirm the termination fee policy before signing.
Data security certifications. Look for SOC 2 Type II and ISO 27001 as baseline indicators of data security maturity.
Support model. A dedicated account contact provides faster responses to state-specific compliance questions than a shared support queue.
Own US Entity vs. Partner Network
An EOR that holds its own US legal entity bears direct employment liability. A partner-network model routes that liability through a third party, adding contractual and compliance risk at every layer.
State-Level Coverage Depth
Confirm the provider covers all 50 states with jurisdiction-specific compliance rules, not a single federal-level policy applied uniformly.
California carries the most complex obligations. Employers must pay daily overtime after 8 hours worked in a single day, provide meal breaks and rest breaks, and reimburse business expenses under California Labor Code Section 2802. These rules apply in addition to federal FLSA requirements.
In-House Compliance Team
Verify whether compliance staff are employees of the EOR or outsourced. In-house teams respond faster to state law changes and carry direct accountability.
Benefits Tiers and ACA Compliance
Confirm the provider offers ACA-compliant health plans. Check whether 401(k), short-term disability, and long-term disability are included or available as add-ons.
Pricing Transparency
EOR fees in the USA typically range from $199 to $1,000 per employee per month. The most common range is $499 to $699. A flat monthly fee per employee is preferable to a percentage-of-payroll model. For a full cost breakdown, see employer of record cost.
Data Security Certifications
SOC 2 Type II and ISO 27001 are the baseline certifications to verify when evaluating an EOR provider. SOC 2 Type II confirms that security controls have been independently audited over a defined period. ISO 27001 confirms a documented information security management system is in place.
Support Model and Integration Capability
Gloroots assigns a dedicated account contact to each client, providing direct access for state-specific compliance questions. The platform integrates with major HRIS and payroll tools. For a full review of integration options, see employer of record software.
Workforce and Talent Pool in the United States
The USA has approximately 165 million active workers, a median age of 38.9, and around 40% hold tertiary degrees. English is the primary language of business, and the workforce is multilingual in major cities.
The country produces a strong STEM pipeline through institutions including MIT, Stanford, and UC Berkeley. Key talent hubs concentrate by sector: New York for finance and media, Silicon Valley for technology and AI, Boston for biotech, Chicago for logistics, and Austin for startups.
Work culture is performance-driven. Remote and hybrid arrangements have become standard expectations across technology, finance, and professional services roles. Benefits costs add 20 to 30 percent above base salary in competitive markets, a factor that directly affects total employment cost planning.
Category | Key facts |
|---|---|
Workforce size | Approximately 165 million active workers |
Median age | 38.9 years |
Tertiary education | Around 40% of the workforce |
Primary business language | English; multilingual workforce in major cities |
Top talent hubs | New York, Silicon Valley, Boston, Chicago, Austin |
Key industries | Technology, finance, life sciences, healthcare, aerospace, manufacturing |
Benefits cost premium | 20 to 30 percent above base salary in competitive markets |
Companies evaluating North American hiring more broadly can compare market conditions and employment obligations in employer of record Canada.
Employment Law Essentials in the United States
US employment law operates on two levels: federal statutes set a baseline, and state law frequently exceeds it. Employers must apply whichever standard is stricter.
The FLSA sets a 40-hour standard workweek. Non-exempt employees earn 1.5x their regular rate for hours beyond 40 in a week. California applies daily overtime after 8 hours in a single day. California also requires a 30-minute unpaid meal break after 5 hours of work and a 10-minute paid rest break for every 4 hours worked. California Labor Code Section 2802 requires employers to reimburse employees for all necessary business expenses. Failure to comply exposes employers to enforcement actions under the Private Attorneys General Act (PAGA), with penalties reaching $250 per violation per employee.
The federal minimum wage is $7.25 per hour. State and city rates are higher in many jurisdictions. Employers must apply the highest applicable rate at all times.
The Worker Adjustment and Retraining Notification (WARN) Act requires employers with 100 or more employees to provide 60 days advance written notice before a plant closing or mass layoff. Several states, including California and New York, have mini-WARN statutes with lower employee thresholds and broader coverage.
Misclassifying employees as independent contractors carries significant financial exposure. At the federal level, IRS Section 3509 imposes back taxes at fixed rates on unreported wages. In California, PAGA penalties for misclassification can reach $250 per violation per employee for an initial violation. These figures represent floor-level exposure; litigation costs and back-pay liability add to the total. The misclassification section of this guide covers the full penalty framework.
Employment Contracts
Written employment contracts are not legally required in the US, but every agreement should include an IP assignment clause. Under the work-for-hire doctrine, works created by an employee within the scope of employment belong to the employer by default. In an EOR structure, the EOR is the legal employer, so IP assignment clauses in the employment agreement must explicitly assign all work product rights to the client company to avoid ownership ambiguity.
Working Hours and Overtime
The FLSA sets a 40-hour standard workweek. Non-exempt employees earn 1.5x their regular rate for hours beyond 40. California requires daily overtime after 8 hours and mandates a 30-minute unpaid meal break after 5 hours worked, plus a 10-minute paid rest break per 4 hours worked. California Labor Code Section 2802 also requires employers to reimburse employees for all necessary business expenses.
Minimum Wage
The federal minimum wage is $7.25 per hour. Many states and cities set higher rates. California sets $16 per hour, New York City sets $16 per hour, and Washington sets $16.28 per hour. Several states, including California and Washington, index their rates annually to inflation.
Some cities set rates above their state minimums. Seattle and San Francisco are two examples. Employers must apply the highest rate applicable to the employee's work location, whether federal, state, or local.
Leave and Statutory Benefits in the United States
The United States has no single federal framework for paid leave. Entitlements vary by federal law, state law, and employer practice, which means compliance obligations differ depending on where each employee works.
The table below summarizes the main leave categories, statutory entitlements, pay rates, and key conditions.
Leave type | Entitlement | Pay rate | Key conditions |
|---|---|---|---|
Annual leave | No federal minimum; 10 to 20 days market standard | Paid (employer discretion) | Colorado requires PTO payout on termination |
Sick leave | Varies by state and city | Paid where mandated | California, New York, Washington, and many cities mandate paid sick leave |
Family and medical leave | 12 weeks unpaid (FMLA) | Unpaid federally; paid in California, New York, New Jersey, and Washington | 12 months tenure required; employer must have 50 or more employees |
Public holidays | 11 federal holidays | No federal pay requirement | Most employers pay as market practice |
Disability insurance | No federal mandate; market standard as employer benefit | Varies by plan | Short-term and long-term disability are standard in competitive benefit packages |
FMLA eligibility has two firm requirements: the employee must have at least 12 months of tenure, and the employer must have 50 or more employees. Employees at smaller employers have no federal job-protected leave entitlement.
Short-term and long-term disability insurance are not federally required but are standard components of competitive US benefit packages. Several states, including California, New York, and New Jersey, operate their own state disability programs funded through payroll deductions.
Annual Leave
No federal law requires employers to provide paid vacation. The market standard is 10 to 20 days of paid time off annually, and Colorado requires employers to pay out accrued PTO upon termination.
Sick Leave
No federal paid sick leave mandate exists. California, New York, Washington, and many cities require paid sick leave, with accrual rates and caps set at the local level.
Maternity and Paternity Leave
The FMLA provides 12 weeks of unpaid, job-protected leave for eligible employees. Eligibility requires at least 12 months of tenure and an employer with 50 or more employees.
California, New York, New Jersey, and Washington offer paid family leave programs funded through employee payroll deductions.
Public Holidays
The USA observes 11 federal public holidays. No federal law requires employers to pay employees for those days, though most do as standard practice.
Payroll, Tax and Statutory Contributions in the United States
US payroll runs bi-weekly or semi-monthly. Employers withhold federal and state income tax plus FICA contributions and remit employer-side contributions each pay cycle.
The Federal Unemployment Tax Act (FUTA) rate is 6% on the first $7,000 of wages per employee. Employers who pay state unemployment insurance (SUI) on time receive a credit of up to 5.4%, reducing the effective FUTA rate to 0.6% in most states.
SUI rates vary by state and by each employer's experience rating. Workers' compensation insurance is state-mandated; rates vary by state and by industry classification code.
The EOR issues W-2 forms under its own Employer Identification Number (EIN). The W-2 filing deadline is January 31 each year. Clients should confirm this arrangement with their EOR before the first payroll cycle.
Under the NLRB's 2023 joint-employer rule, EOR agreements must clearly delineate which party controls the terms and conditions of employment. A well-drafted EOR services agreement reduces joint-employer classification risk for the client company.
Contribution | Employer rate | Notes |
|---|---|---|
Social Security (OASDI) | 6.2% | Wage base $176,100 for 2025 |
Medicare | 1.45% | No wage cap; Additional Medicare Tax of 0.9% on wages above $200,000 (single filer) |
FUTA | 6% gross; 0.6% net | Applied to first $7,000 of wages; net rate after state credit |
SUI | Varies by state | Rate set by state and employer experience rating |
Workers' compensation | Varies by state | State-mandated; rate depends on industry classification code |
Gloroots manages payroll filings, W-2 issuance, and statutory contributions across all 50 states. EOR agreements issued through Gloroots include explicit control delineation to address joint-employer risk.
Work Visas and Permits in the United States
The US issues several nonimmigrant work visa categories, each tied to a specific occupation type, employer relationship, or nationality. The most common are H-1B (specialty occupation), O-1 (extraordinary ability), L-1 (intracompany transfer), and TN (available to Canadian and Mexican nationals under USMCA).
A critical limitation applies to EOR arrangements: most EOR providers cannot sponsor H-1B visas. The H-1B petition must be filed by the actual employing entity, which is typically the client company, not the EOR. If your hire requires H-1B sponsorship, the client company must file directly.
An EOR can employ workers who already hold valid US work authorization, including H-1B holders sponsored by a prior employer, O-1 holders, and green card holders. For companies also managing internationally mobile workers in other markets, see employer of record UK for a comparable visa and employment overview.
Visa Type | Purpose | Validity |
|---|---|---|
H-1B | Specialty occupation roles requiring a bachelor's degree or equivalent | 3 years, extendable to 6 years |
O-1 | Workers with extraordinary ability in sciences, arts, business, or athletics | Up to 3 years, with annual extensions |
L-1 | Intracompany transfers of managers, executives, or specialized knowledge workers | 1 to 3 years depending on subcategory |
TN | Canadian and Mexican nationals in USMCA-listed professions | Up to 3 years, renewable |
If you want to hire a foreign national in the US through an EOR, confirm that the individual already holds valid work authorization. The EOR manages payroll and compliance; it does not initiate visa sponsorship on the client's behalf.
Equity and ESOP Consulting in the United States
Equity compensation is standard in US technology and startup markets. RSUs, stock options, and ESOPs are common components of total compensation packages, particularly for senior and technical roles.
Tax obligations attach at vesting. When RSUs vest, the fair market value of the shares is treated as ordinary income. The EOR must withhold federal and state income tax plus FICA contributions on that amount in the pay period the vesting event occurs.
The 83(b) election is a separate filing obligation. An employee who receives restricted property may elect to recognize income at grant rather than at vesting, but the election must be filed with the IRS within 30 days of the grant date. The EOR cannot file this election on the employee's behalf. The employee must act independently and on time.
Whether the EOR administers equity grants directly or the client manages equity separately depends on the provider. Most EOR platforms track vesting schedules for payroll withholding purposes but do not act as plan administrators. Clients typically retain their own equity management platform and instruct the EOR on withholding amounts at each vesting event.
IP assignment agreements and work-for-hire clauses in the employment contract interact with equity grants. Confirm that equity grant documentation and IP assignment terms are aligned before the employee's start date to avoid conflicting obligations.
Misclassification Risk in the United States
Misclassification occurs when a worker is treated as an independent contractor instead of an employee, or when a non-exempt employee is incorrectly classified as exempt from overtime requirements.
The IRS applies Section 3509 rates to misclassified workers. Where there is no intentional disregard, the assessment is 1.5% of wages for income tax plus the employee share of FICA at a reduced rate. Intentional misclassification triggers higher rates and additional penalties.
California adds further exposure through the Private Attorneys General Act (PAGA). PAGA penalties reach $250 per violation per employee for first violations and $1,000 per violation for subsequent violations. California also applies the ABC test under AB5 to determine contractor status.
The IRS uses four criteria to evaluate worker classification:
Behavioral control: whether the company controls how work is performed
Financial control: whether the company controls the business aspects of the worker's job
Type of relationship: written contracts, benefits, and permanency of the relationship
Integration into the business: how central the worker's services are to regular business operations
Penalty exposure includes IRS Section 3509 assessments, state-level fines, retroactive benefit cost liability, and PAGA litigation risk in California. An EOR eliminates misclassification risk for the employment relationship by making the EOR the legal employer of record, with all obligations documented and compliant from day one.
Hiring, Onboarding, Termination and Offboarding in the United States
US employment compliance begins before the employee's first day and continues through final offboarding. Each stage carries specific legal deadlines that vary by state.
Before day one
Obtain background check authorization under the Fair Credit Reporting Act (FCRA)
Collect Form I-9 documents for identity and work authorization verification
Issue a state-specific offer letter that reflects local wage, leave, and at-will terms
Confirm workers' compensation policy coverage for the employee's state of residence
Day one
Submit E-Verify within three business days of the start date
Activate benefits enrollment for health, dental, and any applicable state programs
Provision equipment and system access per the client's instructions
First week
Begin the ACA enrollment window for applicable employees
File state new-hire reporting, required within 20 days in most states
Confirm payroll account setup and first pay cycle timing
Ongoing compliance milestones
Track FMLA eligibility at the 12-month employment mark
Monitor ACA measurement periods for full-time equivalent status
Prepare annual W-2 filings for each employee
Termination carries its own set of deadlines. The WARN Act requires 60 days' advance notice for qualifying mass layoffs. State final pay deadlines differ: California requires final pay on the same day as termination. COBRA notices must be issued within 14 days of a qualifying event.
Offboarding steps include issuing the final paycheck, settling any outstanding expense reimbursements, delivering benefits continuation notices, confirming return of company property, and obtaining IP assignment confirmation. Gloroots manages each of these steps as part of Employment Lifecycle Management, tracking deadlines across all applicable states.
Onboarding
Before day one: obtain background check authorization per FCRA; collect Form I-9 documents; issue a state-specific offer letter; confirm workers' compensation policy is active.
Day one: complete E-Verify submission; activate benefits enrollment; provide equipment and system access; distribute the employee handbook.
First week: file state new-hire reporting within 20 days; confirm payroll account setup; begin ACA waiting period tracking.
Ongoing: track the 12-month FMLA eligibility milestone; monitor the ACA measurement period; prepare for annual W-2 issuance by January 31.
Termination
WARN Act: employers with 100 or more workers must give 60 days written notice before mass layoffs affecting 50 or more employees.
California: final pay is due on the last day of employment for involuntary terminations.
OWBPA: employees aged 40 and older must receive 21 days to review separation agreements and 7 days to revoke after signing.
Offboarding
Final pay: Issue the final paycheck by the state-mandated deadline. Reimburse outstanding expenses under California Labor Code 2802 or the applicable state law.
Documents: Provide a COBRA election notice within 14 days of separation. Include OWBPA disclosures in any separation agreement for employees aged 40 or older.
Exit steps: Confirm IP assignment and return of company property. Revoke system access and file a state separation notice where required, including California and Georgia.
W-2: The EOR issues the W-2 under its own EIN by January 31 following the applicable tax year.
What's New: Recent Regulatory Changes in the United States
Four regulatory developments from 2023 and 2024 directly affect US employment compliance. Each carries active litigation risk or pending implementation, which means compliance obligations can shift between quarters.
NLRB joint-employer rule (effective February 26, 2024): Expands the joint-employer liability test to include indirect control over essential employment terms. EOR agreements must clearly delineate which party controls which employment conditions.
FTC non-compete rule (April 2024): The FTC issued a rule banning most non-compete agreements. A federal court stayed enforcement as of August 2024. The rule remains in litigation, creating uncertainty for employment agreements drafted during 2024.
California SB 616 (effective January 1, 2024): Expanded paid sick leave from 3 to 5 days (40 hours) for most employees. Employers with California workers must update accrual tracking accordingly.
FLSA salary threshold: The exempt employee threshold rose to $844 per week ($43,888 per year) on July 1, 2024, with a second increase to $1,128 per week ($58,656 per year) scheduled for January 1, 2025. A federal court vacated the rule in November 2024, reverting the threshold to $684 per week pending further litigation. Exempt classifications require review each quarter until the litigation resolves.
Assign a compliance owner to monitor the NLRB joint-employer rule and FLSA threshold status on a quarterly basis. Both remain subject to court decisions that can change employer obligations with limited notice.
Costs and Financial Planning for Hiring in the United States
Hiring in the USA costs more than the base salary alone. Employers pay FICA at 7.65% of gross wages, FUTA at 0.6% net on the first $7,000 of wages, state unemployment insurance (SUI) at rates that vary by state, workers' compensation insurance, and ACA-compliant health benefits. In competitive US markets, benefits add 20 to 30 percent above base salary to total employment cost.
Less visible costs include SUI experience-rating increases after layoffs, workers' compensation premium audits, and benefits administration overhead. These costs apply whether you hire directly or through an EOR, though the structure differs. For a detailed breakdown of typical EOR pricing, see employer of record cost. Gloroots publishes country-specific pricing on the pricing page.
Cost Element | Direct Entity | Gloroots EOR |
|---|---|---|
Employer FICA (7.65%) | Employer pays directly | Included in EOR payroll |
FUTA (0.6% net) | Employer pays directly | Managed by Gloroots |
SUI (varies by state) | Employer registers and pays per state | Managed by Gloroots across all states |
Workers' comp insurance | Employer enrolls and manages audits | Covered under EOR policy |
ACA-compliant health benefits | Employer selects and administers plan | Gloroots provides compliant plan options |
EOR service fee | Not applicable | $199 to $1,000 per employee per month; most common range $499 to $699 |
A direct entity gives you full control over benefits selection but requires state-by-state registration and ongoing compliance management. An EOR consolidates those obligations under a single provider at a predictable monthly fee per employee.
Common Challenges and How Gloroots Solves Them in the United States
US employment compliance is not a single ruleset. Fifty states each set their own wage, leave, and termination rules, and several states add requirements that go well beyond federal law. California alone requires daily overtime after 8 hours, mandates meal and rest breaks, requires expense reimbursement, and exposes employers to Private Attorneys General Act (PAGA) litigation. The WARN Act requires 60 days' advance notice before mass layoffs at covered employers. Misclassification risk and joint-employer exposure under the NLRB's 2023 rule add further compliance layers.
Challenge | How Gloroots Manages It |
|---|---|
Multi-state payroll complexity | Gloroots runs payroll across all 50 states with state-specific withholding and filings |
California-specific compliance (meal breaks, expense reimbursement, PAGA) | Gloroots applies California-specific employment agreements and tracks state-mandated obligations |
WARN Act notice management | Gloroots tracks headcount thresholds and manages required 60-day notice obligations |
Joint-employer risk under NLRB 2023 rule | Gloroots structures the engagement to maintain clear employer-of-record status and documented employment relationships |
EOR-to-entity transition mechanics | Gloroots supports transition planning when clients move to a direct US entity, including contract handover and payroll migration |
Using an EOR involves real trade-offs. You have less direct HR control than with your own entity, benefits costs carry a provider markup, and moving to a direct entity later requires careful transition planning. Contractual lock-in terms vary by provider. Gloroots publishes its pricing and contract terms transparently so clients can plan transitions without unexpected costs.
Why Gloroots Is a Strong EOR Partner in the United States
Gloroots suits international companies entering the US market without a legal entity and domestic companies hiring across multiple states. Its EOR services cover both use cases under a single engagement.
Gloroots holds its own US legal entity rather than operating through a partner network. Its in-house compliance team monitors state law changes across all 50 states, and its benefits administration meets ACA requirements. That structure reduces the intermediary risk common in partner-network models.
Under one engagement, Gloroots manages FICA, FUTA, and state unemployment insurance contributions, workers' compensation, and W-2 issuance. Clients do not need to coordinate separate vendors for each obligation.
The arrangement works best for companies hiring between 1 and 100 US employees across multiple states without establishing a direct entity. Gloroots supports this range through its EOR for startups, EOR for small business, EOR for mid-market companies, and EOR for enterprises offerings.
Before signing, confirm that Gloroots' pricing tier and benefits stack match your headcount and target state mix. Review the pricing page to assess fit against your specific hiring plan.
Conclusion
The US has no federal notice period requirement and 50 distinct state employment law regimes. Managing that compliance layer, not speed of hire, is the primary reason companies adopt an EOR arrangement in this market.
Before selecting a provider, map your target hire states, headcount, and timeline against the four hiring paths described above. Review the best employer of record criteria and compare costs on the pricing page. For companies evaluating other major markets alongside the US, see employer of record Germany for a comparable overview.
Frequently Asked Questions About Employer of Record in the United States
Is using an EOR legal in the United States?
Yes. EOR arrangements are fully legal under US federal and state law. No federal statute prohibits them. The EOR is the legal employer of record; the client directs the work. A properly structured EOR engagement is distinct from worker misclassification because the employment relationship is transparent and documented.
How much does an EOR in the United States cost?
EOR fees in the US typically range from $199 to $1,000 per employee per month, with most providers pricing between $499 and $699. Costs beyond the EOR fee include employer FICA (7.65%), FUTA (0.6% net), state unemployment insurance, workers' compensation insurance, and ACA-compliant health benefits. See our pricing page for Gloroots-specific rates.
How long does it take to hire an employee in the US through an EOR?
An EOR can onboard a US employee in 2 to 5 days once the offer is accepted and Form I-9 documents are collected. Setting up your own US legal entity takes 4 to 8 weeks plus additional time for state payroll tax registrations. EOR is the faster path for test-market entries and small teams.
What benefits does an EOR provide to US employees?
A US EOR provides ACA-compliant health insurance, 401(k) retirement plans, short-term and long-term disability coverage, and paid time off administration. Benefits costs typically add 20 to 30 percent above base salary in competitive US markets. The EOR manages ACA employer mandate compliance for clients with 50 or more full-time equivalent employees.
What is the difference between an EOR and a PEO in the United States?
An EOR is the sole legal employer and requires no existing US entity on the client's part. A PEO operates as a co-employer and requires the client to hold its own US legal entity. EOR is appropriate for companies without a US entity; PEO suits companies that already have one and want shared HR administration.
Can an EOR sponsor a US work visa for a foreign national?
In most cases, no. H-1B and other employer-sponsored visas require the petitioning employer to be the actual employer of record. Because the EOR is the legal employer, the client company typically cannot use the EOR structure to sponsor a visa. Workers must already hold valid US work authorization to be employed through an EOR. Some EOR providers offer immigration referral services; confirm this with your provider.
Do EOR employees receive W-2 forms in the United States?
Yes. The EOR issues W-2 forms under its own Employer Identification Number by January 31 each year. The client company receives an invoice rather than issuing a W-2 directly. Employees file their taxes using the EOR's W-2. This is a standard feature of the EOR structure and does not affect the employee's tax obligations.
What happens when I want to transition from an EOR to my own US entity?
When your US headcount reaches 50 to 100 employees, establishing a direct entity is worth evaluating. The transition involves setting up a US legal entity, registering for state payroll tax accounts, obtaining workers' compensation insurance, issuing new employment agreements, and ensuring benefits continuity. The process typically takes 4 to 8 weeks. Your EOR should support the transition rather than create contractual barriers to it.
