Employer of Record in USA
Hiring in USA at a glance
An Employer of Record (EOR) in the USA is the legal employer of record for your US-based staff, managing payroll, taxes, and compliance across all 50 states.
US employment law varies significantly at the state level. Each of the 50 states sets its own rules on minimum wage, paid leave, overtime, and worker classification, creating layered compliance obligations for every employer.
- Hiring speed: 2 to 5 days
- Employer FICA rate: 7.65% of gross wages (6.2% Social Security + 1.45% Medicare)
- Federal notice period: No statutory federal notice period requirement
- Coverage: Full compliance across all 50 states
This page covers hiring options, employment law, payroll, benefits, onboarding, and termination for US-based employees.
Gloroots is an EOR provider operating in the USA. This guide is written to help readers evaluate all available hiring paths, not only the Gloroots solution, so you can make an informed decision for your workforce.
What Is an Employer of Record in the USA?
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.
Foreign companies entering the US market and domestic firms hiring across multiple states both use EOR arrangements to manage compliance without establishing a new legal entity in each state.
In practice, the client selects the candidate, and the EOR issues a state-specific employment agreement. The EOR runs payroll with federal and state withholdings, administers benefits, and manages day-to-day HR compliance. The client retains full control over the employee's work and performance. This arrangement is fully legal under US federal and state law. No federal statute prohibits it, and a properly structured EOR engagement is distinct from worker misclassification because the employment relationship is transparent, documented, and compliant. To understand the full mechanics, see how does EOR work.
Your Hiring Options in the USA: 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 appropriate when you have no US entity, a small or test-market team, and a fast time-to-hire requirement.
A direct entity suits large, established US teams. A PEO requires an existing US entity and operates as a co-employer. Independent contractor arrangements apply only to genuinely independent project work. When your US headcount reaches 50 to 100 employees, transitioning to a direct entity is worth evaluating. For guidance on selecting a provider, see best employer of record.
| Path | Setup Time | Compliance Ownership | Cost Structure | Best For |
|---|---|---|---|---|
| EOR | 2 to 4 weeks | EOR owns all compliance | Flat monthly fee per employee | No US entity; small or test-market teams |
| Own Entity | 4 to 8 weeks plus 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 |
A PEO is a co-employer and requires you to hold an existing US entity. An EOR is the sole legal employer and requires no entity on your part. A staffing agency leases workers who remain on the agency's books. EOR employees are employed on behalf of your company on a permanent basis.
How to Hire in the USA Through an EOR: Step by Step
Hiring through a US EOR follows a defined sequence from candidate selection to first paycheck. Each step has specific legal and administrative requirements.
Decide between EOR and entity
No US entity is required to use an EOR. EOR is appropriate for test-market entries and teams below 100 employees. Above that threshold, a direct entity is worth evaluating.
Select and vet your EOR provider
Confirm the provider holds its own US legal entity rather than operating through a partner network. Review the criteria in the section below on choosing the right EOR.
Issue a state-specific employment agreement
The EOR generates a compliant offer letter and employment contract tailored to the employee's state of residence. Contract terms must reflect that state's wage, leave, and termination rules.
Complete Form I-9 and E-Verify
Form I-9 must be completed within three business days of the employee's start date. The EOR manages document collection, verification, and E-Verify submission on your behalf.
Enroll in benefits
Activate payroll
Manage ongoing compliance and offboarding
The EOR monitors state law changes throughout the employment lifecycle. On termination, the EOR handles required notices, final pay deadlines by state, and COBRA administration.
How to Choose the Right EOR in the USA
Choosing a US EOR requires evaluating legal structure, coverage depth, and support model. The criteria below apply regardless of which provider you consider. 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 for employment. 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 and require particular depth.
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
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 certifications 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.
Workforce and Talent Pool in the USA
The USA has approximately 165 million active workers, a median age of 38.9, and around 40% hold tertiary degrees. The country produces a strong STEM pipeline through institutions including MIT, Stanford, and UC Berkeley.
Key talent hubs include New York (finance and media), Silicon Valley (technology and AI), Boston (biotech), Chicago (logistics), and Austin (startups).
English is the primary language of business. Work culture is performance-driven, with growing employer emphasis on remote and hybrid arrangements. Benefits costs add 20 to 30 percent above base salary in competitive markets, a factor that affects total employment cost planning. For companies also evaluating North American hiring more broadly, see employer of record Canada for a comparable market overview.
| Category | Key Facts |
|---|---|
| Workforce size | Approximately 165 million active workers |
| Median age | 38.9 years |
| English proficiency | Primary business language; multilingual workforce in major cities |
| Top talent hubs | New York, Silicon Valley, Boston, Chicago, Austin |
| Key industries | Technology, finance, life sciences, healthcare, aerospace, manufacturing |
Employment Law Essentials in the USA
Employment contracts
Written contracts are not legally required in the US, but offer letters must state the wage, role, and at-will terms. State law may impose additional disclosure requirements. Gloroots issues state-specific compliant agreements for every hire.
Working hours and overtime
The FLSA sets a 40-hour standard workweek. Non-exempt employees earn 1.5x their regular rate for hours worked beyond 40. California applies stricter rules, requiring daily overtime after 8 hours in a single day.
Minimum wage
The federal floor is $7.25 per hour. State and city rates are higher in many jurisdictions: California sets $16 per hour (2024), New York City sets $16 per hour, and Washington sets $16.28 per hour. Employers must apply the highest applicable rate.
Exempt vs. non-exempt classification
FLSA exempt status requires meeting a duties test (executive, administrative, professional, computer, or outside sales) and a federal salary threshold of $684 per week ($35,568 per year). California, New York, and Washington set higher state thresholds. Misclassifying non-exempt employees as exempt triggers back-pay liability.
At-will employment and the Montana exception
At-will employment applies in 49 states. Montana is the only state where at-will does not apply after a probationary period. Montana employers must have cause to terminate an employee once that period ends.
Anti-discrimination laws
Title VII, the ADA, the ADEA, and state equivalents prohibit discrimination in employment. Under the OWBPA, employees aged 40 and older must receive 21 days to review separation agreements and 7 days to revoke after signing.
Leave and Statutory Benefits in the USA
Annual leave
No federal law requires paid vacation. Market standard is 10 to 20 days of PTO annually. Some states, including Colorado, require 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. Accrual rates and caps vary by jurisdiction and must be tracked 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, Washington, and New Jersey offer paid family leave programs funded through payroll deductions.
Public holidays
There are 11 federal public holidays. No federal law requires employers to pay employees for those days. Most employers provide paid holidays as standard market practice.
ACA employer mandate
Employers with 50 or more full-time equivalent employees must offer ACA-compliant minimum essential coverage or pay a shared responsibility payment. Gloroots manages ACA compliance for clients across all applicable states.
Disability insurance
| Leave type | Entitlement | Pay rate | Key conditions |
|---|---|---|---|
| Annual leave | No federal minimum; 10-20 days market standard | Paid (employer discretion) | Colorado requires PTO payout on termination |
| Sick leave | Varies by state and city | Paid (where mandated) | CA, NY, WA, and many cities mandate paid sick leave |
| Family and medical leave | 12 weeks unpaid (FMLA) | Unpaid federally; paid in CA, NY, NJ, WA | 12 months tenure; employer 50+ employees |
| Public holidays | 11 federal holidays | No federal pay requirement | Most employers pay as market practice |
Payroll, Tax and Statutory Contributions in the USA
US payroll runs bi-weekly or semi-monthly. Employers must withhold federal and state income tax, FICA contributions, and remit their own employer-side contributions on each pay cycle.
The Social Security wage base updates annually. For 2025, it is $176,100, up from $160,200 in 2023. Medicare has no wage cap. The Additional Medicare Tax of 0.9% applies to wages above $200,000 for single filers and $250,000 for married filing jointly.
| Tax bracket (2024, single filer) | Rate |
|---|---|
| Up to $11,600 | 10% |
| $11,601 to $47,150 | 12% |
| $47,151 to $100,525 | 22% |
| $100,526 to $191,950 | 24% |
| $191,951 to $243,725 | 32% |
| $243,726 to $609,350 | 35% |
| Over $609,350 | 37% |
| Contribution | Employer rate | Employee rate | Notes |
|---|---|---|---|
| Social Security (OASDI) | 6.2% | 6.2% | Capped at $176,100 wage base (2025) |
| Medicare | 1.45% | 1.45% | No wage cap; employee pays additional 0.9% above $200,000 |
| FUTA | 6% (net 0.6% after credit) | None | On first $7,000 of wages per employee |
| SUTA | Varies by state | None (most states) | Rate depends on employer experience rating |
| Workers' compensation | Varies by state and industry | None | Mandatory in all states |
Work Visas and Permits in the USA
The US offers multiple work visa categories. The employer of record acts as the sponsoring employer for eligible visa types, enabling foreign companies to place workers in the US without a local entity.
Gloroots, as the legal employer, can sponsor H-1B, L-1, and TN visas. Foreign companies without a US entity cannot independently sponsor visas. An EOR makes international talent mobility possible from day one.
| Visa type | Purpose | Validity |
|---|---|---|
| H-1B | Specialty occupation workers (technology, finance, engineering) | 3 years, renewable to 6 years |
| L-1A | Intracompany transferees (managers and executives) | 3 years, renewable to 7 years |
| L-1B | Intracompany transferees (specialized knowledge) | 3 years, renewable to 5 years |
| TN | Canadian and Mexican professionals under USMCA | 3 years, renewable |
| O-1 | Individuals with extraordinary ability | Up to 3 years, renewable |
Equity and ESOP Consulting in the USA
Equity compensation, including stock options, RSUs, and ESPPs, is standard practice in US technology, finance, and growth-stage companies. It is particularly common in Silicon Valley, Austin, and New York tech sectors.
Tax treatment varies by instrument. ISOs receive favorable capital gains treatment if holding periods are met. NSOs are taxed as ordinary income at exercise. RSU vesting triggers immediate ordinary income tax. Private company options require a 409A valuation to establish fair market value and avoid IRS penalties.
Misclassification Risk in the USA
Misclassification, treating an employee as an independent contractor, is one of the highest-enforcement compliance risks in the US. The IRS, DOL, and state agencies all actively audit worker classification.
Regulators apply several criteria to determine whether a worker is an employee:
- The worker operates under company supervision and control over how work is performed.
- The worker follows a fixed schedule set by the company rather than their own hours.
- The services provided are integral to the company's core business operations.
- The worker cannot subcontract the work or hire their own staff to complete it.
Penalties for misclassification are significant and can accumulate quickly:
- Back taxes covering unpaid Social Security, Medicare, and income tax withholdings owed for each affected worker.
- Retroactive benefits liability, including overtime pay, healthcare contributions, and retirement plan contributions.
- IRS and DOL civil penalties assessed on a per-worker basis.
- California and New York impose the strictest state-level fines, with California's ABC test creating additional exposure under AB5.
FLSA exempt vs. non-exempt misclassification carries its own risk. Misclassifying a non-exempt employee as exempt triggers back-pay liability for all unpaid overtime hours. Similar risks apply in other major hiring markets, including those governed by the employer of record UK framework.
An EOR employs workers as W-2 employees from day one under compliant contracts, eliminating misclassification risk before it arises.
Hiring, Onboarding, Termination and Offboarding in the USA
Onboarding
Onboarding in the US follows a structured sequence tied to federal and state deadlines. Missing any step creates compliance exposure.
- Before Day One: Issue a state-specific employment agreement and offer letter. Collect IRS Form W-4 and applicable state withholding forms. Initiate Form I-9, which must be completed within 3 business days of the start date. Confirm E-Verify enrollment if required by state or federal contract.
- Day One: Complete I-9 Section 2 in person or via an authorized representative. Provide the employee handbook and all required state notices. Confirm payroll registration is active.
- Beyond: Begin ACA eligibility tracking for employers approaching the 50 full-time equivalent threshold. Schedule 30-, 60-, and 90-day check-ins.
Termination
At-will employment allows termination without cause in 49 states. Montana requires cause after the probationary period. The federal WARN Act requires 60 days notice for mass layoffs affecting 100 or more employees where 50 or more are dismissed. New York's WARN Act sets a stricter standard: 90 days notice for reductions of 25 or more workers.
Offboarding
- Settlement: Issue the final paycheck per state deadline. California requires payment on the day of termination. Texas requires payment within 6 days. New York requires payment on the next scheduled payday. Include all accrued PTO if state law mandates payout.
- Documents: Provide a COBRA election notice within 14 days of the qualifying event. Issue Form W-2 by January 31 of the following year. Provide a separation notice to support unemployment eligibility.
- Exit: Revoke IT and system access on the last day. Collect company property. Update payroll and benefits records. File state unemployment documentation.
What's New: Recent Regulatory Changes in the USA
The DOL's 2024 revised FLSA overtime rule raised the federal exempt salary threshold to $844/week (July 2024) with a further planned increase to $1,128/week from January 2025. However, a federal district court in Texas vacated the entire rule in November 2024, reverting the threshold to the pre-2024 level of $684/week ($35,568/year).
- DOL overtime rule, July 2024: The exempt salary threshold rose to $844 per week, affecting salaried workers previously classified as exempt below the new level.
- DOL overtime rule, January 2025: The threshold increased to $1,128 per week ($58,656 per year); employers should audit exempt classifications against the new figure.
- Social Security wage base, 2025: The taxable wage base increased to $176,100 from $168,600 in 2024; both employer and employee FICA contributions increase accordingly.
- Pay transparency laws: California, New York, Colorado, and Washington now require salary ranges in job postings, which affects how international employers advertise US roles.
- FTC non-compete ban: The FTC rule banning most non-compete agreements was blocked by federal courts in 2024. State-level bans in California, Minnesota, North Dakota, and Oklahoma remain in effect.
Employers should audit exempt classifications and job posting practices on a quarterly basis. Gloroots monitors federal and state regulatory changes on clients' behalf.
Costs and Financial Planning for Hiring in the USA
Total employment cost in the US exceeds base salary by 30 to 45 percent when statutory contributions and benefits are included.
Hidden costs include state-specific workers' compensation rates that vary by industry and state, SUTA experience-rating adjustments, and ACA shared responsibility payments for employers with 50 or more full-time equivalents who fail to offer compliant coverage. Understanding the full employer of record cost before committing to a hiring model prevents budget overruns.
| Cost Element | Direct Entity | Gloroots EOR |
|---|---|---|
| Entity setup | State filing fees, legal, and accounting costs | No setup cost; Gloroots employs under its own US entity |
| FICA (Social Security and Medicare) | Employer registers and remits directly | Gloroots manages registration and remittance |
| FUTA and SUTA | Employer files federal and state unemployment taxes | Gloroots files on behalf of the employment relationship |
| Workers' compensation | Employer obtains state-specific policy | Covered under Gloroots' policy |
| Health insurance | Employer sources and administers plan | Gloroots provides ACA-compliant benefits packages |
| 401(k) | Employer establishes and administers plan | Gloroots administers retirement enrollment |
| ACA compliance | Employer tracks FTE threshold and files 1094-C/1095-C | Gloroots manages ACA tracking and filings |
| Severance administration | Employer manages per state law | Gloroots executes per applicable state requirements |
| EOR fee | Not applicable | Predictable monthly fee per employee |
Per-state employer cost data for California, New York, Texas, Florida, and Washington covering SUTA rates (ranging from 2.7% in Texas and Florida to 4.1% in New York for new employers, with experienced employer rates between 0.1% and 6.2% depending on state), workers' compensation rate ranges (from ~$0.75 per $100 payroll in Texas to ~$1.61 in California), paid leave mandates, and total employer cost above gross salary as a percentage.
Common Challenges and How Gloroots Solves Them in the USA
Hiring in the US presents five recurring challenges that catch international employers off guard, even with experienced HR teams.
| Challenge | How Gloroots Solves It |
|---|---|
| ACA employer mandate compliance for growing teams | Gloroots tracks full-time equivalent headcount and manages 1094-C and 1095-C filings as teams approach the 50-FTE threshold. |
| I-9 and E-Verify management across states | Gloroots runs I-9 completion and E-Verify enrollment as part of the standard onboarding workflow. |
| Pay transparency law compliance for job postings | Gloroots advises on salary range disclosure requirements in California, New York, Colorado, and Washington before roles are posted. |
| FLSA exempt classification audits | Gloroots reviews worker classifications against current federal salary thresholds and flags reclassification risk. |
| State-specific WARN Act obligations | Gloroots tracks applicable notice periods by state and supports compliant workforce reduction planning. |
| Permanent establishment risk for foreign companies without a US entity | Employees conducting business activities in the US can create taxable presence for a foreign parent company. Gloroots acts as the legal employer, which mitigates permanent establishment risk. |
Each of these challenges carries direct financial or legal exposure. Gloroots manages them through its Employment Lifecycle Management and Compliance and Employment Governance services.
Why Gloroots Is a Strong EOR Partner in the USA
Gloroots is well suited for foreign companies entering the US market without a legal entity, and for domestic companies hiring across multiple states who want to reduce compliance overhead.
US-specific strengths include Gloroots' own US entity (not a partner network), an in-house compliance team monitoring all 50 states, ACA-compliant benefits packages, and I-9 and E-Verify management built into the onboarding workflow.
Gloroots covers all 50 states with state-specific contracts, payroll, and benefits from day one of hire.
The model is cost-effective for teams of 1 to 100 US employees, where EOR fees are lower than the cost of entity setup and ongoing maintenance.
Buyers should request confirmation of Gloroots' own US entity status, SOC 2 Type II certification, and a sample state-specific employment agreement before signing. Companies expanding beyond the US can also review Gloroots' coverage in markets such as employer of record Germany.
Conclusion
The US employs 165 million workers across 50 states, each with distinct employment law obligations that change frequently.
Companies evaluating US expansion should map their headcount trajectory against the EOR-to-entity transition threshold, confirm ACA obligations, and verify that their EOR provider holds a direct US entity before signing. Gloroots operates its own US entity, runs payroll across all 50 states, and manages compliance under a single employment operating layer.
Frequently Asked Questions About Employer of Record in the USA
Is it legal to use an Employer of Record in the United States?
EOR arrangements are fully legal under US federal and state law. No federal statute prohibits the model. A properly structured EOR is the sole legal employer and meets all payroll, tax, and benefits obligations. This is distinct from misclassification, which involves treating an employee as a contractor to avoid those obligations.
How long does it take to hire an employee in the US through an EOR?
Most EOR providers activate payroll within 2 to 4 weeks of contract signature, depending on the employee's state of residence and benefits enrollment timing. The first paycheck date is governed by the state's payroll cut-off rules. Gloroots describes its US onboarding as taking "a few days" according to its FAQ.
What is the difference between an EOR and a PEO in the US?
A PEO is a co-employer that requires the client to already have a US legal entity. An EOR is the sole legal employer and requires no existing entity. PEOs offer broader HR services but share liability with the client. EORs bear full employer liability.
How much does an Employer of Record in the US cost?
EOR fees are typically a flat monthly rate per employee, covering payroll, tax filings, and benefits administration. Total employment cost exceeds base salary by 30 to 45% when FICA (7.65% employer share), health insurance, 401(k) match, and workers' compensation are included. Entity setup adds incorporation and ongoing compliance costs on top.
What employee benefits does an EOR provide in the US?
Can an EOR sponsor a US work visa?
Yes. Because the EOR is the legal employer of record, it can act as the sponsoring employer for eligible visa categories including H-1B, L-1, and TN. Foreign companies without a US entity cannot independently sponsor work visas, making EOR the practical path for hiring international talent in the US.
When should a company transition from an EOR to its own US entity?
The transition is typically cost-effective when a company reaches 50 to 100 US employees, at which point ongoing EOR fees may exceed entity setup and maintenance costs. Other triggers include the need for direct equity grants, a US-listed entity for investor purposes, or greater control over benefits design.
What is permanent establishment risk and how does an EOR help?
Having employees conduct business activities in the US can create a taxable presence (permanent establishment) for a foreign company, triggering US corporate tax obligations even without a registered entity. Using an EOR as the legal employer mitigates this risk because the EOR, not the foreign company, is the employer under US law.
Frequently asked questions
