How to Hire Employees in the United States
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Foreign employers can hire US employees by forming a local entity, engaging an Employer of Record, or contracting independent workers directly.
The central compliance challenge is managing simultaneous federal, state, and local obligations across 50 states, each with distinct wage, leave, and tax rules and no single unified labor code.
- Employer FICA contributions total 7.65% of wages, split between 6.2% Social Security and 1.45% Medicare, matched dollar-for-dollar by the employee.
- At-will employment is the default in nearly all US states, meaning either party can end the relationship at any time, subject to anti-discrimination law.
- FUTA is charged at 6% on the first $7,000 of each employee's annual wages, with credits available for state unemployment contributions.
- The median time-to-fill an open role in the US is approximately 44 days, making early hiring infrastructure decisions critical to timelines.
This guide covers hiring models, employment contracts, payroll obligations, statutory benefits, onboarding steps, and termination rules for foreign employers entering the US market.
Gloroots operates as a Global Employer of Record in the US, managing employment contracts, payroll, tax filings, and compliance so foreign companies can employ US workers without forming a local entity. Gloroots is not a law firm and this guide does not constitute legal advice.
Job Market and Hiring Trends in the United States
Tech and healthcare labor shortages are the primary drivers of international hiring in the US through 2025 and 2026, as domestic talent pipelines in both sectors fall short of employer demand.
Hiring activity is expanding beyond traditional centers. Austin, Dallas, Miami, and Raleigh have emerged as active talent markets for technology, finance, and life sciences roles.
- The US added approximately 212,000 total nonfarm payroll jobs in Q1 2026, according to the Bureau of Labor Statistics.
- Post-2025 executive orders rolled back affirmative action requirements for federal contractors, changing diversity hiring obligations for companies with government contracts.
- The BLS Employment Cost Index shows new-hire salaries rising across industries through 2025, driven by sustained inflation and competition for skilled workers.
- Labor shortages in technology and healthcare remain acute, with approximately 72% of employers globally reporting difficulty filling open roles, according to ManpowerGroup.
- Visa restrictions tightened through 2025 and 2026 are reducing international talent pipelines, pushing more US employers toward domestic sourcing and remote hiring models.
These conditions make early workforce planning essential. Companies entering the US market in 2025 or 2026 should account for longer fill times, higher compensation benchmarks, and shifting compliance obligations when building their hiring strategy.
Your Options for Hiring in the United States: Entity vs. EOR vs. Contractor
Foreign employers entering the US market have three primary hiring paths. Each carries distinct compliance requirements, cost structures, and timelines that affect how quickly and safely you can employ workers.
Entity setup requires state incorporation, a federal EIN, and multi-state payroll tax registration. This path suits companies committing to long-term US operations with larger headcount.
Contractor engagement is immediate and lower cost, but carries significant misclassification risk under IRS and Department of Labor standards. It works best for short, project-based engagements where the worker retains full control over how services are delivered.
An how does EOR work overview explains the third path in detail. With an EOR, a local legal employer manages payroll, contracts, and compliance while you direct the work. Choosing the best employer of record for your US hiring needs depends on team size, speed requirements, and compliance appetite.
| Path | Setup Time | Cost | Compliance Burden | Best For |
|---|---|---|---|---|
| Entity Setup | 4 to 8 weeks | High | High: federal, state, and local obligations | Long-term US expansion |
| EOR | Days | Predictable monthly fee | Managed by EOR provider | Fast market entry without entity |
| Contractor | Immediate | Low upfront | High misclassification risk | Short-term, project-based work |
Employees vs. Contractors in the United States
Misclassifying a worker as an independent contractor exposes employers to IRS enforcement, Department of Labor penalties, and back-tax liability that can accumulate quickly across multiple workers.
The IRS applies a three-category test to determine true worker status. The first category is Behavioral Control: whether the company controls how the worker performs tasks. The second is Financial Control: whether the company controls the business aspects of the worker's job, including payment method and profit opportunity. The third is Type of Relationship: whether written contracts, benefits, and the permanency of the arrangement indicate an employment relationship.
Specific penalties for misclassification include up to $1,000 per misclassified worker, 100% of unpaid employment taxes, and 20% of wages that should have been paid as employee compensation.
California applies a stricter standard through its ABC test. Prong A requires that the worker is free from the company's control in performing the work. Prong B requires that the work falls outside the company's usual course of business. Prong C requires that the worker operates an independently established trade or business of the same nature as the work performed.
| Factor | Employee | Independent Contractor |
|---|---|---|
| Control | Company directs how work is done | Worker controls methods |
| Benefits and Social Security | Employer provides and contributes | Worker self-funds |
| Taxation | Employer withholds and remits | Worker pays self-employment tax |
| Contractual Agreement | Employment contract with statutory protections | Service agreement, fewer protections |
| Exclusivity | Typically works for one employer | May work for multiple clients |
Cost to Hire an Employee in the United States
Total employment cost in the US typically runs 1.25 to 1.4 times base salary. Salary alone does not reflect what employers actually pay.
Beyond FICA and FUTA, employers carry several additional mandatory costs. State Unemployment Tax Act (SUTA) contributions vary by state and by each employer's experience rating, making them distinct from the flat federal FUTA rate. Workers' compensation premiums are employer-paid and state-mandated, with rates tied to industry risk classification. Payroll processing fees, HR administrative overhead, and ACA health coverage costs add further to the total.
| Contribution | Employer Rate | Employee Rate | Notes |
|---|---|---|---|
| Social Security | 6.2% | 6.2% | Applies up to $184,500 wage base (2026) |
| Medicare | 1.45% | 1.45% | No wage cap; additional 0.9% surtax on high earners |
| FUTA | 6% on first $7,000 | None | Credit reduces effective rate to 0.6% in most states |
| SUTA | Varies by state and experience rating | None in most states | Separate from FUTA; rates differ significantly by state |
| Workers' Compensation | Employer-paid; rate varies by industry | None | State-mandated; non-coverage triggers fines and stop-work orders |
| ACA Health Coverage | Employer cost varies by plan | Employee share varies | Mandatory for employers with 50+ FTE employees |
Additional hidden costs include state disability insurance programs in California, New Jersey, New York, Hawaii, and Rhode Island, plus onboarding expenses and payroll processing fees that accumulate across a growing headcount.
Employers using an EOR model can review a detailed breakdown of fees and trade-offs in the employer of record cost guide.
Compliance Risks While Hiring in the United States
Hiring in the US creates layered compliance obligations. Federal, state, and local requirements apply simultaneously, and a gap at any level can trigger penalties.
- Worker misclassification: Misclassifying an employee as an independent contractor can result in fines up to $1,000 per worker, liability for 100% of unpaid payroll taxes, and back-pay exposure covering 20% of missed wages.
- Payroll tax errors: The IRS charges failure-to-deposit penalties of up to 15% of the unpaid tax amount. Late or incorrect deposits compound quickly across a multi-state payroll.
- ACA non-compliance: Employers with 50 or more full-time equivalent employees must provide minimum essential health coverage. Failure to comply carries a penalty of $2,970 per employee under 2026 figures.
- Workers' compensation gaps: Operating without required workers' compensation coverage exposes employers to state fines, stop-work orders, and personal liability for workplace injury claims.
- Multi-state payroll registration failures: Employers with workers in multiple states must register with each state's tax and unemployment agencies. Missing a registration triggers back-tax assessments and state agency penalties.
- Pay transparency non-compliance: Sixteen states now require salary range disclosures in job postings or upon request. Violations carry financial penalties and increase exposure to pay discrimination claims.
Each risk category carries its own enforcement agency, penalty structure, and remediation timeline. Employers managing headcount across multiple states should audit their compliance posture at the state level, not only at the federal level.
Key Labor Laws in the United States
Employment contracts
Written employment contracts are not legally required in most US states, but they are essential for protecting both parties. All employment terms must reflect applicable federal and state law. At-will employment is the default in 49 states, meaning either party can end the relationship at any time without cause.
Working hours and overtime
The Fair Labor Standards Act sets a standard 40-hour workweek. Non-exempt employees must receive overtime pay at 1.5 times their regular rate for hours worked beyond that threshold. Federal law sets no cap on total weekly hours for adult workers.
Minimum wage
The federal minimum wage under FLSA is $7.25 per hour, a rate unchanged since 2009. States and cities set their own minimums, and employers must pay whichever rate is highest across federal, state, and local levels. California sets its minimum at $16.50 per hour in 2025, and Washington DC sets $17.50 per hour, illustrating how significantly state and local floors can exceed the federal baseline.
Leave entitlements
The Family and Medical Leave Act applies to employers with 50 or more employees. Eligible workers receive up to 12 weeks of unpaid, job-protected leave per year. Many states add paid leave mandates on top of FMLA, so employers must review state-specific requirements alongside federal obligations.
Full-time vs. part-time classification
The Affordable Care Act defines full-time employment as 30 or more hours per week. This threshold affects benefits eligibility, including employer obligations under ACA coverage requirements. Employers with workers across multiple states must track each state's additional classification rules.
What to Include in an Employment Contract or Offer Letter in the United States
Offer letters are standard practice across US employers. Written contracts are not legally required in most states, but documenting employment terms protects both the employer and the employee.
Key elements to include in every offer letter or employment contract:
- Job title and primary duties
- Compensation: base salary, bonus structure, and commission terms
- At-will employment statement
- Working hours and overtime classification (exempt vs. non-exempt under FLSA)
- Benefits summary and eligibility date
- Probationary period, typically 60 to 90 days
- Confidentiality obligations and NDA reference
- IP assignment clause
- Governing law and state jurisdiction
- EEO statement and ADA reasonable accommodation notice
Employers operating in any of the 16 states with pay transparency laws must also include a salary range disclosure in the offer. Omitting this where required creates compliance exposure before the employment relationship even begins.
Payroll and Taxes in the United States
US payroll runs in USD. Biweekly pay cycles are the most common, and state laws regulate the maximum interval between payments.
Foreign employers without a US entity must use an Employer of Record or register for state payroll tax accounts in every state where employees are based. Each state requires a separate registration, and there is no consolidated federal registration that covers state-level obligations.
Income tax withholding is based on Form W-4. Employees who claim exempt status must renew that status annually by February 15. If no W-4 is received, the employer withholds at the single filer rate with no adjustments. Pre-tax deductions for retirement contributions and health premiums reduce taxable income.
Federal income tax applies a progressive rate structure across seven brackets, from 10% to 37%, based on filing status and taxable income. Seven states impose no state income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming.
- Social Security: 6.2% employer, 6.2% employee (wage base: $184,500 in 2026)
- Medicare: 1.45% employer, 1.45% employee (no wage cap)
- FUTA: 6% employer only, on first $7,000 of wages per employee
- SUTA: Variable by state; a separate state obligation distinct from FUTA
- Federal income tax withholding: Employee only, based on Form W-4 elections
Employers must collect and verify each employee's Social Security Number for W-2 reporting. An Individual Taxpayer Identification Number is not an acceptable substitute for an SSN. For a full breakdown of platform costs for managing US payroll, see Gloroots pricing.
Employment Benefits in the United States
US employment benefits fall into two categories: statutory benefits required by law and supplemental benefits offered to attract and retain talent. The statutory floor is lower than in most developed countries, so supplemental benefits carry significant weight in hiring competitiveness.
Paid time off and public holidays
No federal law mandates paid time off for private-sector employees. Market standard is 10 to 15 days of PTO per year. There are 11 federal public holidays, and state laws vary on whether private employers must observe them.
Sick leave
There is no federal paid sick leave law. Eighteen states mandate paid sick leave, including California, New York, Massachusetts, and Washington. Employers operating in multiple states must track each state's accrual rules and eligibility thresholds separately.
Maternity and paternity leave
The Family and Medical Leave Act provides 12 weeks of unpaid, job-protected leave for eligible employees at employers with 50 or more workers. There is no federal paid parental leave law. Several states, including California, New York, New Jersey, Washington, Massachusetts, Connecticut, Oregon, and Colorado, operate paid family leave programs funded through payroll contributions.
Public health insurance
The US has no universal public health insurance system. Under the Affordable Care Act, employers with 50 or more full-time equivalent employees must offer minimum essential coverage or face penalty exposure. The ACA defines full-time as 30 or more hours per week for benefits eligibility purposes. Medicare and Medicaid cover only eligible individuals and are not employer-administered programs.
- Annual/PTO: No federal mandate; market standard 10 to 15 days; state laws vary
- Sick leave: No federal law; 18 states mandate paid sick leave
- Maternity leave (FMLA): 12 weeks unpaid; employers with 50+ workers; job-protected
- Paternity leave (FMLA): 12 weeks unpaid; same eligibility conditions as maternity
- Paid family leave (state): Available in select states; funded through payroll contributions
Federal and state labor law posters must be displayed in every workplace. Employers with fully remote workers must provide digital delivery of required postings to satisfy federal and state notice obligations.
Work Permits and Visas in the United States
US work authorization is determined by immigration status. Employers must verify every employee's eligibility using Form I-9 before or on Day 1 of employment.
Sponsoring a work visa requires a US legal entity. An EOR cannot sponsor H-1B visas on a client company's behalf. Direct visa sponsorship requires entity setup first.
| Visa Type | Purpose | Validity |
|---|---|---|
| H-1B | Specialty occupation | 3 years, renewable |
| L-1 | Intracompany transfer | 1–3 years |
| O-1 | Extraordinary ability | 1 year, renewable |
| TN | USMCA professionals | 1–3 years |
| EAD | Employment authorization document | Varies |
The H-1B visa is subject to an annual cap and a lottery system. International employers should account for this constraint when planning US hiring timelines for foreign nationals in specialty roles.
Onboarding New Hires in the United States
US onboarding is a compliance sequence with legal deadlines at each phase. Missing these deadlines can trigger penalties from federal and state agencies.
Before Day One
- Prepare and sign the employment contract
- Complete Form I-9 within 3 business days of the start date
- Register payroll and state tax accounts
- Set up workers' compensation coverage
- Provide mandatory labor law posters (digital copies for remote workers)
Day One
- Collect Form W-4 and applicable state withholding forms
- Verify Social Security number
- Provide equipment and configure system access
- Share the employee handbook
First Week
- Complete required compliance training
- Introduce reporting structure
- Confirm benefits enrollment deadlines
Beyond the First Week
- Conduct 30/60/90-day performance check-ins
- Confirm I-9 re-verification dates for non-citizen employees
- File state new-hire reports, required within 20 days of hire in most states
Background checks are a formal step in US hiring. Criminal records, education verification, employment history, and references are standard checks. Offers should be structured as conditional pending results. Some states and cities have ban-the-box laws that restrict when criminal history can be requested.
NDAs, Confidentiality and IP Protection in the United States
NDAs and IP assignment clauses are enforceable in the US but subject to state-specific limits on scope and duration.
Key clauses to include in US employment agreements: confidentiality obligations, trade secret definitions aligned with the federal Defend Trade Secrets Act (DTSA), IP assignment under the work-made-for-hire doctrine, and non-solicitation of employees and customers.
Non-compete enforceability varies significantly by state. California bans employee non-competes entirely. The FTC attempted a nationwide non-compete ban in 2024, but that rule faced legal challenges and its current enforceability remains unsettled.
- The work-made-for-hire doctrine means employers own IP created by employees within the scope of employment.
- The DTSA provides a federal civil cause of action for trade secret misappropriation, supplementing state-level protections.
- Overly broad NDA restrictions may be unenforceable depending on the state where the employee works.
Termination and Offboarding in the United States
At-will employment means either party can terminate the employment relationship without cause or advance notice in most states. Federal and state anti-discrimination laws create significant exceptions to this default rule.
There is no federal final pay deadline. State laws vary considerably: some require final pay on the last day of employment, others allow up to 72 hours after termination.
Employers must follow a structured offboarding process to reduce legal exposure and meet statutory deadlines. Practical steps include:
- Revoke system access and collect company equipment on the termination date.
- Issue the final paycheck per the applicable state deadline. California requires same-day payment for involuntary terminations.
- Provide a COBRA continuation coverage notice within 14 days of the qualifying event.
- Retain termination documentation, including performance records, written warnings, and investigation findings, for a minimum of three years.
Employers operating across multiple states must track each state's final pay and notice requirements separately, as obligations differ materially by jurisdiction.
Business Culture in the United States
US workplace culture is direct and results-oriented. Meetings move quickly to agenda items, though brief small talk at the start is common and expected.
- Communication: Direct and outcome-focused. Employees are expected to present solutions, not just problems.
- Hierarchy: Relatively flat in tech and startups. Finance, law, and government sectors are more hierarchical, and titles carry more weight.
- Decision-making: Often decentralized. Individual contributors are expected to take initiative without waiting for top-down direction.
- Meeting culture: Punctuality is expected. Agendas are standard, and follow-up emails with action items are common practice.
- Negotiation: Transactional and time-sensitive. Counteroffers are expected, but prolonged back-and-forth is not.
- Work-life balance: Varies by industry. Tech and finance have long-hours cultures. US workers take an average of 9.5 days of PTO despite employers offering 17.4 days on average, according to SHRM 2023 data.
- Remote work: Widely accepted since 2020. Hybrid models are the dominant arrangement in knowledge-work sectors as of 2025.
Top Sectors to Hire From in the United States
The US workforce spans several high-growth sectors, each with strong demand for specialized roles. Foreign employers targeting US talent should understand where hiring activity is concentrated.
- Technology: The US tech sector employs 9.1 million workers as of 2025, according to CompTIA. In-demand roles include software engineers, data scientists, and cybersecurity analysts.
- Healthcare and life sciences: Healthcare added an average of 63,000 jobs per month in 2024, per BLS data. Registered nurses, clinical data managers, and health IT specialists are consistently in demand.
- Financial services: Global fintech investment reached $91.5 billion in 2024, according to KPMG. Quantitative analysts, compliance officers, and financial engineers are among the most sought-after roles.
- Advanced manufacturing and semiconductors: The CHIPS Act has driven more than $200 billion in announced US semiconductor investment. Process engineers, supply chain managers, and quality assurance specialists are key hiring targets.
- Clean energy: The Inflation Reduction Act is driving more than $300 billion in clean energy investment through 2030, per the Department of Energy. Project developers, grid engineers, and environmental compliance specialists are in high demand.
Employers building cross-border teams may also find strong talent pipelines in neighboring markets. See our guide to hire employees in Canada for a comparable North American hiring overview.
Top Cities to Hire From in the United States
The US has several distinct talent markets, each with a different specialization. Knowing where to hire helps international employers target the right workforce from the start.
- San Francisco Bay Area: The global center for software engineering, AI/ML, and venture-backed startups. LinkedIn's 2024 data places it as the highest concentration of AI talent globally.
- New York City: The largest US metro labor market, with over 4.7 million private sector jobs. Financial services, media, advertising, and legal talent are concentrated here.
- Austin, Texas: The fastest-growing tech hub outside California. Texas has no state income tax, which simplifies employer payroll withholding and attracts talent. Major employers include Tesla, Apple, Google, and Oracle.
- Seattle, Washington: Home to Amazon and Microsoft headquarters, with deep cloud computing and e-commerce talent. Aerospace and biotech are also well represented.
- Raleigh-Durham, North Carolina: The Research Triangle connects biotech, pharma, and university-linked tech talent at a lower cost of living than coastal markets.
International employers hiring across multiple US cities may also consider comparable talent markets abroad. See our guides on how to hire employees in the UK and hire employees in Germany for comparison.
Hire Compliantly in the United States with Gloroots
Gloroots acts as the legal employer of record across all US states, enabling compliant hiring without entity formation, multi-state payroll registration, or in-house US HR infrastructure.
This model is best suited for international companies in early-stage US expansion or those building distributed teams across multiple states.
- No US entity required: Hire in any state from day one without forming a local legal entity.
- Fast onboarding: Employment contracts and payroll are active within days of engagement.
- Local compliance and payroll: Federal and all 50-state obligations are managed under one operating layer.
- Predictable pricing: A fixed per-employee monthly fee with no hidden setup costs.
- Dedicated support: Assigned compliance and HR specialists handle US employment questions directly.
Companies planning long-term US operations with 20 or more employees, or those needing direct visa sponsorship, should evaluate entity formation alongside EOR as complementary options rather than mutually exclusive ones.
Frequently Asked Questions About Hiring in the United States
How much does it cost to hire an employee in the United States?
Total employer cost typically runs 1.25 to 1.4 times the employee's base salary. Mandatory contributions include 6.2% Social Security, 1.45% Medicare, FUTA at 6% on the first $7,000 of wages, and state unemployment insurance.
Benefits such as health insurance, dental, vision, and retirement matching add further cost. Employers should budget for workers' compensation premiums, which vary by state and job classification.
How do I classify a worker as an employee or independent contractor in the US?
The IRS applies a three-category test covering Behavioral Control, Financial Control, and Type of Relationship. Greater company control over how and when work is performed points toward employee status.
California applies the stricter ABC test, which presumes worker status unless the hiring firm proves all three conditions. Misclassification can trigger back taxes, penalties, and interest from the IRS and state agencies.
What are the minimum wage and overtime rules in the United States?
The federal minimum wage under the FLSA is $7.25 per hour, unchanged since 2009. Many states and cities set higher floors, and employers must comply with whichever rate is highest.
Non-exempt employees must receive overtime pay at 1.5 times their regular rate for hours worked beyond 40 in a workweek. State rules may impose additional overtime obligations beyond the federal standard.
What benefits are employers required to provide in the United States?
Statutory obligations include FICA contributions, FUTA payments, and workers' compensation coverage, which varies by state. Employers with 50 or more full-time equivalent employees must offer minimum essential health coverage under the ACA or face penalties.
No federal law mandates paid vacation or paid time off. Paid sick leave requirements exist in several states and cities, so employers must check local rules for each hiring location.
What work visas are available for US employees?
Common work visa categories include the H-1B for specialty occupations, L-1 for intracompany transfers, O-1 for individuals with extraordinary ability, and TN for Canadian and Mexican professionals under the USMCA.
An Employer of Record cannot sponsor H-1B petitions, as that visa requires a direct employment relationship with the sponsoring entity. Companies needing to sponsor H-1B workers must establish a US legal entity.
What are the termination rules in the United States?
Employment in the US is at-will by default in nearly every state, meaning either party can end the relationship at any time without cause, subject to anti-discrimination law and any contractual terms.
The WARN Act requires 60 days' advance notice for mass layoffs at employers with 100 or more workers. No federal law mandates severance pay, but employers must provide COBRA continuation coverage notices within 14 days of a qualifying event.
Which US states have no state income tax?
Seven states impose no individual state income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming. Hiring employees in these states reduces the payroll tax registration burden and lowers net deductions from employee paychecks.
State income tax absence does not eliminate all state-level obligations. Employers must still register for state unemployment insurance and comply with applicable workers' compensation and paid leave laws in each hiring location.
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