Employer of Record in The United States

Hiring in The United States for the first time can be overwhelming, especially when navigating unfamiliar employment laws. Whether you hire independent contractors, set up a legal entity, or use an EOR service, understanding the local employment landscape is crucial for success. Playroll’s comprehensive guide can help you get started if you're hiring locally or relocating a team member.

Companies can hire employees in The United States in the following three ways:

• Setting up a local entity. Entity establishment reduces risk exposure and enables direct hiring, but can be costly and time-consuming – making it less practical for companies seeking quick and flexible solutions for hiring in The United States.
• Partnering with an Employer Of Record. An EOR, like Playroll, is a third-party entity that serves as the legal employer of your international workforce which hires, pays, and manages compliance with The United States’s labor laws and tax regulations.
• Hiring independent contractors. Hiring contractors gives companies a flexible, affordable alternative to hiring local employees, though it involves unique misclassification risks.

Businesses can only operate smoothly in The United States if they comply with local labor laws including drafting compliant employment contract agreements and meeting taxation and payroll obligations. Learn more about the employment laws and regulations in The United States below, to avoid any compliance issues.

Employment Contract Requirements

In the United States, employment agreements assume various formats since there are no specific regulations mandating written documentation to be valid. However, certain states have enacted wage theft laws requiring employers to communicate basic employment terms to their employees in writing. These include:

• Identification of both parties
• Designated workplace and working hours
• Job roles and responsibilities
• Basic salary (including compensation and benefits)
• Total number of holidays
• Reasons for potential employment termination

Onboarding Process

We can help you get a new employee started in The United States quickly, with a minimum onboarding time of just 1-2 working days. The timeline starts once the employee submits all required information onto the Playroll platform and completes any necessary local authority registrations.

For non-nationals, the Right to Work assessment (if applicable) may add up to three extra days. Additional time may be needed for follow-ups on this assessment. Please note, payroll cut-off dates can impact the actual start date. Playroll's payroll cut-off date is the 10th of each month unless otherwise specified.

Working Hours in The United States

The Fair Labor Standards Act (FLSA) does not specify weekly work hours for employees 16 and older. However, OSHA suggests a maximum of 8 consecutive hours a day for five days a week, with an 8-hour rest. Weekly, a day of rest is mandated, and those working over 4 hours daily should have a 10-minute break per hour worked.

Overtime in The United States

Although there is no limitation on working hours, the Fair Labor Standards Act (FLSA) mandates that employees who work beyond 40 hours per week must be compensated with overtime pay at a rate of 1.5 times their regular hourly wage.

Probation Period in The United States

The U.S. lacks a mandated minimum probation period, but employers can set a period between 60 to 90 days. Formal probation periods are uncommon due to at-will employment, allowing employers to terminate without cause, notice, or severance at any time.

Fiscal Year in The United States

1 October - 30 September is the 12-month accounting period that businesses in The United States use for financial and tax reporting purposes.

Payroll Cycle in The United States

The payroll cycle in The United States is usually bi-weekly, with employees being paid every other week.

Minimum Wage in The United States

The minimum wage for employees in The United States is typically 7.25 USD per hour, amounting to ~1,160 USD per month for a typical 40 hour work week.

Bonus Payments in The United States

At present, the United States does not require 13th-month payments.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 9.5% - 12.8% on top of the employee salary in The United States.

Employee Payroll Tax Contributions

In The United States , the typical estimation for employee payroll contributions cost is around 13.65%.

Individual Income Tax Contributions

The federal minimum wage in the U.S. is set at 7.25 USD per hour or 1,160 USD per month. Individual states may have their respective minimum wage laws.

Pension in The United States

Social Security in the U.S. serves as the old-age retirement pension, becoming available from 62 (early retirement) with a 5-6% pension reduction. A minimum of 10 years of service is required, and the federal government calculates benefits based on the highest 35 years of earnings.

Mandatory Leave Entitlement in The United States

The annual leave entitlement in The United States is 0 days for a full time worker. These can include public holidays on top of that or within those days, which would otherwise be unpaid.

Public Holidays In The United States

The United States observes 11 official national public holidays annually. Additionally, individual states have the authority to designate additional holidays beyond those mandated by the federal government. The national holidays recognised by the federal government are:

Paid Time Off in The United States

In the United States, it is not legally required to compensate employees for time taken off for vacation or holidays. According to the Center for Economic and Policy Research, the U.S. stands as the sole advanced economy worldwide that does not ensure paid vacation days and holidays for its workforce.

Maternity Leave In The United States

Eligibility for maternity leave in the United States under the Family and Medical Leave Act (FMLA) mandates specific criteria. This federal law provides pregnant employees with a 12-week unpaid leave, usually taken continuously unless otherwise permitted by the employer. To qualify, the employee must:

• Have worked at least 12 months with the same employer
• Completed a minimum of 1,250 work hours over the past 12 months
• Work location with 50 or more employees within a 75-mile radius

Paternity Leave In The United States

There are no distinct federal provisions that address paternity leave in the U.S. aside from the parental leave stipulated by the Family and Medical Leave Act.

Sick Leave In The United States

Sick leave in the United States falls under the jurisdiction of the Family and Medical Leave Act (FMLA), providing up to 12 weeks of leave and specifically addressing serious illnesses. Eligibility is determined based on the following:

• Employment at least 12 months with the same employer
• Completion of a minimum of 1,250 work hours over the past 12 months
• Work location with 50 or more employees within a 75-mile radius
• Qualification for sick leave under FMLA involves a serious illness, injury, impairment, or hospitalisation of the employee or an immediate family member or addressed by a healthcare provider

Parental Leave In The United States

Under the Family and Medical Leave Act (FMLA), federal law permits 12 weeks of unpaid parental leave that either or both parents can take within the initial year following the birth or adoption of a child. This leave is typically continuous unless the employer provides an exception. To qualify, the employee must:

• Have worked at least 12 months with the same employer
• Completed a minimum of 1,250 work hours over the past 12 months
• Work location with 50 or more employees within a 75-mile radius

Termination Process in The United States

When terminating an employee, employers must adhere to federal, state, and city ordinances. Termination expenses may encompass compliance with the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), which is a federal law enabling employees to maintain health insurance coverage during unemployment.

Notice Period in The United States

As the United States largely follows oeat-will employment relations, either party may terminate the agreement without cause at any given time. Nevertheless, it is customary that they provide a two-week notice before termination.

Severance in The United States

The United States does not have mandated statutory severance provisions.