Planning to hire employees in the United States of America? Here’s a quick guide

The United States has a civilian labor force of over 150 million people, with total employment expected to continue growing steadily over the coming decade. 

With a talented workforce across all sectors, from technology and finance to healthcare and manufacturing, American workers are most suited for businesses seeking to expand their global workforce.

However, the onboarding process in the U.S. is not as simple as it seems. With federal wage and tax regulations, state regulations, and stringent worker classification rules, engaging employees in the United States of America requires a steep learning curve for compliance.

However, you don’t have to establish a local presence or become an expert on U.S. labor regulations for hiring. An Employer of Record (EOR), like Payoneer Workforce Management, helps streamline the process so you can focus on the core business.

In this guide, we will take you through everything you need to know, from the various ways of engaging local talent to onboarding procedures, essential labor regulations, and how to remain compliant during the process.

How to hire in the United States of America

To engage talent in the United States of America, you can choose from a few talent engagement methods for your business and get familiarized with local labor laws.

1. Set up a local entity

Forming a legal entity in the U.S. allows you to have control over the management of your local workforce. You have the option to form either an LLC, a C Corporation, or a branch office.

Setting up a legal entity in the U.S. involves registering your business with the federal and state governments, obtaining an EIN from the IRS, and other requirements. 

This process is quite resource-intensive, but it is worth it if you have long-term plans to establish a large presence in the U.S.

2. Partner with an Employer of Record (EOR)

An Employer of Record (EOR) in the United States of America is a third-party organization that legally employs workers on your behalf. It enables businesses to enter the U.S. market and engage employees without establishing a local presence.

The EOR partner helps handle matters related to employment in the United States, including employment contracts, payroll, taxes, benefits, and compliance, on your behalf.

Working with a reputable EOR helps simplify the process of engaging talent in the United States and supports local compliance. 

3. Engage independent contractors

Some businesses choose to work with independent contractors for project-based work. However, there are special regulations in the U.S. governing worker classification. Misclassifying employees as contractors can lead to fines & penalties imposed by the IRS and the Department of Labor.

To reduce costly classification mistakes, you can use a contractor management tool to help you onboard contractors compliantly.

Where to find employees in the United States of America

When engaging employees in the United States of America, you need to know the best places to find local talent:

1. Using LinkedIn or other job posting sites such as Indeed, Glassdoor, or ZipRecruiter is a good option. For this, you have to make sure to communicate the job requirements and benefits clearly when advertising the job post. 
2. Many workers also use industry-specific job posting sites like Dice (for tech-based jobs) and Idealist (for non-profit jobs), depending on the type of job they are trying to fill.
3. The United States has various degree-granting institutions, making campus recruiting programs and internship pipelines a great way for companies to build relationships with young talent. 

Further, staffing and recruitment agencies often have a pool of pre-screened candidates and understand the local labor market conditions. 

They can also be used to fill both temporary and full-time positions.

Onboarding employees in the United States of America

A compliant onboarding process in the United States may take a couple of weeks, and it helps with establishing a successful employment relationship. 

It involves the following steps:

1. Verify identity and work authorization: Confirm the employee’s identity and legal right to work.
2. Collect tax and payroll forms: Gather documents needed for tax withholding and payroll setup.
3. Address local or regional requirements: Complete any state-specific paperwork.
4. Sign the employment agreement: Formalize terms of employment in writing.
5. Enroll in benefits: Set up health insurance or other benefits as applicable.

1. Verify identity and work authorization

Every U.S. employer is required to complete Form I-9 for each individual hired. This is required for citizens and noncitizens. 

Employees must complete Section 1 of the form on the first day of employment. As an employer, you must verify identity and employment authorization documents within three business days of the hire date.

With this form, employees have to submit the following acceptable documents: 

• List A documents verify identity and work authorization
  • Valid U.S. Passport or U.S. Passport Card
  • Permanent Resident Card (Form I-551)
  • Foreign passport with a temporary I-551 stamp or a printed immigrant visa notation
  • Employment Authorization Document (Form I-766) with photo
  • Foreign passport with Form I-94/I-94A and a valid work authorization endorsement
  • Passport from the Federated States of Micronesia or the Republic of the Marshall Islands with Form I-94/I-94A under the Compact of Free Association
• List B documents verify identity
  • State-issued driver’s license or ID with photo or identifying details
  • Federal, state, or local government-issued ID with photo or identifying details
  • School ID card with photo
  • Voter registration card
  • U.S. military ID or draft record
  • Military dependent ID card
  • U.S. Coast Guard Merchant Mariner Card
  • Native American tribal document
  • Canadian government-issued driver’s license
• List C documents verify work authorization
  • U.S. Social Security Card
  • Certification of Birth Abroad (Forms DS-1350, FS-545, FS-240)
  • Original or certified U.S. birth certificate with official seal
  • Native American tribal document
  • U.S. Citizen ID Card (Form I-197)
  • Resident Citizen ID Card (Form I-179)
  • DHS-issued Employment Authorization Document

Note: Employees may choose one document from List A or a combination of one document from List B. 

2. Collect tax withholding forms

New employees must complete Form W-4 (Employee’s Withholding Certificate) to calculate federal income taxes withheld. This form captures filing status and additional withholding choices. Most states also require a separate form for state income taxes.

3. Address state-specific requirements

Some states have their own requirements for onboarding that go beyond federal regulations. These may include state tax withholding forms, new hire reporting to state agencies, and required workplace postings about employee rights.

4. Sign the employment agreement

The U.S. is a primarily “at-will” employment environment, but signing an offer letter or employment contract helps to establish key terms. These usually include job title, salary, eligibility for benefits, work location, and any confidentiality or non-compete agreements

5. Enroll in benefits

Private health insurance is not mandatory in the United States, but many employers offer medical, vision, and dental coverage as part of their benefits package. 

Key employment laws and requirements in the United States of America

Employment regulations in the United States operate at the federal, state, and local levels. You may be required to comply with applicable employment laws as follows: 

Wage and hour laws

The Fair Labor Standards Act (FLSA) sets the federal minimum wage at $7.25 per hour. However, the minimum wage in many states may be higher.

The FLSA also requires that overtime pay be 1.5 times the regular rate for work in excess of 40 hours in a workweek. Certain executive, administrative, and professional employees are exempt from overtime pay if they meet certain salary and job-duty tests. 

The current federal minimum salary requirement for exemption is $684 per week ($35,568 per year).

Family and medical leave

The Family and Medical Leave Act (FMLA) requires that employers with 50 or more employees provide leave for up to 12 weeks. Eligible reasons for FMLA include the birth or adoption of a child, the care of a family member with a serious health condition, or the employee’s own serious health condition.

Workplace safety

The Occupational Safety and Health Act requires employers to provide a workplace free from recognized hazards. The Occupational Safety and Health Administration (OSHA) sets and enforces protective standards.

Payroll tax obligations

Employers must withhold and remit several types of employment taxes. These include federal income tax based on the employee’s W-4 elections, Social Security tax at 6.2% employer share and 6.2% employee share, Medicare tax at 1.45% each for employer and employee, and the Additional Medicare Tax of 0.9% on wages exceeding $200,000. 

Employers also pay Federal Unemployment Tax (FUTA) at 6% on the first $7,000 of wages per employee.

Employers must deposit withheld taxes according to IRS schedules using the Electronic Federal Tax Payment System (EFTPS). Most employers file Form 941 quarterly to report these taxes.

State-level variations

State of the union laws may also include additional benefits for employees beyond the federal requirements. 

These include higher minimum wage rates (some states pay more than $15 an hour), paid family and medical leave, paid sick leave, and tougher overtime exemption rules in states such as California, New York, and Washington.

Because each state has its own requirements, managing multi-state compliance can get complicated fast. For instance, 

Termination and Severance

In the United States, terminations may occur under several scenarios. These include employee resignation, mutual agreement between the employer and employee, termination during the probationary period, or dismissal by the employer for reasons such as misconduct, performance issues, or absence without leave.

Because employment in the U.S. generally follows an at‑will framework, either party may end the employment relationship at any time. Although not legally required, providing a two‑week notice is a common practice across most workplaces.

There are no statutory severance pay requirements in the United States. Any severance offered depends entirely on employer policy, employment agreements, or discretionary arrangements.

Explore Payoneer Workforce Management in the United States of America

Hiring and workforce management in the United States of America can get complicated, especially if you’re also managing multiple states, tax jurisdictions, and compliance requirements. 

Payoneer Workforce Management is a unified platform that helps you employ full-time employees and independent contractors in 160+ countries, including the United States, without setting up a local legal entity.

With our EOR platform, you can onboard local talent quickly and compliantly, run and streamline global payroll securely, navigate local employment laws, and manage taxes, benefits, timesheets, and more.

From fast onboarding to multi-state compliance support, Payoneer Workforce Management gives your business everything it needs to engage employees in the United States of America and beyond.

Book a demo to talk to our experts.

FAQs

1) What documents are required to hire an employee in the United States?

The minimum requirement for employers is to complete Form I-9 for each new employee. The employee must present acceptable documents to establish identity and authorization to work in the United States. You will also require the employee to complete Form W-4 for federal taxes and state taxes, if applicable. Other documents that may be required include offer letters, employment contracts, and company policies.

2) What is the federal minimum wage in the United States?

The federal minimum wage is $7.25 per hour.  Many states and localities have higher minimum wage rates. Employers are required to pay the highest rate of minimum wage, federal, state, or local. Some states have minimum wages above $15 per hour.

3) Is private health insurance mandatory for employees in the United States?

Private health insurance is not mandatory in any state in the U.S. Employers are free to offer health insurance as part of the employee benefits package. Public programs such as Medicare and Medicaid provide health insurance to eligible individuals. Many employers offer private health insurance that covers medical, vision, and dental care to employees as a recruitment and retention strategy.

4) Can foreign companies hire employees in the United States without a local entity?

Foreign companies can also work with an Employer of Record (EOR) such as Payoneer Workforce Management to engage employees in the United States without having to establish a legal presence in the United States. The EOR will be the employer of record for tax purposes, and you will retain control of the employee’s work.