Employer of Record in the United States: Complete Guide 2026

An Employer of Record helps businesses expanding into the United States without a local entity by serving as the legal employer for local talent and supporting onboarding, payroll, statutory benefits, and compliance with local employment laws. The minimum wages differ by state; in addition to benefits, for instance, federal law provides up to 12 weeks of unpaid leave under the Family and Medical Leave Act (FMLA). On the other hand, several states may impose additional paid leave requirements while applying different eligibility rules. 

At the same time, termination rules may vary widely. Although employment is generally at-will, employers have to make sure that terminations are not retaliatory or discriminatory. 

These are not merely edge cases. These are instances that highlight the United States’ layered and fragmented legal landscape that businesses must navigate while hiring without a local legal entity. 

An Employer of Record like Payoneer Workforce Management can help businesses start hiring in the United States without setting up local entities or any administrative delay. 

Book a demo to understand how we can support employing in the U.S, without a local entity.

Read on to know how.

How to hire employees in the United States?

You can either choose to set up a legal entity, bring on contractors for short-term flexible work, or skip the hassle entirely by partnering with an Employer of Record. An Employer of Record like Payoneer Workforce Management can help you handle hiring and payroll seamlessly while reducing the administrative burden. 

Have a look at the three main ways in which you can hire talent in the United States: 

1. Set up a local entity: If you choose to set up a local entity in the United States, you’ll maintain full operational control of the business, but there are high setup costs involved.

2. Hire independent contractors or freelancers: This is a flexible option if you require talent for a short-term project. However, be careful not to misclassify employees as contractors or freelancers, or you could risk financial penalties.

3. An EOR in the United States: When you work with an Employer of Record in the United States, you can employ local talent without setting up a local entity. An EOR can help you manage United States payroll, taxes, benefits, and navigate local compliance requirements.

Payoneer Workforce Management enables compliant onboarding of talent in 160+ countries without having to set up a legal entity.

How does an Employer of Record help manage hiring in the United States?

An Employer of Record helps businesses hire in the United States by acting as a legal employer employing workers on your behalf, while allowing you to manage the day-to-day activities with ease. An EOR handles contracts, taxes, payroll, benefits, and compliance with labor law, thereby reducing risk and administrative burden for the employer. It also allows for faster, more cost-efficient market entry without establishing a local entity. 

In the US, the Employer of Record manages tasks like: 

• Issuing employment contracts in alignment with the local labor laws
• Payroll processing and disbursement of salaries
• Administering statutory benefits and social contributions
• Withholding and filing of taxes
• Compliance with labor laws 

This is not just a convenient workaround, but is also a structurally smarter way of hiring. 

Payoneer Workforce Management brings this to life across 160+ countries, giving businesses the infrastructure to hire, pay, and manage employees in the United States while keeping international expansion lean, compliant, and fast.

How to onboard employees in the United States?

After you have hired an employee in your US team, you have to issue compliant contracts, collect the key documents, and get help with payroll management right from the first day. 

Certified “Global Momentum Leader” by G2 reports in onboarding and HR compliance, Payoneer Workforce Management is a platform that helps streamline these operations. 

Typically, the onboarding process includes:

• Enrollment in payroll and benefits: The local talent must be enrolled in payroll and benefits, as per local legal entitlements.
• Device shipment and configuration: The new candidates must be provided with all the necessary equipment and devices. So that they can begin working without any issues from the first week of joining.
• Orientation: Arrange an orientation session during the local hire’s first week to explain company procedures, the onboarding process, and their responsibilities in their new role.
• Introduction to team and colleagues: Schedule time for the local talent to get to know the team and wider business colleagues.

Payoneer Workforce Management enables companies to compliantly engage talent across borders through its technology platform.

Book a demo today!

What happens if you hire without an EOR in the United States?

Entering the US hiring landscape without partnering with an EOR means building and managing everything by oneself. This includes everything ranging from setting up a local entity to running payroll across jurisdictions, handling tax obligations, keeping up with state-specific employment regulations, and so on. 

This not only increases the red tape but may also result in errors, ultimately leading to fines, delays, and potential legal complications. 

An EOR like Payoneer  Workforce Management can help offer a different approach by acting as a legal employer on behalf of the organization. The employer does not have to set up an infrastructure from scratch, but can rely on the EOR for all the HR-related tasks like issuing a contract, managing payroll, compliance requirements, etc. 

Have a look at this table to see how these approaches compare:

Parameter	Hiring without an EOR	Hiring with an EOR
Establishing a local entity	It is essential to build a local legal entity.	Establishing a local legal entity is not mandatory.
Compliance	It is the business’s responsibility to maintain compliance.	EOR helps businesses navigate compliance.
Employment contracts	Businesses have to draft compliant employment contracts and issue them to employees.	EOR’s draft compliant employment contracts.
Payroll, taxes, and statutory benefits	It is the business’s responsibility to manage taxes, payroll, and statutory benefits.	It is managed by the EOR.
Hiring time	Takes a lot of time to complete the hiring process.	Since it is less administrative work, the hiring process does not take much time.
Administrative burden	All core employment functions, including benefits, onboarding, HR operations, and payroll, are managed directly by the company.	HR operations are supported by the EOR.
Risk of non-compliance	Evolving labor law requirements across jurisdictions lead to a higher risk	Compliance with statutory obligations, local labor laws, payroll, etc., is managed by experts, which helps reduce risk

How to pay employees in the United States (US)?

While paying employees in the United States, employers must navigate federal laws like the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA), the Americans with Disabilities Act (ADA), and several other varying state and local regulations to maintain accuracy. 

These laws help determine how employees are compensated, including minimum wage, leave entitlements, overtime pay, and so on. As a result, it can be said that payroll in the United States requires careful consideration and management across multiple jurisdictions. 

Here are the key details you need to know about United States payroll management.

Key payroll information

Here is some key information about running payroll in the U.S.:

• Payout currency: U.S. Dollar (USD)
• Pay date: 15th and last working day of the month
• Federal minimum wage: USD 7.25 per hour (each state also has its own minimum wage)

Income tax

The United States has a progressive, federal income tax, and rates vary by income. Here are the federal tax rates for single filers in the U.S.:

Income range (USD)	Federal income tax rate
0 to 11,925	10%
11,926 to 48,475	12%
48,476 to 103,350	22%
103,351 to 197,300	24%
197,301 to 250,525	32%
250,526 to 626,350	35%
626,351 and above	37%

Each state also has its own income tax regulations. Some states have a flat-rate income tax on all income levels, some have progressive rates, and some do not collect income taxes at all. Always check the regulations in your employee’s state.

Social security

In the U.S., employers are responsible for withholding an employee’s Social Security and Medicare contributions from their salary.

Social Security provides financial protection to employees, including retirement, disability, and survivor benefits. 

Contribution type	Employer rate	Employee rate	Total
Social security	6.2%	6.2%	12.4%
Medicare	1.45%	1.45%	2.9%

Other employer costs

There will be additional employer costs related to variable components of an employee’s salary, such as annual benefits.

Other employee benefits

Here are some of the additional benefits your U.S. employees may be entitled to:

• Public health insurance: There are several types of public healthcare available in the U.S, including health insurance, health plans (HMOs), and public programs like Medicare and Medi-Cal.
• Private health insurance: Private health insurance can cover medical, vision, and dental care for employees. Premiums start from USD 552 per annum for employees, and plans can cover both them and their families.

When you choose to work with an Employer of Record, United States employees can be paid easily and compliantly. Payoneer Workforce Management’s unified, all-in-one platform gives you a single dashboard to manage your entire global workforce.

Therefore, stop losing time and money to cross-border complexity. You can scale faster with Payoneer’s multi-currency account and operate globally without friction. 

The example shows a simplified payroll breakdown of a mid-income employee in New York. The employee earns 70,000 USD annually, which is below the Social Security wage base. Therefore, all statutory contributions apply consistently throughout the year. 

Refer to our employee cost calculator to have a better idea.

Percentages shown include statutory rates, effective rates (adjusted for annual caps), and variable employer costs depending on state and company factors. 

Employer costs (monthly)

The gross monthly salary of the employee: USD 5,833

Component	Amount (in USD)	Rate	Explanation
Gross salary	5,833	100%	Base monthly salary
Social Security (OASDI)	362	6.2%	Applies fully below the wage cap
Medicare	85	1.45%	No wage cap
FUTA	42 (Approx)	0.7% (Approx)	Applies only to the first USD 7,000 annually
State Unemployment	150-350	2.5%-6% (Approx)	Varies by employer and state limits
Worker’s Compensation	50-150	1%-2.5% (Approx)	Industry-dependent
Employer Liability Insurance	100-200	1.7%-3.4% (Approx)	Non-statutory
Total employer cost			6,600-7,000 USD approximately

Employee deductions (monthly)

The gross monthly salary of the employee: USD 5,833

Component	Amount in USD	Rate	Explanation
Gross salary	5,833	100%	Base monthly salary
Federal income tax	700-1,000	12%-17% (Approx)	Progressive tax rates
NY State income tax	250-400	4%-7% (Approx)	Progressive state tax
Social Security (OASDI)	362	6.2%	Applies fully below the wage cap
Medicare	85	1.45%	No wage cap
Net monthly salary			4,000-4,400 USD approximately

Key considerations made while making these calculations: 

• Full 6.2% Social Security applies (below cap).
• No additional Medicare tax.
• Lower taxes due to progressive brackets.
• Employer costs vary by state and industry.

What are the most important employment laws in the United States?

Employers hiring in the United States have to comply with a wide range of federal, state, and local employment laws. These regulations govern all the important aspects of employment relationships, like working hours, termination practices, overtime compensation, notice requirements, employee rights, statutory leave laws, etc. Understanding these obligations is important for maintaining compliance and managing a US-based workforce effectively. 

The key employment laws in the United States are listed below: 

Working hours

In the United States, the standard workweek is 40 hours.

Overtime hours

Overtime pay is mandatory under federal law (FLSA) and in some states. If your employee has to work for more than 40 hours in a workweek, they must be paid at least one and a half times their regular wage. 

An employer and employee have to mutually agree regarding the extra pay for extra work. 

Probation period

Probationary periods are not statutory in the United States, as employment is at will. 

Notice period

Notice periods vary depending on the type of employment. While both the employer and employee can terminate employment immediately in the U.S, a 2-week notice period is standard practice both during and after the probation period.

Navigate labor laws using Payoneer Workforce Management’s infrastructure.

What is the minimum wage in the United States?

The federal minimum wage in the United States for non-exempt employees is USD 7.25 per hour.

It’s important to note that individual states have their own minimum wage, so always check the local regulations in your employee’s state.

How are employment contracts issued in the United States?

Employment contracts in the United States define the key terms and conditions of employment between an employer and employee. While contract requirements may vary depending on the role and jurisdiction, a well-drafted agreement should clearly outline compensation, job responsibilities, working arrangements, and other essential employment terms to support a smooth onboarding process.

Employment contracts in the U.S. should include the following information:

• Employer’s name and address
• Employee’s name and address
• Start date and length of employment
• Job title and duties
• Place of work
• Working hours
• Rate of pay, pay date, and overtime pay

With Payoneer Workforce Management as your EOR partner, you can onboard talent quickly and securely with localized contracts and payroll.

What is the employee leave policy in the United States?

There is no statutory law for paid leave in the United States that is followed all across the country. Leave policies in the United States are shaped by the Family and Medical Leave Act (FMLA), state laws, and policies designed by the employer. 

To navigate the leave requirements in the United States, employers should have a thorough understanding of both statutory entitlements and employer-provided benefits. The types of leaves available to employees may differ based on the workplace policies and applicable laws in the jurisdiction. 

Here are key details of the United States’ leave policy.

Public holidays

There are 11 annual public holidays in the U.S. View the complete list of public holidays here.

There are several federal holidays on which government offices and some private offices remain closed. Have a look at the list below: 

Event	Date
New Year’s Day	1st January
Birthday of Martin Luther King, Jr.	3rd Monday of January
Inauguration Day	20th January, every 4 years following a presidential election
Washington’s Birthday (Also known as President’s Day)	3rd Monday of February
Memorial Day	Last Monday in May
Juneteenth National Independence Day	19th June
Independence Day	4th July
Labor Day	1st Monday in September
Columbus Day	2nd Monday in October
Veterans Day	11th November
Thanksgiving Day	4th Thursday in November
Christmas Day	25th December

Individual states may also have additional public holidays. For instance, the State and the District of Columbia may recognize their own holidays like Indigenous Peoples Day or Emancipation Day. Different ethnic and religious groups also celebrate days that hold special meaning to them, like Christmas and Easter for Christians, High Holy Days for Jews, Diwali for Hindus, Ramadan for Muslims, and so on. 

Vacation time

While it is not mandatory to offer paid or unpaid vacation leave in the U.S., many employers do. 

Leave carry-forward policies depend on specific state laws. Some states allow employees to carry forward a limited amount of leave.

FMLA leave entitlement in the United States 

Under this law, eligible employees shall get up to 12 weeks of unpaid, job-protected leave within a span of 12-months for qualifying reasons like adoption, childbirth, foster care placement, serious health condition, providing caregiving to immediate family members, etc.

Other leave

Here are some other types of leave in the United States:

• Compassionate leave: Though not federally mandated, many employers offer compassionate leave policies. Some states also mandate that employers must offer bereavement leave to their employees.
• Voting leave: Employees receive up to 2 hours of leave on election day.
• Workers’ compensation leave: This applies to employees injured while working. The duration of leave depends on injury recovery.

Do foreign employees require a work permit to work in the United States?

Foreign nationals require authorization to legally work in the United States. The kind of authorization depends on the individual’s immigration status, type of employment, and eligibility under US immigration law. 

The common pathways for work authorization are as follows: 

• Non-immigrant workers shall get temporary work visas
• Individuals seeking permanent residence shall get employment-based immigrant visas 

In some cases, employers in the United States must sponsor or petition on behalf of the foreign worker before the commencement of the employment. Foreign employees must maintain a valid work authorization and adhere to the conditions of their visa or immigration status throughout their employment tenure. 

Check the government website for more detailed information.

How to conduct background checks of employees in the United States?

Background checks are an essential part of the hiring and onboarding process of employees that can help you assess a candidate’s qualifications, employment history, and suitability for a role. These might include checks on employment history, educational history, or social media checks.

You will likely need the employee’s consent before conducting any background checks. You’ll also need to comply with local background check requirements. Always check with the applicable federal, state, and local laws. 

The following are reviewed during an employee’s background check: 

• Verification of a candidate’s employment history
• Candidate’s educational qualification 
• Criminal background checks 
• Verification of identity
• Social media presence 
• Reference checks 

What are the rules of the termination of employees in the United States?

Employment termination in the U.S. is a complex process, so it’s essential to understand the legal responsibilities you have as an employer. All federal and state agencies have certain termination laws that employers need to follow in order to avoid instances of wrongful termination. 

• All states in the United States except Montana allow “at-will” employment. Either the employer or the employee may choose to terminate the employment contract at any point in time. However, there should be a valid reason for termination. 

This means that employment can be terminated immediately in any of the following scenarios:

• Employee resignation
• Mutual agreement between the employee and the employer
• Termination during probationary period
• Termination by the employer due to performance issues, misconduct, absence without leave, etc.
• “At-will” employment does not apply to employees who work under a signed contract, in the public sector, or in accordance with a union’s collective bargaining agreement. 

While employment at will allows either the employer or the employee to terminate at any time, a 2-week notice period is still customary practice in the U.S.

There are no statutory provisions for severance pay in the U.S.

How to register a company in the United States?

If you want to build a significant workforce in the U.S., you may be considering registering your business there.

There are several complex steps involved in registering a company in the U.S. Check relevant government websites for more information.

If you’re looking for a quicker and more cost-effective way to engage talent remotely, an Employer of Record in the United States can help. 

Payoneer Workforce Management enables compliant onboarding of talent in 160+ countries without having to set up a legal entity.

How is a PEO different from an EOR? 

Both an Employer of Record (EOR) and a Professional Employer Organization (PEO) are designed to support HR and payroll functions on behalf of organizations, but they follow two entirely different practices. 

PEO	EOR
A PEO may be considered a co-payment model where the business and the PEO collectively share the responsibilities related to hiring. However, for this, the business should have a registered local entity in the United States. This also means that the business still remains responsible for legal risks, compliance errors, etc.	An Employer of Record acts as a legal employer and manages the end-to-end HR operations on the business’s behalf. There is no need for setting up a local entity. The EOR supports employment contracts, payroll, tax compliance, and adherence to federal and state labor laws, significantly reducing your administrative and legal burden.

Simplify hiring in the United States with Payoneer Workforce Management 

Navigating the US employment landscape is more than just hiring talent. It demands managing a set of complex federal, state, and local regulations, which can eventually slow down the expansion process. 

Businesses have to take a smart approach instead of setting up entities, interpreting the complex labor laws, and managing compliance risk. This can be done by partnering with an EOR like Payoneer Workforce Management, which acts as a legal employer, simplifying the hiring and employment process. 

Book a demo today and start building your US team with confidence. 

Frequently asked questions (FAQs)

About the author

Martyna Krawczyk

HR and Immigration Lawyer, Global HR Operations

Martyna Krawczyk is an HR and Immigration Lawyer and Associate within the Global HR Operations team at Payoneer Workforce Management (formerly Skuad). She holds an LPC LL.M. from the University of Law in the UK and an Associate CIPD certification. Martyna also serves as Vice President of the Labour Law Association of Poland and was recognized at the Wolters Legal Hackathon 2024. Her areas of focus include international employment law, cross-border workforce compliance, and global immigration, supporting organizations in managing international workforces.