Overview
Hiring in the US is not one compliance regime; it is 50. Employer payroll taxes run roughly ~7–12% depending on state, but California, New York, and Massachusetts add meal-break, paid leave, and classification rules that punish DIY payroll. An EOR skips entity formation and state employer registrations for your first US hires.
The US has federal statutes layered on state and city rules. Statutory employer costs are lower than most of Europe (no federal severance, limited federal paid leave), but the failure mode is patchwork compliance: California meal breaks, New York wage-theft enforcement, Texas at-will culture. Health insurance is not federally mandated for small teams, yet skipping it loses every competitive skilled hire.
Foreign companies use a US EOR to avoid LLC/C-Corp formation, EIN setup, multi-state employer accounts, and registered agents. That path is typically 4–8 weeks and ~$5,000–$15,000 before the first paycheck. With an EOR you sign a service agreement, the EOR entity becomes legal employer, and local hires can start in days.
Key Employment Facts
| Item | Detail |
|---|---|
| Minimum wage | $7.25/hr federal; California ~$16.90/hr (2026); New York ~$17.00 NYC/Long Island/Westchester, ~$16.00 rest of state |
| Working hours | No federal weekly cap; FLSA overtime 1.5× above 40 hrs/week for non-exempt |
| Probation period | Not a federal concept; at-will covers most exits |
| Notice period | None required (at-will); federal WARN: 60 days for covered mass layoffs |
| Severance | Not legally required; market practice ~1–2 weeks per year of service |
| Paid leave | No federal PTO mandate; state sick leave varies (e.g. CA ~40 hrs, NY up to ~56 hrs) |
| Employer costs % | ~7.65% FICA + state UI (~0.5–5.4%) + workers’ comp; benefits often push all-in to ~25–35% |
Employer Cost
Federal statutory employer costs look cheap. Benefits and state programs are where the budget moves.
Federal payroll taxes: Social Security 6.2% on wages up to the annual wage base (~$176,100 for 2025; confirm current year) + Medicare 1.45% with no cap. Total 7.65% up to the SS base, then 1.45% above it. Additional Medicare tax withholding can apply at high employee wages; that is employee-side.
FUTA/SUTA: Federal FUTA effectively 0.6% on the first $7,000 after credits ($42/employee/year). State UI rates and wage bases vary widely: California max rates and Texas taxable wage bases are not interchangeable. Your EOR’s experience rating affects the pass-through.
Workers’ compensation: State-mandated. Office roles may be cents per $100 of payroll; higher-risk classes are multiples of that. The EOR’s mod rate flows into your cost.
Market-essential benefits (not federal mandates, functionally required): Employer-paid health premiums often ~$5,000–$12,000/year per employee depending on plan and family status. A 3–6% 401(k) match on a $120,000 salary is ~$3,600–$7,200/year.
Worked example ($120,000 California tech hire): FICA ~$9,180, FUTA/SUTA ~$500–$1,500, workers’ comp ~$600, health ~$8,000, 401(k) match ~$4,800, EOR fee ~$7,200. All-in above salary ≈ $30,000–$31,000 (~25–26%). Budget ~25–35% above base for a competitive fully loaded US seat.
Statutory Benefits
Federal law requires little paid time off. FICA, unemployment insurance, workers’ compensation, and unpaid FMLA leave (employers with 50+ employees) are the core federal stack. No federal paid vacation, no federal paid sick leave, no federal paid parental leave.
COBRA: After loss of coverage, offer ~18 months of continuation at employee cost plus ~2% admin. Wrong notice process can mean $110/day penalties per person. ACA employer mandate: At 50+ full-time employees, affordable minimum essential coverage or penalties ($2,970 per FT employee/year on recent figures). Most EOR entities already clear that threshold; confirm ACA handling in the MSA.
State paid leave is the multi-state trap. California pairs paid family leave and SDI. New York runs PFL (~12 weeks at ~67% of average weekly wage) plus short-term disability. Washington, Massachusetts, Connecticut, and Oregon each run their own PFML-style programs. You do not need a 50-state manual on day one. You do need the EOR to map leave and wage rules for every state where someone actually works, including remote employees who moved without telling payroll.
Competitive floor for skilled hires: medical, dental, vision, 401(k), and 2–4 weeks PTO. EORs bundle these so foreign employers are not negotiating group health from scratch.
Work Visas and Immigration
Many EOR hires are US persons or existing visa holders. Relocation sponsorship is slow and expensive.
| Visa/Permit Type | Who It’s For | Duration | Processing Time |
|---|---|---|---|
| H-1B | Specialty occupations (bachelor’s minimum) | 3 years, up to 6 | Lottery in March, start October; premium ~15 business days |
| L-1A / L-1B | Intra-company managers or specialized knowledge | Up to 7 / 5 years | ~2–6 months; premium ~15 business days |
| O-1 | Extraordinary ability | Up to 3 years | ~2–4 months; premium available |
| TN (USMCA) | Canadian/Mexican professionals in treaty roles | Up to 3 years | Canadians often at port; Mexicans ~1–3 weeks |
EORs can petition as employer of record, but USCIS scrutinizes staffing-like relationships on H-1B. Lottery selection rates often sit near ~25–30%. L-1 usually fails in pure EOR setups because it needs a qualifying corporate relationship between foreign and US entities. Prevailing wage can set salary floors above your plan in SF or NYC. Legal fees commonly run ~$5,000–$15,000 per petition plus USCIS fees. Confirm immigration ownership before you sell a start date.
Choosing an EOR for United States
Provider fees, state coverage depth, and benefits packaging change frequently. See the ranked shortlist: Best EOR for United States. If you already have a US entity and only need co-employment help, read EOR vs PEO before you buy the wrong product.
Termination Rules
At-will employment is the default in 49 states (Montana is the post-probation exception). Either party can end employment without notice unless a contract says otherwise.
At-will does not allow: Discrimination (Title VII, ADEA, ADA, and related laws), retaliation for protected activity, or public-policy violations. Those claims have no “six-month free pass” and uncapped damages in many forums.
State overlays (focus states, not all 50): California adds daily overtime after 8 hours, meal/rest break penalties, AB 5 classification risk, stricter mini-WARN thresholds, and immediate final pay on termination. New York lowers WARN thresholds vs federal and runs aggressive wage-theft enforcement; NYC adds scheduling rules. Massachusetts requires earned sick accrual and runs state PFML via payroll contributions. If your first three US hires sit in CA/NY/MA, buy an EOR that already operates those regimes daily.
Severance: Not federally required. Market practice is ~1–2 weeks per year, usually traded for a release. ADEA releases for 40+ employees need ~21 days to consider (~45 in group layoffs) and a 7-day revocation window.
WARN: Federal WARN covers employers with 100+ FT employees for mass layoffs/plant closings (60 days’ notice). State mini-WARN laws (California, New York, New Jersey, others) lower headcount triggers. Budget final wages, accrued PTO where state law treats it as wages (California), COBRA admin, and any negotiated severance. Clean individual exits often cost 0–4 weeks’ pay unless you fund a release package.
Frequently Asked Questions
Do I need an EOR or a PEO in the United States?
Use an EOR when you have no US entity (or will not put the hire on your entity). The EOR is the legal employer; you direct the work. Use a PEO when you already have a US entity and want co-employment for benefits and payroll sharing. Buying PEO without an entity fails. Buying EOR when you already run multi-state payroll on your own EIN can be overkill. Decision framework: EOR vs PEO.
How do I hire across multiple states without becoming a 50-state expert?
Pick the states where people will actually work, then require the EOR to confirm registration, UI, workers’ comp class codes, sick leave, and final-pay rules for those states only. Remote employees who relocate create new nexus overnight. Put a written relocation-notice clause in the handbook and reconcile state tax profiles quarterly. Depth matters most in CA, NY, MA, WA, and other PFML states, not in memorizing every city minimum wage on day one.
Is severance required when we let someone go at-will?
No federal mandate. Many employers still offer 1–2 weeks per year for a signed release, especially for tenured or senior roles. Skipping a release can be cheaper short-term and more expensive if a discrimination or wage claim follows. In California, unused vacation that has accrued is wages and must be paid out.
Can an EOR sponsor H-1B for our US hire?
Sometimes, if the EOR can prove a bona fide employer-employee relationship and pay prevailing wage. Lottery odds and RFEs make this a poor plan for “hire by next quarter” needs. Prefer candidates who already hold work authorization, or budget 12+ months and legal fees. L-1 is usually the wrong tool for pure EOR arrangements.
When should we form our own US entity instead of EOR?
When you have durable US headcount, want equity plan administration on your own entity, or need corporate banking and sales contracts in the US parent’s name. Formation is fast relative to Europe; multi-state payroll and benefits are the ongoing cost. Many teams stay on EOR through ~10–20 employees, then migrate once HR ops capacity exists. Compare providers on the before you migrate.
Sources
Related Decision Pages
- EOR vs PEO : Entity vs co-employment decision
- Rippling Review : US payroll depth and platform fit
- Deel Review : Multi-state EOR coverage
- Remote Review : Owned-entity model and IP handling
- Pebl Review : Immigration-heavy US scenarios
- Compare EOR providers
- Hiring your first international employee
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