Employer of Record (EOR) in the United States: How to Hire, What It Costs, and How to Stay Compliant

An Employer of Record (EOR) in the US lets a foreign company hire American employees legally across all 50 states without setting up a local entity. The EOR becomes the legal employer — running payroll, withholding federal and state taxes, and managing benefits and compliance — while you keep operational control. Mandatory employer payroll taxes are relatively low (about 10%), but health insurance and benefits push the real cost of a US hire to roughly 120% of salary, and rules vary sharply from state to state.

The US offers one of the world’s largest and most dynamic labour markets, known for innovation and a deep talent pool. The complexity lies in its layered system — federal law plus 50 different state regimes — so an EOR is the fastest, most compliant way to hire without building multi-state infrastructure yourself.

Key benefits of hiring in the US through an EOR

• Hire employees across all 50 states without a local entity
• Compliance with federal and state labour, tax, and employment laws
• Simplified payroll, tax withholding, and multi-state reporting
• Fast market entry and flexible scaling
• Reduced administrative burden and HR risk

Why choose an EOR in the US?

An EOR acts as the legal employer for your staff while you direct their daily work. It is ideal for hiring across multiple states, testing the market, or bringing on a key individual quickly — without registering as an employer in each state and running your own US payroll, unemployment, and workers’ compensation.

How much does it cost to employ someone in the US in 2026?

Mandatory employer taxes are modest — 7.65% FICA (Social Security and Medicare), federal unemployment (FUTA, effectively 0.6%), state unemployment (SUTA, varies), and workers’ compensation — together roughly 10% of pay. The larger real-world cost is health insurance, which employers with 50+ staff must offer and which most others provide to compete. The example below uses $6,000/month gross with typical single-coverage health benefits.

The United States at a glance

Employment framework

Employment contracts & at-will employment

The US follows at-will employment: either party can end the relationship at any time, with or without cause, as long as the reason is not discriminatory or otherwise unlawful. Most hires are documented with an offer letter covering job title, salary and pay frequency, benefits, working hours and location, confidentiality and IP, and termination conditions. Contracts are usually permanent (indefinite); fixed-term or project-based arrangements are less common.

Probation period

Probationary periods are typically 60–90 days, used to assess suitability — though under at-will rules, employment can end at any time regardless.

Working hours & overtime

The standard week is 40 hours. Under the Fair Labor Standards Act (FLSA), non-exempt employees must receive 1.5× pay for hours over 40 in a week; some states (e.g. California) also require daily overtime beyond 8 or 12 hours. Whether an employee is exempt depends on salary and duties tests — the operative federal salary floor is currently $684/week ($35,568/year) after a 2024 increase was struck down, though several states set higher thresholds.

Minimum wage (2026)

The federal minimum wage is $7.25/hour and has not changed since 2009. However, 30 states plus Washington, D.C. set higher rates — the effective minimum ranges up to around $17.95/hour — and 19 states raised their minimums on 1 January 2026. Federal contractors have a separate minimum of $17.75. Because most workers are covered by a higher state or city rate, the applicable floor must be checked per location.

Payroll & taxation

Federal income tax 2026

Federal income tax is progressive across seven brackets — 10, 12, 22, 24, 32, 35, and 37% — made permanent by the 2025 tax legislation (the “One Big Beautiful Bill Act”). The 2026 standard deduction is $16,100 (single) and $32,200 (married filing jointly). State income tax is separate and ranges from 0% (in nine states) to about 13.3%.

Payroll taxes & contributions

Employers and employees each pay FICA: Social Security at 6.2% on wages up to $184,500 (2026) and Medicare at 1.45% with no cap; employees also pay an additional 0.9% Medicare on wages over $200,000. Employers separately pay federal unemployment tax (FUTA, 6.0% on the first $7,000 but effectively 0.6% after state credit) and state unemployment tax (SUTA, which varies by state and experience rating), plus workers’ compensation. Payroll is filed with the IRS and state authorities.

Employee benefits & leave

• Health insurance: employers with 50+ full-time-equivalent staff must offer coverage under the Affordable Care Act, and most smaller employers provide it to attract talent. This is the single largest benefit cost.
• Retirement: 401(k) plans are common, often with employer matching (not legally required federally).
• Workers’ compensation: required in almost every state for work-related injury and illness.
• Unemployment & disability insurance: funded through employer taxes; some states also mandate short-term disability.
• Family & medical leave: the federal FMLA gives eligible employees up to 12 weeks of unpaid, job-protected leave (employers with 50+ staff). A growing number of states (California, New York, New Jersey, Washington and others) run their own paid family-leave programs.
• Paid time off: not required by federal law — most employers voluntarily grant 10–20 paid days combining vacation and sick leave. Paid sick leave is mandatory only in certain states and cities (typically accruing 1 hour per 30–40 hours worked).
• Public holidays: 10 federal holidays are typically observed, though private employers are not required to pay for them.

Termination & severance

Under at-will employment, either party may end the relationship at any time without notice, provided the reason is not discriminatory or retaliatory. Severance pay is not required by law but may be offered voluntarily or set out in an agreement. For large-scale layoffs, the federal WARN Act requires 60 days’ advance notice (employers with 100+ employees), and some states have stricter “mini-WARN” rules. An EOR handles final pay, documentation, and benefits termination in line with each state’s requirements.

Work permits & immigration

Foreign nationals need valid work authorisation. Common categories include the H-1B (specialty occupations, subject to an annual cap and lottery), L-1 (intra-company transfers), O-1 (extraordinary ability), TN (Canadian and Mexican professionals under USMCA), the EB-1/EB-2/EB-3 employment-based green cards, and the E-2 investor visa. Petitions are adjudicated by USCIS, with processing times from a few weeks to several months (see the H-1B fee note above).

NDA & IP rights

NDAs are enforceable where reasonable in scope and duration. Non-compete clauses vary sharply by state — banned in California and several others, and restricted elsewhere. Intellectual property created during employment generally belongs to the employer unless agreed otherwise in writing.

What changed for 2026

• Higher Social Security wage base: the cap rose to $184,500 (from $176,100), so more of higher salaries is subject to the 6.2% tax.
• Tax cuts made permanent: the 2025 “One Big Beautiful Bill Act” locked in the 10–37% bracket structure; the 2026 standard deduction is $16,100 (single).
• $100,000 H-1B fee: a new supplemental fee on certain overseas H-1B hires is being collected pending litigation, alongside a wage-weighted lottery.
• State minimum-wage rises: 19 states increased their minimum wage on 1 January 2026, widening the gap above the $7.25 federal floor.
• Overtime threshold in flux: the federal exempt salary level remains $35,568/year after the 2024 increase was vacated, but litigation and several higher state thresholds continue.

Frequently asked questions