As the strongest economy in the world, spanning six time zones, the USA’s free enterprise system encourages invention and innovation. With a GDP of over $20 trillion and 327 million population, this is the largest consumer market in the world.
The USA is a magnet for attracting the cream of international talent, with a fast-moving economy and ‘level playing field’ for business that demands companies move swiftly and positively if they want to extend their international reach into this lucrative market.
As a Professional Employer Organization (PEO) and Recruitment Process Organization (RPO), Bradford Jacobs source top-level staff for any industry or sector, from inside the US or abroad, to find the perfect fit for every role. This is backed by Employer of Record (EOR) services to handle all aspects of staff administration and compliance with USA’s complicated employment, tax and registration laws that can vary and even conflict between federal and state regulations.
Challenges when expanding into the USA
Federal laws and state laws. This combination comprises a major challenge, particularly regarding employment, payroll and tax. Federal and state laws can dovetail, overlap, or even contradict. And in such a huge landmass – the third largest in the world – comprising 50 states with an individual approach to many issues, even choosing the best location for your business is another major challenge.
The USA market place is sophisticated, mature and intensely competitive. Incoming corporations will be challenged to live up to these standards, while also matching superior management, sales and marketing expertise.
Strategic tax planning is another key challenge facing companies planning opening a subsidiary, taking into account federal and state taxes and how they relate to taxes in the home territory.
Companies looking for ‘off the peg’ payroll solutions in the jurisdiction they are moving into. Plunging into a new territory without ‘on the ground’ advice from local representatives who can offer perspectives on housing, schools and neighbourhoods is another potential challenge. Migrating staff into the US also requires expert knowledge of the relevant work permits and visas.
A ‘business as usual’ philosophy may work in your home territory, but will likely be entirely different to ‘business as usual’ in the USA. A do-it-yourself approach to the above will not provide a quick launch for your company’s move into the US market.
The answer? These complexities make it strongly advisable to consult with global recruitment specialists Bradford Jacobs on the alternatives to opening a subsidiary. Our Professional Employer Organization (PEO) international recruitment network will onboard the ideal candidates who will be under your operational control. Then our Employer of Record (EOR) services relieve the administrative headaches, freeing incoming companies to concentrate on their territorial expansion with across the board support. The employees are all yours – the paperwork is all ours.
The Recruitment and Hiring Process in the USA
Foreign companies opening a subsidiary must follow a strict procedure to register and onboard employees.
Form I-9: First, ensure the employee has Form I-9, allowing them to legally work. This gives the employer their contact details and Social Security number and must be completed on or before their first day and presented with ID and employment authorization no later than the third day.
Form W-4: All employers must complete Form W-4 informing their employee how much tax is withheld from their salary and must be completed before receiving the first salary payment.
Labor Agency: New employees’ details must be forwarded to the relevant state’s Labor Agency, who oversee any issues between employees and employer and handle unemployment benefits.
Workers’ Compensation Insurance: It is mandatory in most states for employers to hold compensation insurance, covering employees becoming ill or injured due to work.
Payroll: After hiring employees companies must set up a payroll system, internally, through accountants or a professional payroll outsourcing company such as Bradford Jacobs.
Outsourcing payroll is the cost-effective, time-saving and simple method of promptly paying employees, filing tax returns, fulfilling social insurance requirements and ensuring compliance with the many layers of US federal and state laws. Bradford Jacobs provide total solutions to remove the hazards and penalties that would apply for failing to act legally on all the above.
Legal Checks you can make on USA Employers
There are no mandatory requirements for pre-employment checks in the USA, though certain regulated sectors may require fingerprinting, background checks, motor vehicle history and drug/alcohol screening.
Permissible checks, inevitably, vary state to state. Checks may include:
- References and educational qualifications
- Criminal background or credit checks may be performed according to federal, state or local laws and some restrict such checks until after a conditional job offer
- Medical, drug and alcohol screening are generally permissible after a conditional job offer
How do Companies hire Employees in the USA?
Companies must deal with federal and state laws and local regulations. Another unique feature surrounds contracts. Fixed-term, full-time or part-time, temporary and seasonal contracts are familiar concepts. But ‘at-will’ contracts mean either employer or employee can terminate with or without notice or cause, as long as termination is not discriminatory or retaliatory.
These issues must be dealt with before companies then move into actually hiring staff. The next stage of the onboarding employees involves:
- Ensuring Form I-9 is in place allowing employees to work in the US
- Completing Form W-4 so the employer knows how much withholding tax to remit for federal tax
- Registering the employee with the relevant state’s Labor Agency
- Putting worker’s compensation insurance in place
- Deciding on payroll method to pay employees, pay withholding tax to the Internal Revenue Service (IRS) and the state’s tax agency if applicable and file tax returns. This process will operate more efficiently by employing payroll specialists such as Bradford Jacobs
- Employers must have an Employer Identification Number (EIN) before remitting forms and withheld taxes to the Internal Revenue Service (IRS). Employers can apply for an EIN online using the IRS website. Employers must also register to pay federal taxes electronically through the Electronic Federal Tax Payment System
Outsourcing the recruitment and hiring process through Bradford Jacobs’ Professional Employer Organization (PEO) network will give you the security that our in-depth know-how can deal with all these potential problems. Trusting our Employer of Record (EOR) services to handle every aspect of payroll compliance will guarantee a trouble-free move into your new territory.
Basic Facts on Hiring in the USA
- Employers must ensure correct documentation, including Form I-9, is in place confirming the employee’s legal right to work in the US
- Employers must complete Form W-4 relating to how much withholding tax they deduct for federal taxes
- Employees must be registered with the relevant state’s Labor Agency
- Employer must have worker’s compensation insurance; requirements can vary between states
- Employer must establish payroll system to pay employees, pay taxes to the Internal Revenue Service, the state’s tax authority if applicable and file tax returns
The sensible alternative is for employers to outsource their payroll to an Employer of Record (EOR) such as Bradford Jacobs. We have the experience and expertise to handle every aspect of the process, relieving employers of the headaches associated with complying with employment and tax regulations. Other basic steps on recruiting and hiring staff in the USA include:
- If the employer is not operating under ‘employment at-will’ provisions, employees should receive a comprehensive contract detailing their role, location and any bonuses, benefits, commission, termination and severance payments
- In addition to paying federal tax, some states apply personal income tax. In addition there are corporate, sales, property and dividend taxes
- US employers withhold tax and social insurance contributions from employees’ salaries and pay the IRS on their behalf
- The federal tax year runs from January 1 and returns must be filed by April 15 of the following year. Individual states have varying deadlines. Some municipal authorities also impose taxes
- For federal taxes, employers file a quarterly Form 941 to reconcile all wages and taxes paid. An annual Form 940 is filed to report and pay federal unemployment taxes due
- When placing employees on their payroll, employers must withhold taxes on vacation allowances, bonuses, commissions and fringe benefits the same as salaries
USA Work Culture
American workplace culture a blend of teamwork and individual responsibility and many define themselves by their work. It is common for higher level management to draw on their university and college contacts for business.
US office environments can be intensely competitive, with workers striving to be the ‘employer of the year’ or in line for other recognition. Hierarchical office structures can nevertheless be quite open in the relationship between employees and managers. Here are a few insights into US work culture:
- Greetings: Firm handshakes, friendly smiles – first names are often used even at initial meetings, with a little small talk
- Dress code: Varies with location and sector. Business attire tends to be formal for men and women, but whereas Wall Street banks expect suits, California’s Silicon Valley techies will not be out of place in shorts and t-shirts. If unsure, err on the side of caution
- Meetings follow defined agendas and, because of the ‘time is money’ philosophy, negotiations can quickly come to a conclusion. Communication should be direct, straightforward and to the point
- Conflicts tend to be dealt with directly and openly
- Business cards can be swapped but not everyone uses them in the digital age
- Handshakes are largely symbolic – signing the contract is the vital closer
- Business is often conducted over breakfast, lunch or dinner – the golf course is another popular venue
- The hierarchical structure is clear from the number of acronyms attached to positions in a company. From vice-presidents downwards there are SVPs, EVPs, AVPs and EDs before you reach the more usual MDs. It’s as well to get them in the right order
- During meetings, switch off the mobile and don’t send emails
What Employment Laws exist in the USA?
Employment laws, administered by the Department of Labor (DoL), vary at federal, state and sector levels, including:
- Civil Rights Laws protect employees against discrimination based on race, color, religion, gender, nationality, pregnancy, age and disability and are enforced at federal level
- Family and medical leave laws allow employees up to 12 weeks’ unpaid leave over 12 months with conditions depending on length of service
- Workers’ compensation laws cover work-related injury or illness.
- Workplace safety laws protect employees from hazards and repetitive injuries and infectious diseases, among many other conditions
How do you onboard USA Employees?
Migrating existing employees or recruiting new staff in-country are the first stages for companies planning to onboard employees. The most efficient and effective method is through a Professional Employer Organization (PEO) global recruitment company such as Bradford Jacobs. Our international recruitment specialists manage every stage of the process from finding the employee to organizing work permits and visas.
Locating and onboarding staff inside the US avoids visa issues, but your ideal new staff member must still be integrated into the company. Making them a happy, motivated and effective team member is an essential process. Human resources is a key element of the Employer of Record (EOR) services at Bradford Jacobs.
We devise specific onboarding plans to integrate your new employee into the company, with guides, information, resources and support to help them understand local customs, culture and business etiquette wherever they are from and moving to. Our consultants ensure the process begins before ‘Day 1’ with ongoing support lasting well beyond the first week.
What are the benefits of outsourcing hiring for the USA?
A major benefit of outsourcing recruitment is that it streamlines international expansion by opening potential new markets efficiently, speedily and cost-effectively. Optimizing the benefits of outsourcing allows companies to focus on planning and managing their new venture.
Advantages for the parent company include:
- • A wide-ranging talent search undertaken by a Professional Employer Organization (PEO) with reduced recruitment costs
- Control over capital expenditure, without the need to establish premises for a subsidiary or branch
- Mitigate risks with an ‘easy in, easy out’ operation while exploring new markets
- Quickly launch new projects
- Focus on core business
- improve flexibility
- Scale your global workforce to fit expansion blueprint
The next stage is to outsource payroll, by utilizing Bradford Jacobs’ Employer of Record (EOR) expertise to deal with the demanding requirements of employment laws and regulations at all levels. Bradford Jacobs’ global recruiting and EOR services take care of selection, onboarding, payroll, compliance and providing ongoing support.
Do what you do best – outsource the rest.
Working with recruitment agencies in the USA
The US recruiting and staffing industry is worth over $174 billion with more than 20,000 companies operating out of twice that number of offices. The industry has developed in line with the growth of remote working against regular nine-to-five employment.
Recruitment or staffing companies serve almost every industry or sector. In 2018 the American Staffing Association gave the following figures on candidate industry placement:
- 37% Industrial
- 28% Office, clerical and administrative
- 13% Professional and managerial
- 13% Engineering, information technology and scientific
- 9% Health care
- There is also a federal employment site, USA Jobs, which is open to US citizens and nationals and some non-US nationals who can apply for ‘open to the public’ jobs.
Employment Contracts in the USA
Under US laws there are no minimum requirements for notice requirements with “at will” contracts, and parties can negotiate terms as long as they do not contravene any laws.
Fixed Term/Open-ended Contracts: No laws govern these.
Probation/Trial Periods: These usually depend on company policy and typically provide for an evaluation after 90 days.
Notice Periods: US law does not provide for notice periods, except where a contract provides for one or in the case of mass dismissals governed by the Worker Adjustment and Retraining Notification Act (WARN Act).
USA Minimum Wage
The federal minimum wage is $7.25 per hour but can vary between states, with the higher rate applying.
Probation Periods in the USA
Probation, trial or introductory periods are not covered by federal law, but many employers use them to evaluate new staff members, generally for 90 days.
United States employment is generally ‘at will’, which means the employer or employee can terminate the relationship when they like and without reason, as long as it does not violate an individual’s rights on such as race, gender, age, pregnancy or religion.
Employers must ensure policies and procedures are carefully worded and probationers understand that during and after this trial period the employment remains ‘at will’.
All states have the same ‘at will’ policy except for Montana where employees, following a probationary period, can only have their employment terminated for good cause. If no time period has been agreed, then the default probationary period is six months from the date of hiring.
Overtime in the USA
United States employees generally work more hours annually compared to the rest of the world, working longer shifts and taking fewer vacations. Except for a few occupations (such as transportation) there is no federal restriction on hours worked.
However, the Fair Labor Standards Act (FLSA) states that work exceeding 40 hours in a 168-hour period is overtime and employees must be paid not less than 50% above their regular pay. Work on Saturdays, Sundays, holidays, or regular days of rest is not automatically overtime unless overtime is worked on such days.
Notice Periods in the USA
Most US workers, unless they have an employment contract or collective bargaining agreement, are employed ‘at will’ and therefore employers do not need to give notice and a worker can resign without notice. Parties are free to negotiate as long as none of the provisions violate any federal, state or local laws, rules or regulations.
The only time a US employer cannot terminate a contract is if it constitutes a violation of the employees’ rights; for instance due to an employee’s race, gender, age, pregnancy or religion.
Redundancy, Termination and Severance in the USA
Employers are not required to provide individual employees with notice of termination, unless affected by plant closures and mass redundancies where other regulations apply.
USA Pension Plans
Employers may offer their employees a pension provision through a number of different mechanisms. The most common forms are private pension funds which are defined benefit (DB), defined contribution (DC), or hybrid. There also exist many state and local government employee retirement funds, which are largely DB, sponsored by states and municipalities.
Public Holidays in the USA
There are no national holidays as in other countries as the United States Congress only has constitutional authority to create holidays for federal institutions, although most ‘Federal Holidays’ are also observed as state holidays. There are 10 federal holidays recognized by the US Government, when all non-essential government employees are off work and most government offices are closed, including post offices.
For details of ‘State Holidays’ and how they impact on private and public employers follow the link https://www.employmentlawhandbook.com/leave-laws/federal-state-holidays/
New Year’s Day January 1
Martin Luther King Jr. Birthday Third Monday in January
Washington’s Birthday Third Monday in February (President’s Day)
Memorial Day Last Monday in May
Independence Day July 4
Labor Day First Monday in September
Columbus Day Second Monday in October
Veterans’ Day November 11
Thanksgiving Day Fourth Thursday in November
Christmas Day December 25
*Every four years Inauguration Day is celebrated on January 20 and is counted as a federal holiday.
Working Hours in the USA
The weekly average of 40 hours usually comprises an eight-hour shift over five days with at least eight hours’ rest in between. Exceeding 40 hours in a 168-hour period is considered overtime.
A flexible work schedule is an alternative to the traditional 9 to 5, 40-hour working week. Alternative arrangements such as flexible schedules are a matter of agreement between employer and employee.
Lunch or coffee breaks are not required under federal law and are between the employer and employee, usually 20 minutes or less and paid as working time. However, if breaks are agreed then they are considered part of working hours when calculating any overtime. Unauthorized breaks are not counted. Some states have their own regulations for breaks or meal periods.
Sick Leave in the USA
Federally, there is no mandatory paid sick leave, though many states have their own laws. Around 25% of the workforce have no paid sick leave in either public or private sectors.
Around 68% of workers who have access to paid leave receive a fixed number of sick days based on length of service. For instance, after one year of service 22% of workers are allowed fewer than five days per year. Agreements vary between states.
The US has no national health service; if someone becomes ill treatment must be paid for. However, the government does fund two health plans: Medicare (insurance program for those who have paid into it) and Medicaid, assistance program for the low paid.
Vacation and Holiday Leave in the USA
Although there is no statutory need, most US employers offer paid holidays of around 10 days annually. Allowances can increase with length of service.
Maternity Leave in the USA
The Family and Medical Leave Act (FMLA) ensures that mothers can take up to 12 weeks for pregnancy and child rearing, but only 60% are eligible.
The law ensures that a worker’s job remains in place and their health insurance continues. There is no obligation that time off is paid. Eligible employees must have completed a minimum 1,250 hours work in the previous year. For more information: https://www.dol.gov/agencies/whd/fmla
Generally, paid maternity leave is treated as a form of benefit. Extending this benefit to workers is a decision made by each business, and therefore terms vary from employer to employer.
See the following link for state by state information https://www.paycor.com/resource-center/maternity-leave-laws-by-state
Work with Bradford Jacobs’ Global Payroll and Recruitment Services in the USA
Bradford Jacobs’ Employer of Record (EOR) and Professional Employer Organization (PEO) specialist teams put into action their market-leading understanding of hiring and recruiting in the USA when consulting with international companies on their global expansion plans. Negotiating the complex federal and state labor laws and complying with payroll, tax and registration issues demands expert guidance. Every aspect of hiring and recruiting in the US falls within our expertise and experience. Remove the risks, costs and uncertainty of establishing a subsidiary in the United States by outsourcing your recruitment and payroll through Bradford Jacobs. Contact us now – we have the solutions.