Employer of Record USA: A Detailed Guide on Employer of Record 2025

Expanding your business into the U.S. can be challenging due to complex federal and state compliance requirements. With varied labor laws, tax rules, and benefits regulations across states, staying compliant is critical. Engaging an Employer of Record in USA simplifies this process. An EOR becomes the legal employer on your behalf, managing payroll, compliance, benefits, and onboarding. This allows your company to hire U.S. talent without setting up a legal entity, reducing both time and risk. By partnering with a U.S. EOR, you ensure legal compliance, avoid costly penalties, and free up internal resources for core business operations.

Table of Content

• Overview about USA
• What is an Employer of Record in USA
• Employer of Record vs Legal Entity
• What are the Use Cases for Availing of Services Under Employer of Record USA?
• Laws and Compliance Best Practices to Hire Employees in the USA
• Best EOR Companies in USA
• What are EOR Services in USA?
• How to Hire Employees Through an EOR USA Partner
• Taxes in USA
• Total Compensation Calculator for Hiring Employees in USA
• Key Considerations While Hiring Employees Through EOR in USA
• Employee Benefits in USA
• Terminations in USA
• Key Steps Involved in Terminating Employees in the USA
• How to Choose the Right EOR USA Services?
• Benefits of Working With an Employer of Record (EOR) Service Provider in USA
• Visa Types in USA
• Risks or Drawbacks of EOR USA
• How Does Employer of Record USA (EOR) Differ From HR Software?
• How Much Does It Cost to Avail Services Under EOR USA?
• Conclusion: EOR USA
• FAQs

Overview about USA

The United States, with its world-leading economy and diverse workforce, is a prime destination for companies aiming to scale globally. The U.S. offers strong intellectual property rights, a robust infrastructure, and a pro-business environment that attracts global investment. However, navigating employment in the U.S. can be complex due to varying state-wise labor laws, tax regulations, and employee benefit requirements. Employer of Record (EOR) services help companies overcome these challenges efficiently by ensuring compliance with both federal and state laws while enabling quick market entry.

What is an Employer of Record in USA

An Employer of Record (EOR) in the USA is a third-party organization that becomes the official employer of a company’s workforce in the country. The EOR handles hiring, onboarding, payroll, benefits administration, and compliance with U.S. federal and state employment laws. This model allows companies to employ talent in the U.S. without needing to incorporate a domestic legal entity, reducing time-to-hire and risk.

Employer of Record vs Legal Entity

Criteria	Legal Entity	Employer of Record (EOR)
Definition	A legal entity is a business registered in the U.S. that can directly hire employees and is responsible for all legal and operational functions.	An Employer of Record (EOR) is a third-party provider that legally employs U.S.-based workers on behalf of a foreign company.
Ownership	Owned by the parent company or shareholders.	The EOR is the legal employer, but the client retains full operational oversight.
Employment Contracts	Employment agreements are managed and signed directly by the legal entity.	The EOR signs contracts with employees, aligning with U.S. laws and ensuring compliance.
Compliance Responsibility	The company must manage compliance with both federal and state laws, including tax, labor, and benefits regulations.	The EOR assumes full responsibility for compliance with federal and state employment laws.
Payroll & Benefits Management	Payroll, taxes, and benefits are processed internally or through a U.S.-based provider.	The EOR administers all payroll and benefits, using established U.S. systems and providers.
Tax Liabilities	The company is liable for all payroll taxes, unemployment insurance, and filings at both federal and state levels.	The EOR assumes tax liabilities and ensures timely filings in compliance with U.S. laws.
Time to Set Up	Incorporating a U.S. entity can take weeks or months, involving federal and state registrations.	EOR setup is quick—often within days—using existing infrastructure and local expertise.
Employee Onboarding	Onboarding is handled internally, requiring compliance expertise and operational processes tailored to each state.	The EOR manages onboarding end-to-end, including employment eligibility verification and benefits enrollment.
Employment Law Expertise	In-house or external legal counsel is required to navigate complex multi-state employment regulations.	The EOR provides in-depth expertise in U.S. employment law, covering all 50 states.
Risk & Liability	The company bears full employment-related legal risks and penalties for non-compliance.	The EOR assumes legal responsibility and shields the client from employment-related liabilities.
Control Over Workforce	Full control over employee management, hiring, firing, and HR policies.	Operational control is retained by the client; the EOR handles HR, payroll, and compliance.
Flexibility	Less agile, with fixed structures and higher legal and operational overhead when expanding across multiple states.	Highly flexible, enabling instant workforce deployment across U.S. states without complex legal setup.
Cost & Investment	Requires substantial investment in legal, HR, accounting, and tax setup plus ongoing administrative costs.	Lower upfront costs since the EOR already has the necessary frameworks in place.
Global Expansion	Must set up a legal entity for each country/state of operation, which is time-consuming and costly.	EOR enables seamless U.S. expansion without entity formation, while remaining fully compliant with local regulations.

Suggested Read: EOR- A Detailed Guide on Employer of Record 2024

What are the Use Cases for Availing of Services Under Employer of Record USA?

1. Business Expansion Without a Legal Entity

Expanding into the U.S. market can be challenging due to its decentralized legal framework, where employment laws vary by state. An Employer of Record (EOR) enables companies to begin hiring and operating in the U.S. without setting up a formal entity. The EOR becomes the legal employer, handling state-specific taxes, payroll, and compliance so the client can concentrate on business growth.

This is especially beneficial for:

• Startups exploring the U.S. market.
  
• Global firms running short-term or pilot projects.
  
• Companies seeking a fast, low-risk route to U.S. market entry.
  

2. Offering Full-time Employment to Contractors or Freelancers

Many businesses begin by engaging U.S. talent as freelancers or independent contractors. However, converting them into full-time employees can be legally tricky due to worker classification rules. An EOR simplifies this transition by offering compliant full-time employment contracts and administering statutory benefits while avoiding misclassification risks.

3. Recruiting Talent Across U.S. States

The U.S. offers a highly skilled and diverse workforce across sectors such as tech, healthcare, and finance. Hiring across multiple states requires localized compliance. An EOR ensures adherence to state-specific employment laws, payroll tax rates, and benefit mandates, allowing businesses to build distributed teams without establishing physical offices or local HR departments.

Laws and Compliance Best Practices to Hire Employees in the USA

Hiring in the U.S. involves navigating both federal and state-specific employment regulations. Compliance failures can result in lawsuits or government penalties. Here are essential legal areas and best practices to follow:

• Understanding U.S. Labor Laws: Get familiar with laws such as the Fair Labor Standards Act (FLSA), Family and Medical Leave Act (FMLA), and Equal Employment Opportunity (EEO) laws that govern wages, leave, and non-discrimination.
  
• Taxation in the USA: Employers must comply with federal tax (e.g., FICA, FUTA), and state/local taxes. An EOR handles filings, wage withholding, and remittance across jurisdictions.
  
• Employee Benefits in the USA: Employees expect benefits like healthcare, 401(k) retirement plans, paid time off (PTO), and disability insurance. EORs offer compliant and competitive benefits packages.
  
• Contract Structuring: Employment agreements must outline at-will terms, benefits, NDAs, and arbitration clauses aligned with U.S. law.
  

Best practices include using automated compliance systems, consulting labor law experts, and leveraging an EOR for comprehensive compliance coverage.

Best EOR Companies in USA

Choosing a reliable U.S.-based EOR is essential to ensuring a smooth employment experience. Top EORs provide end-to-end HR, legal, and payroll support with state-wise compliance expertise. Explore the Top EOR Companies in the USA to find partners that best suit your organization’s size, industry, and goals.

What are EOR Services in USA?

Payroll Management

Payroll in the U.S. must account for various federal and state-level deductions, Social Security, Medicare, and unemployment insurance. EORs calculate wages, manage direct deposits, issue W-2 forms, and handle withholdings and tax submissions. This eliminates administrative burdens and ensures error-free payroll cycles.

Employee Onboarding

Onboarding in the U.S. requires I-9 verification, background checks, benefits enrollment, and setting up state tax accounts. EORs streamline the entire process, providing compliant contracts, processing new-hire paperwork, and ensuring employees are integrated swiftly and lawfully.

HR Administration

HR Administration services from EORs cover employee records management, performance documentation, PTO tracking, and disciplinary process handling. Many EORs provide Self-Service Employee Portals, enabling U.S. employees to access HR features independently, enhancing transparency and efficiency.

Equipment Procurement and Management

For remote or hybrid teams, EORs can facilitate the delivery and maintenance of laptops, ergonomic tools, or specialty devices. They also track asset recovery during offboarding, making equipment logistics seamless for international employers.

EOR USA Services

Compliance and Legal Support

EORs ensure compliance with federal laws like FLSA, OSHA, and ADA, along with state-specific mandates. They handle mandatory reporting and updates, significantly reducing legal exposure for foreign businesses unfamiliar with the U.S. regulatory system.

Taxation and Statutory Compliance

EORs manage all tax requirements including income tax withholdings, payroll filings, and unemployment insurance. They also ensure that employee contributions and employer obligations are accurate across different U.S. states, avoiding IRS penalties.

Employee Insurance and Benefits Administration

Top U.S. talent expects comprehensive benefit packages. EORs provide group health insurance, dental/vision coverage, life insurance, and 401(k) retirement plans. These offerings help attract and retain quality employees, while maintaining legal and market standards.

Risk Management and Insurance

EORs provide Workers’ Compensation, Employment Practices Liability Insurance (EPLI), and manage risk related to wrongful termination, discrimination, or compliance audits. This ensures the employer is protected legally and financially.

Self-Serve Employee Portal

U.S.-based EORs offer intuitive employee portals where workers can download pay stubs, manage benefits, check PTO balances, and submit HR requests. This self-service model boosts engagement while reducing manual HR intervention.

Employee Tax Optimization

EORs assist employees in maximizing post-tax income by optimizing withholdings, pre-tax benefits, and tax-saving retirement options. This enhances employee satisfaction while ensuring alignment with IRS rules.

Employee Retirement

Managing retirement plans like 401(k) and other deferred compensation schemes is a complex task. EORs handle plan enrollment, contributions, and compliance with ERISA regulations, securing long-term benefits for employees.

Offboarding & Recovery

EORs handle end-of-employment processes such as final wage disbursement, COBRA benefits communication, and retrieval of company equipment. They also manage exit interviews and compliance documentation, ensuring a smooth and legal offboarding experience.

How to Hire Employees Through an EOR USA Partner

Hiring employees through an EOR USA Partner provides international businesses with a streamlined and compliant approach to establishing a presence in the U.S. without the need for a domestic legal entity. This model simplifies the process of hiring across multiple states and ensures full alignment with U.S. labor, tax, and benefit regulations.

EOR USA Partner

An EOR USA Partner is a third-party organization that serves as the legal employer for your U.S.-based workforce. The EOR manages employment-related responsibilities including federal and state-specific compliance, payroll, benefits administration, and tax reporting. By leveraging a U.S. EOR partner, your company can focus on sourcing top talent, managing day-to-day operations, and achieving business growth—without the burden of navigating America’s intricate regulatory landscape. The EOR also acts as a legal buffer, minimizing compliance risks, and shielding you from costly litigation or penalties.

Select the Best EOR Service Provider in USA for Your Business

Choosing the right EOR partner in the U.S. is critical to ensuring operational and legal success. The best EOR provider should demonstrate deep expertise in U.S. employment law across federal and state levels, coupled with a solid understanding of local business practices. Evaluate potential partners based on their ability to manage multistate payroll, tax withholdings, benefits like 401(k) and healthcare, and provide HR support. Ensure the provider offers scalable and customizable services that fit your hiring plans and organizational needs.

Hire & Onboard Your New Employees

Once the EOR USA partner is selected, hiring can begin immediately. Your EOR will support recruitment efforts by posting job ads, screening candidates, and handling employment documentation. After a candidate is selected, the EOR will manage the onboarding process, issuing legally compliant employment contracts, verifying eligibility to work (Form I-9), and enrolling new hires in benefits. This ensures a seamless and compliant onboarding experience tailored to U.S. legal standards.

Remote EOR Employee Onboarding Checklist for USA

Onboarding Step	Responsibility	Details
Before Offer Letter
Collect Candidate Information	Company	Gather name, contact info, SSN or equivalent ID, previous employment details, and education credentials.
After Offer Letter
Draft Employment Contract	EOR	Create compliant offer letters outlining at-will terms, compensation, and benefits under U.S. labor law.
Background Verification	EOR	Run background checks with employee consent, including criminal, education, and employment history screening.
Welcome Email	Company & EOR	Company initiates a cultural welcome; EOR provides legal onboarding documentation.
On Joining Day
Employment Documentation	EOR	Ensure completion of I-9 form, W-4 form, and other required documents.
Payroll Setup	EOR	Set up employee in the payroll system, establish state tax accounts, and assign benefits.
Policy Briefing	Company	Explain PTO policy, code of conduct, work expectations, and internal processes.
Account Setup	EOR	Coordinate bank account and benefits portal setup.
Introduction to Systems	EOR	Provide access to payroll, HRIS, and compliance platforms.
IT Setup	Company/EOR	Ensure delivery and configuration of required hardware, software, and communication tools.
Mentor Assignment	Company	Assign a team member to support new hire integration into company culture and team dynamics.
Post-Onboarding
Payroll Explanation	EOR	Walk the employee through paystub components: gross salary, deductions (e.g., FICA), and net pay.
Ongoing Support	Company	Conduct regular 1:1s, performance check-ins, and gather feedback.
HR Operations	EOR	Continue payroll, benefits, compliance filings, and day-to-day employee support.

Processing Payroll

U.S. payroll processing is intricate due to the multiple federal and state-level deductions, tax brackets, and compliance deadlines. An EOR partner simplifies this by ensuring accurate, timely, and lawful compensation while handling all mandatory tax filings and deductions.

Key components of payroll management in the USA include:

• Base Salary & Allowances: The employee’s gross salary, bonuses, overtime (where applicable), and stipends are processed per employment agreements.
  
• Statutory Deductions: EORs calculate and withhold Social Security, Medicare (FICA), and unemployment taxes (FUTA/SUTA). Contributions vary by location and wage base.
  
• Federal & State Income Tax: EORs determine accurate withholding based on IRS W-4 forms and applicable state forms, submitting taxes to the correct agencies.
  
• Other Benefits: Health insurance premiums, 401(k) contributions, commuter benefits, and flexible spending accounts (FSA/HSA) are also factored in during payroll runs.
  

Stages of the payroll process in the U.S.:

1. Payroll Calculation: EORs compute gross wages, applicable overtime, pre-tax and post-tax deductions, and benefits contributions.
   
2. Tax Compliance: EORs ensure accurate federal and state tax withholdings and submit employer contributions. They also file returns such as Form 941 and W-2 reporting.
   
3. Salary Disbursement: Net pay is processed through direct deposit or pay card. EORs guarantee timely disbursement aligned with federal/state wage laws and pay frequency standards.

Suggested Read: Hire Employees in India Through EOR

Taxes in USA

Taxes are a critical component of the U.S. financial and employment system. Employees in the United States are subject to various federal, state, and local taxes. The primary taxes affecting employee compensation include federal income tax, FICA taxes (Social Security and Medicare), state income tax, and unemployment taxes. Understanding these obligations is essential for both financial planning and legal compliance in the U.S.

Federal Income Tax Brackets (2025)

Federal income tax in the U.S. is progressive, meaning higher income levels are taxed at higher rates. The IRS adjusts tax brackets annually.

Income Bracket (Single Filer)	Tax Rate
Up to $11,000	10%
$11,001 – $44,725	12%
$44,726 – $95,375	22%
$95,376 – $182,100	24%
$182,101 – $231,250	32%
$231,251 – $578,125	35%
Over $578,125	37%

Note: Rates and thresholds vary based on filing status (Single, Married Filing Jointly, Head of Household).

Tax Due Dates in USA

• Annual Tax Returns: Individuals must file by April 15th each year (or the next business day if it falls on a weekend).
  
• Quarterly Estimated Taxes: Required for self-employed individuals or those with significant non-wage income. Due on April 15, June 15, September 15, and January 15.
  
• Payroll Tax Deposits: Employers must deposit withheld taxes either semi-weekly or monthly, depending on IRS requirements.
  
• W-2 Form Filing: Employers must issue W-2s to employees and file with the SSA by January 31st.

U.S. tax thresholds vary based on filing status and income level. For example:

• Individuals earning under $13,850 (single) or $27,700 (married jointly) may owe no federal income tax after applying the standard deduction.
  
• Businesses must adhere to corporate tax rates, with the federal corporate income tax set at a flat 21% as of 2025.
  
• Additional taxes may apply depending on self-employment, investment income, or alternative minimum tax (AMT) conditions.
  

FICA Taxes (Social Security and Medicare)

FICA taxes are mandatory payroll deductions split between employer and employee.

Tax Type	Rate (2025)	Wage Limit
Social Security	6.2% (employee)	Up to $168,600
Medicare	1.45% (employee)	No wage limit
Additional Medicare	0.9% (over $200,000)	Paid only by employee
Employer Match	6.2% (SS) + 1.45% (Medicare)	Same as employee contribution

Employers are responsible for withholding and remitting both employee and employer portions.

State and Local Income Tax

Most U.S. states impose an additional income tax, with rates and brackets varying widely. A few states (e.g., Florida, Texas, Washington) have no state income tax. Local taxes may also apply in cities like New York or San Francisco. Employers must register with the relevant state agencies and remit withheld taxes on behalf of employees.

Deductions and Exemptions

The U.S. tax code offers several deductions and credits that reduce taxable income:

• Standard Deduction: Automatically applied unless the taxpayer itemizes.
  
• Pre-tax Benefits: Contributions to 401(k) plans, Health Savings Accounts (HSAs), and Flexible Spending Accounts (FSAs) are excluded from taxable income.
  
• Child Tax Credit: Up to $2,000 per child under 17 (subject to income limits).
  
• Education Credits: The Lifetime Learning Credit and American Opportunity Credit help reduce education-related tax burdens.
  

Employers offering pre-tax benefits and tax planning support help employees maximize savings and reduce liability.

401(k) Retirement Plans

401(k) plans are tax-advantaged retirement savings options sponsored by employers. Employees can contribute up to $23,000 annually (or $30,500 with catch-up contributions if over 50). Contributions reduce taxable income. Employers often provide matching contributions, which are also tax-deferred. These plans are subject to ERISA and IRS nondiscrimination rules.

Unemployment Taxes

Employers must pay Federal Unemployment Tax Act (FUTA) and State Unemployment Tax Act (SUTA) contributions:

• FUTA: 6.0% on the first $7,000 of wages (with credits reducing effective rate to 0.6%).
  
• SUTA: Varies by state and company history; paid entirely by the employer.
  

These taxes fund unemployment benefits and are separate from employee payroll deductions.

Workers’ Compensation and Disability Insurance

These are state-mandated employer contributions that cover workplace injuries or short-term disabilities. Rules and rates vary by state. Some states (e.g., California, New Jersey) also require employee contributions for state disability insurance.

Asanify’s Support For Employee Tax Optimization

While Asanify is India-based, if offering U.S. EOR services, Asanify ensures employee tax optimization by aligning with federal and state tax codes. This includes:

• Automated W-4 guidance for accurate withholding.
  
• Administering 401(k), HSA, and FSA programs to lower taxable income.
  
• Educating employees on pre-tax benefits and eligible deductions.
  
• Ensuring compliance with IRS, SSA, and state tax agencies via timely filings and audits.
  

With Asanify, global employers can confidently navigate U.S. payroll tax complexity, and employees can maximize take-home pay while staying compliant.

Total Compensation Calculator for Hiring Employees in USA

When hiring employees in the United States, understanding the Total Compensation is essential for both employers and employees. Total Compensation refers to the full value of what a company spends on an employee annually, including base salary, bonuses, benefits, and employer-paid taxes. To simplify this, businesses can use a Total Compensation Calculator to break down all elements of a U.S.-based employee’s pay package. This includes gross pay, 401(k) contributions, insurance premiums, and the employer’s share of Social Security and Medicare. Such tools help both employers and employees visualize take-home pay after deductions and better understand the value of benefits. For more details on salary structuring and how to calculate total compensation accurately, check out our blog!

Key Considerations While Hiring Employees Through EOR in USA

Employee Agreements in USA

Employee agreements are a foundational aspect of employment in the U.S. An EOR partner ensures that all contracts adhere to federal and state employment laws. These agreements typically include job roles, compensation details, at-will employment clauses, confidentiality and non-compete terms, and termination procedures. While many U.S. roles operate under “at-will” conditions, employment contracts must still comply with wage laws, anti-discrimination statutes, and labor standards. A professionally drafted agreement protects both the employer and employee and clarifies expectations and legal rights.

Work Hours and Probation

In the U.S., a standard workweek is 40 hours (8 hours per day over 5 days), with overtime governed by the Fair Labor Standards Act (FLSA). Most salaried roles are exempt from overtime, but hourly roles must be compensated at 1.5x the regular pay for overtime hours. Probation periods are not mandated by law but are commonly defined internally (often 90 days). EOR partners ensure clear documentation of such periods and guidance on performance evaluations or early terminations during the probation window.

Leave Policies

There is no federal law mandating paid leave in the U.S., but many states and employers provide paid time off (PTO), sick leave, and family leave. EOR providers help businesses develop compliant, state-aligned leave policies.

Leave Type	Description	Typical Duration
Paid Time Off (PTO)	Combined vacation, sick, and personal leave	10–25 days annually
Sick Leave	Paid leave for illness; mandatory in some states	3–7 days (state-dependent)
Family Leave (FMLA)	Unpaid leave for family or medical reasons (protected under FMLA)	Up to 12 weeks
Maternity Leave	Often covered under FMLA or short-term disability insurance	6–12 weeks (unpaid/partial)
Paternity Leave	Varies by employer/state law	Typically 1–6 weeks
Bereavement Leave	Leave due to the death of a family member	2–5 days
Jury Duty Leave	Protected unpaid leave to serve on a jury	As required by court
Military Leave	Leave for service members under USERRA	As required by orders

EORs help define leave policies in compliance with federal (FMLA, USERRA) and state-level leave laws like the California Paid Family Leave Act or New York Paid Sick Leave.

Types of Leave in the USA

• Paid Time Off (PTO): Combines vacation, sick, and personal leave. Offered as a lump sum or accrued monthly.
  
• Sick Leave: Mandatory in states like California, New York, and Washington; policies must meet minimum accrual rates.
  
• Maternity/Paternity Leave: FMLA provides up to 12 weeks of unpaid leave for eligible employees. Some states and employers offer paid parental leave.
  
• Bereavement Leave: Not federally required, but commonly provided for 2–5 days.
  
• Sabbatical Leave: Offered by select employers for long-term employees (typically unpaid or partially paid).
  
• Military Leave: Covered under USERRA, guaranteeing job protection for reservists or active service.
  

List of General Public Holidays in USA 2025

Date	Holiday	Category
1 January 2025	New Year’s Day	Federal Holiday
20 January 2025	Martin Luther King Jr. Day	Federal Holiday
17 February 2025	Presidents’ Day	Federal Holiday
27 May 2025	Memorial Day	Federal Holiday
4 July 2025	Independence Day	Federal Holiday
2 September 2025	Labor Day	Federal Holiday
14 October 2025	Columbus Day	Federal Holiday
11 November 2025	Veterans Day	Federal Holiday
28 November 2025	Thanksgiving Day	Federal Holiday
25 December 2025	Christmas Day	Federal Holiday

Note: Some states and companies also observe Juneteenth, Good Friday, or Election Day as holidays.

Gratuity Equivalent: 401(k) Retirement Plans

While the U.S. does not have a gratuity system, retirement planning is facilitated via employer-sponsored 401(k) plans. Employees can contribute up to $23,000 annually ($30,500 if age 50+). Employers may offer matching contributions to encourage participation. These plans are tax-advantaged and governed by ERISA, ensuring nondiscriminatory access and fiduciary oversight. EORs manage enrollments, payroll deductions, and plan compliance for eligible employees.

Termination Policies

Termination policies in the U.S. must comply with federal and state laws. Most employees are hired “at will,” allowing termination by either party at any time, with or without cause. However, EORs ensure:

• Termination is not discriminatory (per Title VII, ADA, ADEA).
  
• Final paychecks and accrued PTO are issued as per state deadlines.
  
• Severance, if offered, complies with written contracts or state WARN Acts.
  
• COBRA notifications are provided for continued health coverage.
  

EORs handle these steps while maintaining compliance and mitigating wrongful termination risks.

Bonus Payments in USA

Bonuses in the U.S. are performance-based and not legally mandated (except under contractual obligation). EORs manage:

• Discretionary Bonuses (end-of-year, team recognition).
  
• Non-Discretionary Bonuses (sales targets, KPIs).
  Bonuses must be included in regular rate of pay for overtime calculations under the FLSA. EORs ensure proper classification and tax treatment of all bonuses.
  

Health Insurance in USA

Health insurance is one of the most valued employee benefits in the U.S. While not federally mandated for small businesses, the Affordable Care Act (ACA) requires employers with 50+ full-time employees to provide Minimum Essential Coverage. EORs offer ACA-compliant group health plans covering:

• Medical, dental, and vision
  
• Mental health support
  
• HSA-compatible plans
  EORs also manage benefit enrollment, premium deductions, and HIPAA compliance, helping employers offer competitive and legally compliant insurance options.
  

Suggested Read: PEO vs EOR Differences- All That You Need to Know 

Employee Benefits in USA

Employee benefits are a vital part of total compensation in the United States, helping attract and retain top talent while promoting employee well-being. In the U.S., benefits typically fall into two categories: mandatory (statutory) benefits and voluntary (supplementary) benefits, many of which are facilitated by an EOR partner.

Statutory Benefits in USA

Statutory benefits are those required by federal and/or state law. These ensure a baseline of financial and job security for employees. Key statutory benefits include:

• Social Security and Medicare (FICA): Both employer and employee contribute to fund retirement and healthcare.
  
• Unemployment Insurance (UI): Employers pay federal and state-level unemployment taxes to provide income support during job loss.
  
• Workers’ Compensation Insurance: Covers medical and wage-loss expenses for employees injured on the job.
  
• Family and Medical Leave (FMLA): Guarantees up to 12 weeks of unpaid, job-protected leave for qualifying life events.
  

Supplementary Benefits in USA

Employers often go beyond statutory obligations by offering voluntary benefits that enhance job satisfaction and financial security:

• Health Insurance: Most full-time employees receive employer-sponsored health coverage, including medical, dental, and vision plans.
  
• Retirement Plans (401(k)): Employers offer tax-advantaged savings plans with optional matching contributions.
  
• Bonuses and Incentives: Many companies offer annual or performance-based bonuses tied to KPIs or profitability.
  
• Stock Options or RSUs: Offered particularly in tech and startup sectors to align employee incentives with company performance.
  

Asanify’s Flexible Benefits Plan for EOR Employees

If extending EOR support to the U.S., Asanify offers a Flexible Benefits Plan tailored to IRS regulations. This includes:

Flexible Benefit Component	IRS Code Section	Tax Treatment	Annual Limit (USD)
Pre-tax Health Insurance	Section 125 (Cafeteria Plan)	Excluded from income	Based on plan limits
Commuter Benefits	Section 132(f)	Pre-tax	$315/month transit/parking
Health Savings Account (HSA)	Section 223	Tax-deductible	$4,150 (individual), $8,300 (family)
Flexible Spending Account (FSA)	Section 125	Pre-tax	$3,200/year (health)
Dependent Care FSA	Section 129	Pre-tax	$5,000/year (per household)

These benefits help employees save thousands in annual taxes, while employers enhance retention without increasing salary costs.

Terminations in USA

Employment in the U.S. is generally “at-will,” meaning either party can terminate the relationship at any time. However, terminations must comply with federal anti-discrimination laws and state-specific regulations. EOR partners manage terminations carefully to ensure compliance, fairness, and risk mitigation.

Notice Periods in USA

Unlike India, notice periods are not mandated by law. Most roles are at-will, meaning no notice is legally required unless stated in an employment contract. However, employers may offer two weeks’ notice or pay in lieu, especially in senior or contractual roles. EORs ensure these terms are clearly defined in contracts and respected during separation.

Severance Pay in USA

There is no statutory requirement for severance pay in the U.S. However, many employers offer it as a goodwill gesture or per employment agreements. Typical severance includes:

• 1–2 weeks of pay per year of service
  
• Payment of unused vacation/PTO
  
• Continuation of health benefits via COBRA
  

EOR partners handle severance calculations, compliance with WARN Act (for large layoffs), and state-level rules.

Key Points:

• Legal Compliance: Terminations must not violate laws under Title VII, ADA, ADEA, or other federal/state protections.
  
• Documentation: Termination decisions must be supported by performance records, warnings, or strategic restructuring plans.
  
• Employment Contracts: Contracts may include severance clauses or protections under employment agreements.
  
• Employee Rights: Final paychecks, COBRA notifications, and PTO payouts must be issued within state-mandated timelines.
  

Types of Termination

• Termination for Cause: Dismissal due to misconduct (e.g., fraud, harassment). Requires documentation and possibly internal investigation.
  
• Termination Without Cause: Includes layoffs, budget cuts, or role eliminations. May involve severance and formal notice.
  
• Collective Termination: Governed by the WARN Act, requiring 60 days’ notice for mass layoffs at large employers.
  
• Voluntary Termination (Resignation): Employees typically provide two weeks’ notice. Employers conduct exit interviews and process final payments.
  

What are the Key Steps Involved in Terminating Employees in the USA?

1. Internal Review & Documentation
   Employers must document performance issues or business justification. EORs support review processes and gather legal counsel where needed.
   
2. Notice & Communication
   Though not required, formal notice is best practice. EORs help draft termination letters, schedule exit meetings, and clarify final compensation.
   
3. Final Paycheck & Benefits
   Employees receive:
   
   • Final wages (within state-specified deadlines)
     
   • PTO payout (if applicable)
     
   • COBRA health coverage notices
     
   • Severance (if agreed or customary)
     
4. Exit Interview & Offboarding
   EORs conduct structured offboarding, collect company assets, and revoke system access while maintaining professional closure.
   
5. Regulatory Filings & Recordkeeping
   Compliance with employment tax reporting, benefits termination, and legal retention of records is managed by the EOR.

Recommended Read: How to Hire in India Easily- 10 Key Considerations

How to Choose the Right EOR USA Services?

Expertise and Local Knowledge

When selecting an EOR USA partner, it’s critical to choose a provider with in-depth knowledge of U.S. federal and state employment laws. The provider should understand nuances such as at-will employment, multistate payroll compliance, healthcare mandates, tax regulations, and anti-discrimination laws. This ensures smooth operations and full legal compliance across jurisdictions.

Comprehensive Service Offerings

The right EOR USA service provider should offer end-to-end support, including payroll processing, benefits administration, tax compliance, employee onboarding, and termination management. A full-service EOR can manage all aspects of the employment lifecycle, freeing up your team to focus on strategic business goals.

Scalability and Flexibility

Whether you’re hiring one U.S.-based employee or building a distributed team across states, your EOR should be able to scale accordingly. A flexible partner will adapt to your business needs as you expand into different regions or adjust workforce size due to market demands.

Technology and Data Security

Modern EOR providers must offer robust tech platforms for payroll, HRIS, benefits, and compliance tracking. Ensure your EOR adheres to U.S. data privacy laws, such as HIPAA and CCPA, and maintains high standards for encrypting and managing employee data securely.

Compliance and Risk Management

An EOR’s primary value lies in minimizing legal risks. Choose a provider with a strong track record in navigating U.S. labor laws, IRS tax codes, ACA regulations, and state-specific rules. The right partner should also handle filings, audits, and updates as federal or state laws change.

Reputation and Client References

Assess the EOR’s credibility by reviewing client testimonials, independent ratings, and success stories. A trusted EOR will have a history of working with international firms and delivering compliant, efficient service for companies entering or scaling in the U.S.

Expertise in U.S. Employment Regulations

Your EOR should be well-versed in federal laws like FLSA, ADA, FMLA, ERISA, and OSHA, as well as state-level employment statutes. This ensures your company remains compliant while effectively managing payroll taxes, employee documentation, and benefits.

Service Offerings and Scalability

From new hire onboarding to offboarding and everything in between, your EOR USA provider should offer scalable services tailored to your operational needs. This includes support for health benefits, 401(k), commuter benefits, wage garnishments, and more.

Reputation and Client References

Look for providers with positive client reviews and documented success cases. This helps verify the EOR’s ability to manage U.S.-based teams efficiently and communicate effectively across time zones and regulatory environments.

Data Security and Privacy Compliance

Choose an EOR that complies with U.S. cybersecurity standards and federal data privacy laws. This includes secure payroll platforms, HIPAA compliance for healthcare data, and SOC 2 certifications for internal controls.

Transparent Pricing and Contractual Agreements

Ensure your EOR’s pricing is transparent and well-documented in service agreements. Contracts should outline scope, fee structures, service-level expectations, and termination clauses to avoid surprises or legal ambiguities.

Local Network and Support

Your EOR should have a strong U.S. presence, with relationships across state tax authorities, legal advisors, healthcare providers, and benefits brokers. Local expertise ensures quicker resolutions, better benefit customization, and efficient issue handling.

Benefits of Working With an Employer of Record (EOR) Service Provider in USA

Compliance and Legal Expertise

U.S. employment law varies not only at the federal level but also across states. An EOR ensures compliance with complex laws covering taxes, anti-discrimination, paid leave, and worker classification. This reduces legal exposure and ensures regulatory alignment across all hiring jurisdictions.

Time and Cost Efficiency

Avoiding the need to establish a U.S. legal entity saves significant time and money. Your EOR handles payroll taxes, insurance administration, and employee support. This allows your team to focus on core functions while reducing administrative overhead.

Swift Market Entry

EOR providers enable immediate hiring in the U.S. without waiting months to form a subsidiary. Whether you’re testing the market or scaling fast, an EOR allows rapid onboarding of talent without compliance risks.

Local HR Support

A U.S.-based EOR provides real-time HR support, assisting with onboarding, benefits enrollment, leave tracking, and compliance guidance. Their understanding of U.S. cultural and legal norms ensures seamless integration of global employees into American work environments.

Flexibility and Scalability

As your U.S. workforce grows or contracts, your EOR can scale operations accordingly. Whether entering new states, downsizing, or building regional teams, your EOR ensures consistent support and compliance across the board.

Risk Mitigation

From employee misclassification to wrongful termination suits, EORs assume liability for employment compliance. They help you avoid penalties related to FLSA violations, healthcare regulations, wage issues, and more.

Cost Efficiency

With an EOR handling payroll, HR, legal compliance, and benefits, you avoid hiring multiple internal experts or consultants. This reduces costs without compromising on quality or compliance.

Mitigating Cultural and Legal Barriers

An EOR USA partner helps bridge cultural and communication gaps between global teams and U.S. employees. They also ensure that your HR practices align with American business norms, improving engagement and retention.

Focus on Core Business Activities

By outsourcing employment management to an EOR, your internal team can stay focused on growth, sales, and innovation. The EOR handles the administrative heavy lifting, allowing you to operate leaner and more strategically.

Visa Types in USA

Asanify supports your global expansion by offering end-to-end assistance for obtaining work visas and employment authorization in the United States. Our experienced team ensures compliance with U.S. immigration laws, guiding you through document preparation, regulatory checks, and coordination with immigration authorities—so you can focus on growing your business with peace of mind.

If you prefer to handle the U.S. visa and work permit process independently, here’s a comprehensive guide:

Visa Application Process:

The visa process for foreign nationals seeking employment in the U.S. starts with a valid job offer from a U.S.-based company. Once the offer is in place, the sponsoring employer files a petition with the United States Citizenship and Immigration Services (USCIS). Upon petition approval, the candidate applies for a work visa (most commonly the H-1B visa) at the U.S. Embassy or Consulate in their home country.

Applicants must submit documents including the job offer letter, educational credentials, passport, labor condition approval (LCA), and proof of relevant experience. Once the visa is issued, the employee can enter the U.S. and commence work under the terms of the approved petition.

Work Permit (H-1B and Other Employment Visa) Requirements:

The H-1B visa is the most common U.S. employment visa for skilled foreign workers, typically issued for roles requiring specialized knowledge.

Key requirements include:

• A valid passport with sufficient validity.
  
• A confirmed job offer from a U.S. employer in a specialty occupation.
  
• An approved Form I-129 petition by the USCIS.
  
• Educational qualifications that match the position (generally a bachelor’s degree or higher in a related field).
  
• The employer must file an LCA (Labor Condition Application) with the Department of Labor to confirm that wage standards and working conditions will be upheld.
  

H-1B visas are usually granted for three years, extendable up to six years, and subject to an annual cap unless exempt. Other employment-based visa categories include:

• L-1 Visa – for intracompany transfers.
  
• O-1 Visa – for individuals with extraordinary ability.
  
• TN Visa – for Canadian and Mexican citizens under NAFTA/USMCA.
  
• E-2 Visa – for investors and employees of investor companies.
  

Foreign National Registration (Form I-94 and SSN):

Unlike India’s FRRO registration, the U.S. requires foreign employees to complete a few key registrations upon arrival:

• Form I-94: Issued at the port of entry, documenting legal status and duration of stay.
  
• Social Security Number (SSN): Foreign workers must apply for an SSN through the Social Security Administration for tax and employment purposes.
  
• Form I-9 Employment Eligibility Verification: Employers must verify the identity and work authorization of every new hire through Form I-9 and may participate in E-Verify.
  

Timely completion of these requirements is essential for compliance. Delays or errors in documentation can result in fines, visa revocation, or employment termination.

Useful Websites: 

• U.S. Citizenship and Immigration Services (USCIS): https://www.uscis.gov
• U.S. Department of State – Visa Servicesl: https://travel.state.gov/content/travel/en/us-visas.html
• U.S. Social Security Administration (SSA): https://www.ssa.gov/

Risks or Drawbacks of EOR USA

1. Limited Control

A key drawback of using an EOR in the U.S. is reduced direct control over HR administration. While your company retains operational management, the EOR is the legal employer and handles onboarding, payroll, compliance, and benefits. This separation may lead to challenges in aligning EOR-managed employees with your internal culture and performance standards.

2. Potential Cultural Differences

For foreign businesses, understanding American workplace norms—such as at-will employment, communication styles, and benefit expectations—can be challenging. Although EOR providers help bridge cultural and regulatory gaps, misalignment in expectations may affect team integration and employee engagement.

3. Cost

While EOR services eliminate the cost of incorporating a U.S. entity, they come with service fees that can be more expensive than directly hiring staff if you already have local operations. Companies should evaluate the ROI of EOR support versus building an internal HR and legal team.

4. Data Security and Confidentiality

An EOR in the U.S. will manage sensitive employee data like Social Security Numbers (SSNs), banking information, and health records. Companies must ensure the EOR has robust data protection systems, is SOC 2 compliant, and aligns with HIPAA and state privacy laws like CCPA.

5. Scalability Challenges

While EORs are built to scale, rapid hiring across multiple U.S. states may lead to coordination delays or inconsistent service quality. Businesses should confirm that the EOR can support multistate employment, local taxation, and benefits administration at scale.

6. Communication Challenges

Time zone differences or unclear escalation protocols can hinder collaboration. Effective communication between the client and the EOR account team is essential, especially when handling onboarding timelines, terminations, or compliance issues.

How Does Employer of Record USA (EOR) Differ From HR Software?

1. Employer of Record (EOR)

An EOR USA provider acts as the legal employer of your U.S.-based workforce. It manages tax filings, payroll, employment contracts, benefits administration, and compliance with federal and state labor laws.

Key responsibilities include:

• Employment eligibility (Form I-9, E-Verify)
  
• Multistate payroll tax and wage compliance
  
• Benefits enrollment (healthcare, 401(k), etc.)
  
• Terminations, COBRA compliance, and severance
  
• ACA, FLSA, and local leave law compliance
  

An EOR is ideal for companies entering the U.S. market without setting up an entity or for those managing remote workers across multiple states.

2. HR Software

HR software platforms are designed to automate internal HR functions but do not assume legal employer responsibility. They support:

• Employee data management
  
• PTO tracking and scheduling
  
• Performance and recruitment tools
  
• Time and attendance systems
  
• Basic payroll integration (not tax or benefits compliance)
  

Unlike an EOR, HR software does not handle labor law compliance, tax filings, or risk mitigation.

How Much Does It Cost to Avail Services Under EOR USA?

Scope of Services

Costs depend on whether the business requires basic payroll and compliance only, or a full-service package including benefits, recruiting support, and legal consulting. Premium services add to the total cost.

Employee Strength

Most EORs use a per-employee-per-month (PEPM) pricing model. Larger teams may benefit from volume discounts. Costs increase proportionally with team size and service complexity.

Complexity of Employment Regulations

Companies operating in regulated industries (e.g., healthcare, finance) or hiring across multiple states may face higher fees due to complex wage laws, licensing, or benefit compliance requirements.

Customization and Additional Services

EORs may charge additional fees for:

• Immigration sponsorship (e.g., H-1B support)
  
• 401(k) and HSA administration
  
• Equity and bonus management
  
• Legal consultation for sensitive HR cases
  

Technology Infrastructure

EORs with advanced HRIS systems, employee portals, payroll automation, and API integration may charge higher fees. However, this adds significant value in terms of accuracy, transparency, and scalability.

Pricing Models and Contract Terms

Pricing varies based on:

• PEPM fees: Typically range from $400 to $900+ depending on services
  
• Setup fees: One-time onboarding charges per employee or client
  
• Contract terms: Longer contracts may offer reduced pricing
  

Ensure the contract clearly outlines all fees, scope of service, and exit terms.

Conclusion: EOR USA

The Employer of Record (EOR) model in the USA provides a compliant, efficient, and scalable solution for businesses that want to hire employees without forming a legal entity. EOR providers manage everything from state tax registrations to HR compliance, allowing companies to quickly build a U.S. presence while avoiding legal complexity.

Whether you’re testing the U.S. market or managing a fully remote American workforce, an EOR offers a strategic advantage. By handling payroll, employment law, benefits, and compliance, the EOR enables you to focus on your core mission—driving business growth.

FAQs

Not to be considered as tax, legal, financial or HR advice. Regulations change over time so please consult a lawyer, accountant  or Labour Law  expert for specific guidance.