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United States at a glance for global employers
The US is not one employment market. It is 50 overlapping ones. Federal law sets the floor, and states build on top of it, sometimes dramatically.
Essential US employment facts for your hiring decision
Three features of US employment law catch international employers off guard more than any others.
First, at-will employment. In 49 states, either party can end the employment relationship at any time, for any legal reason, without statutory notice. Montana is the only exception, where employees gain additional protections after a probationary period. At-will does not mean consequence-free termination, but it does mean the legal framework is fundamentally different from most of Europe and Latin America.
Second, no federal paid leave mandate. The US has no national requirement for paid vacation, paid sick leave, or paid parental leave. The Family and Medical Leave Act (FMLA) provides up to 12 weeks of unpaid, job-protected leave for qualifying employees, but "unpaid" is the operative word. Several states, including California, New York, and New Jersey, have their own paid family leave programs, which means your obligations depend entirely on where your employee lives.
Third, state-level wage variation. The federal minimum wage is $7.25/hour, but California, New York, and Washington State all require $16/hour or more. If you are hiring across multiple states, you need a system that tracks the applicable minimum for each employee's location, not a single national figure.
What hiring in the US looks like for you
The compliance picture changes the moment you decide where your hire lives. State of residence determines payroll registrations, workers' compensation carrier, minimum wage floor, and in some cases paid leave obligations.
Imagine you just hired a product manager in California
You have found the right candidate in San Francisco. Without an EOR, you would need a California registered entity, a California payroll tax account, a state workers' compensation policy, and ACA-compliant benefits within 90 days of hire. California is one of the most compliance-intensive states in the country, with daily overtime rules, mandatory meal and rest breaks, strict expense reimbursement requirements, and some of the most aggressive enforcement of worker classification standards anywhere in the US.
With Oyster's EOR, the employment agreement is ready in hours, payroll starts on your hire date, and California-specific requirements are already built in. You direct the work. We handle the legal infrastructure. California's complexity does not cost you extra time or extra risk.
What is an EOR and how does it work
An employer of record solves a straightforward problem: you want to employ someone in a country or state where you do not have a registered entity.
How an EOR becomes the legal employer for your US hire
An employer of record in the US is a company that takes on all legal employer obligations under federal and state law on behalf of a client business. The structure is a tri-party arrangement: the EOR (Oyster) is the legal employer on paper, you direct the day-to-day work of your team member, and your team member does the job. The EOR handles contracts, payroll, tax withholding, benefits administration, and HR compliance. You retain full operational control.
This distinction matters legally. The EOR's name appears on the employment agreement and the W-2. That means the EOR carries the employer-side liability for payroll taxes, workers' compensation, and employment law compliance. You get the talent without the entity overhead.
EOR versus setting up your own US entity
Setting up your own US entity is the right answer eventually, but it is rarely the right answer immediately. Entity setup requires state incorporation, a registered agent, state payroll tax accounts, a workers' compensation policy, benefits administration, ongoing tax filings, and legal counsel in each state where employees reside. The minimum timeline to reach full compliance is 4 to 8 weeks, and that assumes no complications.
An EOR eliminates all of that. You can have a compliant US employee in as little as 48 hours. For teams under roughly 100 US employees, or for companies testing the US market before committing to a permanent structure, EOR is almost always the faster and more cost-effective path. The alternative, setting up your own entity, carries ongoing legal, accounting, and HR costs that often exceed EOR fees until you reach meaningful scale.
Why use an EOR to hire in the United States specifically
The US is uniquely complex for global employers because compliance is not a federal question, it is a 50-state question. Each state has its own wage laws, workers' compensation rules, paid sick leave mandates (where applicable), unemployment insurance rates, and tax withholding requirements. A hire in Texas looks nothing like a hire in California from a compliance standpoint, even though both are US employees.
Beyond state variation, the US has two classification risks that carry serious financial exposure. The first is exempt versus non-exempt status under the Fair Labor Standards Act (FLSA), which determines overtime eligibility. Getting this wrong means back pay liability. The second is employee versus independent contractor classification, where the tests vary by jurisdiction and purpose. An EOR makes your team members employees, which eliminates contractor misclassification risk entirely. It also handles at-will employment language, which needs to appear correctly in every employment agreement to be enforceable. An EOR makes US hiring a people decision, not a legal project.
Is it legal to use an EOR in the United States
Yes, EOR arrangements are fully legal in the US. There is no federal statute prohibiting co-employment arrangements, and the EOR model is legally compliant under both federal and state employment law. The EOR takes on all legal employer obligations, which is distinct from misclassification, where a company treats an employee as a contractor to avoid those obligations. In a properly structured EOR arrangement, the EOR is the legal employer, the obligations are met, and the worker receives full employment protections. Oyster uses legally reviewed employment agreements for every US hire to ensure the arrangement is structured correctly from day one.
US labor laws your EOR handles for you
US employment law is layered. Federal law sets minimums, states add requirements on top, and cities sometimes add more. Here is what that means in practice for each major area of employment.
Employment contracts and at-will employment in the US
There is no federal requirement for a written employment contract in the US, but best practice is to document terms in an offer letter or employment agreement. At-will employment means either party can terminate the relationship at any time for any legal reason. No statutory notice is required at the federal level. Montana is the only state that does not follow at-will employment after a probationary period.
Oyster's employment agreement template covers role, compensation, at-will language (required in all states except Montana), remote work schedule, and a Confidentiality and IP Agreement. Probationary periods are not common in the US because they can impose additional obligations on employers, and Oyster's agreements are structured accordingly. The goal is a contract that protects both parties without creating unintended legal exposure.
Payroll taxes and employer contributions in the US
Employers must withhold federal income tax, state income tax where applicable, Social Security at 6.2% on wages up to $160,200, and Medicare at 1.45% with no cap. Withholding is based on the employee's W-4, and nine states have no state income tax. Employers match both Social Security and Medicare contributions, bringing the total FICA employer share to 7.65%. Most states require additional contributions to state unemployment insurance and, in some states, state disability insurance funds.
Employees complete a W-4 at hire, and employers provide W-2s annually. The standard payroll cycle is semi-monthly, with payments around the 15th and the last day of the month. Oyster's payroll cut-off for new team members is the 15th of each month for semi-monthly cycles. Off-cycle payments are available when required by law at an additional cost.
Working hours, overtime, and exempt vs non-exempt
The standard US workweek is 40 hours. Under the FLSA, non-exempt employees must receive overtime pay at 1.5 times their regular rate for hours over 40 per week. Exempt employees are not entitled to overtime. This includes those classified as executive, administrative, professional, computer, or outside sales roles, who must earn at least $684 per week federally ($35,568 annually). Some states, including California, New York, and Washington, have higher thresholds.
Oyster determines exempt versus non-exempt status for each hire and structures the contract accordingly. This determination is final and not eligible for customer exception requests. Non-exempt employees require time tracking, and Oyster has specific policies covering this. Misclassification of exempt status is one of the most common US labor law errors, and the financial exposure from back overtime pay can be significant.
Employee benefits required or expected in the United States
There is no universal healthcare in the US. The Affordable Care Act applies to employers with 50 or more full-time equivalent employees. Those employers must offer ACA-compliant health coverage or pay a shared responsibility tax. Oyster offers four health plan tiers (Essential, Competitive I, Competitive II, and Best in Class) across national and remote-location plan options. Employer-sponsored health plans typically cover 50 to 70% of medical expenses, with employees contributing the remainder through HMO or PPO structures.
Workers' compensation is state-mandated and covers work-related injuries. Oyster automatically enrolls team members in a 401(k) plan with a 3% fixed employer contribution from date of hire, regardless of the team member's own contributions. Short-term disability insurance (provided by 93% of US employers) and long-term disability insurance (provided by 99%) are also included in Oyster's US benefit package. These are not legally required at the federal level, but they are market standard, and candidates expect them.
Leave and time off entitlements in the US
There is no federal right to paid vacation or paid sick leave. No federal law mandates paid parental leave.
Under FMLA, eligible employees may take up to 12 weeks of unpaid, job-protected leave per year. Eligibility requires 12 months of employment, 1,250 hours worked in the past year, and a worksite with 50 or more employees within 75 miles.
Qualifying reasons include childbirth, serious health conditions, and family caregiving.
Over half of US companies voluntarily offer paid maternity leave (53%) and 44% offer paid paternity leave. Several states, including California, New York, New Jersey, and Rhode Island, have their own paid family leave programs that exceed federal minimums. Oyster's employment agreement sets PTO at whatever the customer specifies, with PTO accruing up to a 1.5x cap. There are 11 federal public holidays. For international employers accustomed to statutory paid leave, the US framework requires a deliberate benefits strategy to remain competitive.
Severance pay and termination rules in the US
There is no legal requirement to provide severance pay in the US. Employment is at-will, meaning termination can occur at any time for any legal reason without statutory notice at the federal level. The WARN Act requires 60 days' written notice for mass layoffs at a single site. This applies to employers with 100 or more employees dismissing 50 or more workers. Some states have stricter WARN requirements: New York requires 90 days for 25 or more dismissals.
Employers commonly offer one to two weeks' pay per year of service in exchange for a signed release of claims. Age protections apply: employees 40 and older have at least 21 days to review a separation agreement and 7 days to revoke. Workers are entitled to COBRA continuation health coverage for 18 months after termination. Final pay rules vary by state, with California requiring payment at the time of termination for involuntary dismissals. These details matter, and getting them wrong creates liability.
Worker classification and misclassification risks
One of the highest-risk areas in US employment law is correctly classifying workers as employees versus independent contractors. The test varies by jurisdiction and purpose: federal income tax uses a common-law test, while the FLSA uses an economic realities test. The more control the employer has over the worker, the more likely the worker is an employee. Misclassification exposes you to back taxes, penalties, and retroactive benefits obligations that can reach years into the past.
Oyster's EOR model makes your team members employees, eliminating contractor misclassification risk entirely. If you want to engage independent contractors, Oyster offers a separate contractor management product, but the EOR model and the contractor model are distinct arrangements. This is a keyword gap that competitors rarely address directly: US contractor misclassification risk is real, it is expensive, and an EOR is the cleanest way to avoid it.
The US workforce and what employers can expect
The US has the world's largest pool of tech talent, but compensation expectations and market norms vary significantly by location and sector.
Salary expectations and talent landscape in the US
Compensation benchmarks vary widely across states and cities. A software engineer in San Francisco earns significantly more than one in rural Tennessee, reflecting cost of living differences that are more pronounced in the US than in most other countries. The Equal Pay Act mandates equal pay for equal work regardless of gender, and many states and cities now require pay transparency in job postings, including California, New York, Colorado, and Washington.
Pay is typically set by the customer, and Oyster confirms compliance with state minimum wage and exempt salary thresholds for each hire. Semi-monthly payroll is standard. Bonuses and allowances are not legally required but are common in professional roles. Oyster's compensation benchmarking tools help you set market-rate salaries that attract top US talent without overpaying or creating equity issues across your team (which, in a pay-transparent environment, matters more than ever).
How to choose your US EOR provider
Not all EOR providers understand the US the same way. The US has more state-level employment law variation than most other EOR markets, which means provider depth of coverage is a critical evaluation criterion.
Five questions to ask any US EOR before you sign
The right questions separate commodity EOR providers from specialists who can actually protect you.
Can you handle the state where my employee lives? Ask specifically about California, New York, and Washington. These three states have the most complex requirements, and hesitation from a provider is your answer.
What is your support model and who is my point of contact? Shared support queues work until you have a compliance question at 4pm on a Friday. Oyster offers dedicated contacts, not a rotating help desk.
How do you handle misclassification audits? If a state agency questions the employment relationship, you want a provider with in-house compliance specialists, not a referral to outside counsel.
What benefits do you offer and what tiers are available? Oyster offers four health plan tiers and includes a 401(k) with a 3% employer contribution from day one. Ask any provider to show you the same level of specificity.
What are your termination fees and off-cycle payment processes? Oyster charges no termination fees. Some providers do. Verify before you sign.
How Oyster keeps your US hires compliant
Compliance is the primary reason buyers choose an EOR over independent hiring. Here is what Oyster builds into every US engagement.
Legal protections Oyster builds into every US hire
Oyster's US employment agreements are legally reviewed and include at-will language (required in all states except Montana), remote work schedules, and a Confidentiality and IP Agreement. Oyster handles Form I-9 verification via Equifax's network, which must be completed within 3 business days of hire. Oyster manages workplace notice requirements covering ACA, COBRA, and FMLA, along with state-specific handbook acknowledgments and anti-discrimination training.
Oyster's in-house compliance specialists monitor US federal and state law changes so your agreements and payroll stay current without you tracking every update. And as the only B Corp-certified EOR, Oyster's US hires are supported by an employer built around ethical employment standards, not just legal minimums.
Transparent pricing for US EOR services
EOR pricing is one of the most common questions buyers ask, and one of the areas where providers are least transparent.
What you pay and what is included with Oyster
EOR pricing typically covers employment agreement generation, payroll processing, tax withholding, benefits administration, and compliance monitoring. Oyster's flat pricing model means you pay one predictable amount per employee per month. There are no termination fees, no setup fees, and no add-on costs for state registrations. Benefits costs (health plan premiums) are separate and depend on the tier you choose and the plan your employee selects.
The alternative, setting up your own US entity, carries ongoing legal, accounting, and HR costs that often exceed EOR fees for teams under 100 people. Flat, transparent pricing with no hidden fees is not a marketing claim. It is how Oyster is structured.
Start hiring in the US within 48 hours
Speed matters when you have found the right candidate. Oyster can onboard a new US employee in as little as 48 hours from contract signature to active payroll.
How Oyster onboards your US employee step by step
- You invite your new hire through the Oyster platform
- Oyster generates the employment agreement for their state of residence
- Your hire signs and completes I-9 verification via Equifax
- Benefits enrollment opens (30 days to select)
- Payroll starts on the first eligible payroll date
Total time from invite to active: as little as 48 hours. Oyster's payroll cut-off for new team members is the 15th of each month for semi-monthly cycles. Off-cycle payments are available when required by law at an additional cost. US onboarding also requires Form I-9 completion within 3 business days of start date and state new-hire reporting, both of which Oyster handles automatically.
How Oyster compares to other US EOR providers
The US EOR market has several major players. Here is how Oyster compares to the two most commonly evaluated alternatives.
Oyster versus Deel for hiring in the United States
Both Oyster and Deel offer US EOR services. For US hiring, Oyster uses in-house compliance specialists for employment agreements, while Deel uses a mix of owned entities and partners across markets. Oyster is the only B Corp-certified EOR. Oyster charges no termination fees; buyers should verify Deel's termination terms before signing. Oyster's support model includes dedicated contacts. Deel is more product-led, with support often reliant on AI and chatbots, and ownership that can feel less direct and shared between different teams.
Oyster versus Remote for hiring in the United States
Remote offers more self-serve support, often via email or chat, with access to experts priced as an add-on; Oyster assigns a dedicated contact to each customer. Oyster charges no termination fees, while Remote customers have reported surprise fees and add-ons for access to experts. Oyster is the only B Corp-certified EOR. Both cover the full US market at the federal level; Oyster's compliance engine monitors state-level changes in all 50 states. For teams prioritizing human support and ethical employer practices, Oyster is the clearer choice.
Hire your first US employee with Oyster today
The US is the world's largest talent market. The compliance complexity is real, but it is manageable with the right partner.
Book a demo and hire your US team in days
With Oyster, you get a compliant US employment agreement, full payroll setup, ACA-compliant health benefits, and a 401(k) plan with a 3% employer contribution. Ongoing state-level compliance monitoring is included, with no entity required, no termination fees, and no hidden costs.
Book a Demo to see how it works.
A few things to know about hiring in the U.S.
If you’re unfamiliar with U.S. hiring practices, here’s what to consider when hiring workers based there:
At-will employment
Unlike most other countries, employment in the U.S. is at-will. This means employers can terminate employees at any time for any lawful reason, without notice or severance (except in Montana). Similarly, employees in the U.S. can leave a company at any time without notice. However, giving two weeks' notice is customary. Formal probationary periods for new employees are uncommon because employers can terminate employees at any time.
Employment contracts
Employment contracts are uncommon for employees in the U.S., except for executive positions. Most employers outline job details in an offer letter to prospective employees.
Working hours
The typical workweek in the U.S. is 40 hours. Federal law requires that eligible employees receive 1.5 times their regular pay rate for any hours worked beyond 40 per week. Some states also require overtime pay for employees who work more than eight or 12 hours (depending on the state) in a single workday. In certain cases, employees may be entitled to more than 1.5 times their regular pay after crossing specific overtime thresholds under state law.
Paid leave
U.S. law does not require employers to offer employees paid time off (PTO) for vacations or holidays. However, most companies provide 10–20 days of PTO per year. Similarly, employers in the U.S. are not required to offer paid sick leave. However, under the Family and Medical Leave Act (FMLA), eligible employees must receive up to 12 weeks of unpaid, job-protected leave each year. Additional leave entitlements may apply under state or local laws.
State-by-state differences
Key employment laws vary by state, such as overtime rules, minimum wage requirements, and paid leave policies. For example, employment laws in Arizona differ from those in New York. Many counties and municipalities have their own employment laws as well. It’s important to consider federal, state, and local laws when determining your obligations as an employer of U.S. workers.
Taxes and the overall cost of hiring also vary by state—explore Oyster’s state-specific hiring calculators to learn more:
- Cost of hiring in Arizona
- Cost of hiring in Arkansas
- Cost of hiring in Colorado
- Cost of hiring in Connecticut
- Cost of hiring in Florida
- Cost of hiring in Georgia
- Cost of hiring in Illinois
- Cost of hiring in Indiana
- Cost of hiring in Kansas
- Cost of hiring in Louisiana
- Cost of hiring in Maryland
- Cost of hiring in Massachusetts
- Cost of hiring in Michigan
- Cost of hiring in Mississippi
- Cost of hiring in Missouri
- Cost of hiring in Montana
- Cost of hiring in Nevada
- Cost of hiring in New Jersey
- Cost of hiring in New Mexico
- Cost of hiring in New York
- Cost of hiring in North Carolina
- Cost of hiring in Ohio
- Cost of hiring in Oklahoma
- Cost of hiring in Oregon
- Cost of hiring in Pennsylvania
- Cost of hiring in South Carolina
- Cost of hiring in South Dakota
- Cost of hiring in Tennessee
- Cost of hiring in Texas
- Cost of hiring in Utah
- Cost of hiring in Virginia
- Cost of hiring in Washington
- Cost of hiring in Wisconsin
About Oyster
Oyster is a global employment platform designed to enable visionary HR leaders to find, engage, pay, manage, develop, and take care of a thriving distributed workforce. Oyster lets growing companies give valued international team members the experience they deserve, without the usual headaches and expense.
Oyster enables hiring anywhere in the world—with reliable, compliant payroll, and great local benefits and perks.
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