Employer of record (EOR) in the US: Benefits and how it works

Learn how an employer of record (EOR) in the U.S. works.

Golden Gate Bridge spanning over blue water on a clear day.

PUBLISHED ON

May 29, 2025

Oyster Team

The United States is among the most desirable hiring locations for global companies. With access to leading talent in technology, finance, professional services, and other key industries, it’s no surprise that many international companies look to the U.S. to expand their teams.

But like in many other countries, hiring in the U.S. can be complicated, with federal, state, and local labor laws and regulations that make hiring compliantly especially challenging.

From misclassification and workers' compensation compliance to payroll taxes and benefits packages, every step takes time, and mistakes can be costly.

The good news? You don’t need to set up a legal entity to hire local talent. Using an employer of record (EOR) in the U.S. is a faster, more cost-effective way for global businesses to build distributed teams—while staying fully compliant with U.S. employment laws.

Need a partner in global expansion? Hire talent compliantly in 180+ countries with Oyster.

What is an employer of record (EOR)?

An employer of record (EOR) helps companies hire in new markets without setting up a local entity. An EOR acts as the legal employer, handling tasks like contracts, onboarding, payroll processing, and compliance with labor and tax laws. Many companies use EORs to manage international hiring across multiple countries, including the U.S.

While the EOR takes on legal employment responsibilities, the client company still directs the employee’s day-to-day work. Unlike a professional employer organization (PEO), which co-employs staff with the client company, an EOR assumes full legal liability of the employment relationship.

When to use an EOR in the U.S.

Working with an EOR makes sense for global firms that don’t want to—or aren’t ready to—set up a legal entity to compliantly hire and manage U.S. employees.

Here are a few scenarios where a business would likely benefit from partnering with an EOR in the U.S.:

Expanding into the U.S. for the first time

An EOR can help businesses get set up in the U.S. quickly and effectively without the cost, delays, and legal requirements of establishing a U.S. entity. EORs ensure compliance so companies can test new markets and focus on establishing themselves there.

Needing to stay compliant across different states

In the U.S., businesses must navigate tax rates, time-off rules, and labor laws that vary across states. A good EOR ensures that global enterprises operate compliantly and responsibly across all U.S. states and territories.

Needing to onboard quickly without building HR infrastructure

For many multinational organizations, setting up HR support and people operations in every country where they’d like to hire talent doesn’t make sense—it takes time, resources, and local expertise that may not be practical for every market. An EOR handles all the paperwork and logistics to build a presence within days, not months.

Avoiding misclassification risk

Misclassifying U.S. workers as independent contractors when they qualify as employees can result in hefty fines and tax penalties for businesses. An EOR knows the rules, guarantees the correct classification, and assumes legal liability on its clients' behalf.

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:

Benefits of using an EOR in the U.S.

Using an EOR like Oyster eliminates the need to set up a legal U.S. entity—but that’s not the only perk. Here are a few more benefits businesses gain when partnering with an EOR.

Reduced compliance risks

EORs have extensive knowledge of federal, state, and local laws across the U.S. Oyster’s legal experts understand U.S. regulations regarding everything from hiring to termination. That includes drafting employment agreements, managing payroll, and overseeing all HR processes. If something goes wrong, the EOR assumes legal responsibility and liability, not you.

Accurate payroll and tax withholdings

Oyster ensures that employees get paid accurately and on time, no matter where they work. U.S. employees and contractors receive a seamless payroll experience. At the same time, your business gains peace of mind knowing that the EOR handles tax withholding and payroll processes, such as direct deposit, with transparency and compliance.

Local benefits tailored to U.S. standards

As your EOR, Oyster helps you craft a benefits package, including health insurance, that meets U.S. employee expectations. You can offer a complete compensation plan to attract and retain top talent while adhering to local standards.

Legal employment contracts that meet state-level rules

While employment contracts aren’t legally required in the U.S., they help ensure that you hire compliantly across all 50 states. Your EOR drafts employment agreements that define the terms of employment and outline each party’s responsibilities.

A smooth onboarding experience for U.S. hires

Oyster manages the entire onboarding process, from offer letter to payroll setup, including direct deposit, currency conversions, and benefits package enrollment. This helps you deliver a fast, professional onboarding experience that makes a great first impression on your new hire.

6 steps to choosing an EOR in the U.S.

Choosing the right EOR is an important step toward building your U.S. team with confidence. Before you commit, here are six things to check to make sure the partner you choose meets your business and employee needs.

Define what you need from an EOR

Make sure your EOR matches your business goals. Are you hiring one person in the U.S. or building a larger remote team? Do you plan to offer a full benefits package with a 401(k)? Will your U.S. employees need online access to manage time-off requests and view payslips? Go with an EOR that will meet your needs now and scale with you as you grow.

Check employee experience standards

Research the EOR’s reputation by reading reviews or connecting with businesses that already use their services. Look for onboarding, benefits, and payroll features that meet U.S. employee expectations. A good EOR supports both your business and your employees, acting as the face of your company every day.

Review security and compliance capabilities

Check the EOR’s data security policies to confirm your employee and company information will be protected. Make sure they meet high cybersecurity and compliance standards.

Compare pricing models

How much does the EOR charge for its services? And how does it charge? Do they bundle offerings, charge a flat fee, or use a percentage-based model? Oyster offers upfront, transparent pricing with an all-in-one platform that helps you stay compliant and competitive.

Align on compensation expectations

Evaluate the EOR’s local expertise to ensure that they can help you craft fair, competitive compensation plans that meet U.S. labor laws. Look for partners who understand how to tailor pay and benefits to the employee’s role, skills, and experience.

A simpler way to hire in the U.S.

Oyster’s EOR solution streamlines hiring so you stay compliant in the U.S., whether you’re onboarding one employee or building a full team.

With Oyster, you can legally employ U.S. talent without the hassle of setting up a local entity or navigating complex federal and state labor laws. Grow your team faster while Oyster handles employment contracts, payroll, taxes, and localized benefits, delivering a smooth hiring experience in the United States.

FAQs

Is employment dependent on the state where the team member resides?

As a foreign company hiring U.S. workers, it’s important to remember that federal, state, and local laws govern employment. The states, counties, and municipalities where your prospective team members reside impact your legal responsibilities as an employer, even as a company based outside the U.S.

In general, you’re required to follow the employment laws of where your employees reside. This can get more complicated if employees work remotely from another country. A U.S. EOR helps you manage compliance at all levels to ensure that you meet your legal responsibilities for U.S. employees.

What are the labor law compliance risks of hiring in the U.S. without an entity?

Hiring U.S. employees without a legal entity—or without an EOR that acts as one on your behalf—creates compliance risks. Without a qualified EOR, your business might unintentionally violate U.S. labor or tax laws, including worker misclassification, which can result in fines and back pay. An EOR helps reduce these risks by managing compliance across the entire employee lifecycle, from hiring and onboarding to payroll and termination.

How long does it take to hire through an EOR in the U.S.?

Oyster's platform provides U.S.-specific insights, real-time guidance, and auto-generated compliant employment agreements to help you hire faster. With Oyster as your EOR, you skip the need to set up your own legal entity, making it possible to onboard new talent in days, not months.

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.