Hire Anywhere in the US Without Setting Up an Entity.
The US has 50 different state tax systems, varying employment laws, and complex benefits requirements. RecruitGo handles federal and state compliance, payroll tax withholding, benefits administration, and workers' compensation so you can hire Americans in days.
What Is an Employer of Record in the United States?
An Employer of Record (EOR) is a company that legally employs workers in the United States on your behalf. RecruitGo's US entity becomes the W-2 employer of record. We handle federal and state tax withholding (IRS and state tax agencies), FICA contributions (Social Security and Medicare), state unemployment insurance (SUTA), workers' compensation insurance, benefits administration (health insurance, 401(k)), and compliance with federal employment laws (FLSA, FMLA, ADA, Title VII, EEOC).
You retain full control over the employee's work, schedule, and responsibilities. They report to you, work on your projects, and function as part of your team. We handle everything that US employment law places on the employer — which, in a country with 50 state-level regulatory regimes on top of federal law, is substantial.
Why EOR in the US? Unlike most countries with a single national labor code, the US splits employment regulation between federal law and 50 individual state systems. Each state has its own income tax (or none), unemployment insurance, workers' compensation, paid leave mandates, and employment rules. Hiring in California is vastly different from hiring in Texas. An EOR handles all of this so you don't need to register in, and comply with, each state individually. See full EOR vs entity comparison →
Who Should Use EOR in the United States?
What It Costs to Hire Through EOR
The US has moderate statutory employer costs compared to Latin America or Europe, but the complexity comes from benefits. Health insurance alone can add $500 to $800/month per employee. FICA taxes are fixed at 7.65% (employer share), and state-level costs (unemployment, workers' comp) vary significantly. Total employer cost typically runs 20 to 35% above gross salary depending on the state and benefits package.
| Component | Monthly (USD) | Rate / Basis |
|---|---|---|
| Gross salary | $6,250 | — |
| Social Security (employer) | $387.50 | 6.2% (up to $168,600 wage base) |
| Medicare (employer) | $90.63 | 1.45% (no cap) |
| FUTA (federal unemployment) | $37.50 | 0.6% (on first $7,000) |
| SUTA (state unemployment) | $125 to 312 | 2–5% (varies by state) |
| Workers’ compensation | $31 to 188 | 0.5–3% (varies by industry/state) |
| Health insurance (employer share) | $500 to 800 | ACA-compliant plan |
| 401(k) match (if offered) | $188 to 375 | 3–6% of salary |
| Total employer cost | ~$7,610 to $8,413 | ~122–135% |
* Social Security tax applies only to the first $168,600 of wages (2025 cap). Medicare has no cap. FUTA is 6.0% on the first $7,000, reduced to 0.6% after state credit. SUTA rates vary by state and employer experience rating. Workers' comp varies by state and industry risk classification. Health insurance costs depend on plan level, employee age, and location. 401(k) match is optional but expected for professional roles. EOR management fee not included above.
The real cost is benefits, not taxes: Unlike most countries where statutory contributions dominate, the US employer tax burden (FICA + FUTA/SUTA) is relatively modest at ~10%. The expensive part is benefits — health insurance, 401(k), and PTO. Without competitive benefits, you will struggle to attract US talent. Your EOR provides access to group rates for health insurance and manages 401(k) plans.
How Hiring Works Through EOR
You share the role, salary, work state, and start date. We confirm state-specific requirements (tax registration, workers’ comp, paid leave mandates) and return a full cost breakdown within 24 hours.
We draft an employment agreement compliant with federal and state law. We register for state tax withholding, set up workers’ compensation insurance, enroll the employee in benefits (health, 401(k)), and configure payroll with IRS and state tax agencies.
We run payroll (typically bi-weekly in the US), calculate and remit federal and state income tax, FICA, FUTA/SUTA, provide pay stubs, manage benefits deductions, and file quarterly Form 941 with the IRS. W-2s are issued annually by January 31.
US employment law changes at both federal and state levels. We monitor DOL wage regulations, EEOC updates, state paid leave laws (now in 15+ states), minimum wage changes, ACA reporting requirements, and workers’ compensation rate adjustments.
EOR vs US Entity vs Contractors
| EOR | C-Corp / LLC | Contractor (1099) | |
|---|---|---|---|
| Time to first hire | 3 to 5 days | 2 to 6 weeks | Immediate |
| Setup cost | None | $500 to $5,000+ | None |
| State registrations | Handled by EOR | Your responsibility (each state) | Not applicable |
| Benefits administration | Managed by EOR | Your responsibility | None |
| Misclassification risk | None | None | High (IRS scrutiny) |
| Best for | 1 to 20 people, multi-state | 20+, permanent ops | Project-based only |
1099 contractor risk: The IRS, DOL, and state agencies actively pursue worker misclassification. The DOL's 2024 final rule uses a six-factor “economic reality” test. California's AB5 applies an even stricter ABC test. If a contractor is reclassified as an employee, you owe backdated FICA taxes (both shares), federal and state income tax withholding, benefits, overtime, and penalties. EOR gives you full W-2 employment with zero classification risk.
Federal and State Income Tax
The US uses a progressive federal income tax system with rates from 10% to 37%. On top of federal tax, 41 states (plus DC) levy their own income tax. Employers are responsible for withholding both federal and state income tax from each paycheck, plus FICA contributions.
Federal tax brackets (2025, single filer)
| Taxable income | Rate |
|---|---|
| $0 to $11,925 | 10% |
| $11,926 to $48,475 | 12% |
| $48,476 to $103,350 | 22% |
| $103,351 to $197,300 | 24% |
| $197,301 to $250,525 | 32% |
| $250,526 to $626,350 | 35% |
| Over $626,350 | 37% |
No state income tax states: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming have no state income tax. This makes them popular for remote workers. However, the employee's tax obligation is based on where they physically work, not where the employer is located.
FICA (Social Security + Medicare)
| Component | Rate | Notes |
|---|---|---|
| Social Security (employer) | 6.2% | On first $168,600 of wages |
| Social Security (employee) | 6.2% | On first $168,600 of wages |
| Medicare (employer) | 1.45% | No wage cap |
| Medicare (employee) | 1.45% | No wage cap |
| Additional Medicare (employee) | 0.9% | On wages over $200,000 |
| Total FICA (employer) | 7.65% | Social Security + Medicare |
Employee Benefits and Leave Entitlements
The US is unique among developed economies in having no federal mandate for paid vacation, paid sick leave, or paid family leave. Benefits are largely employer-provided, making them a critical competitive tool for attracting talent. State-level mandates are filling the federal gap — 13+ states now require paid family leave.
There is no federal mandate for paid vacation, paid sick leave, or paid family leave. The FMLA provides 12 weeks of unpaid, job-protected leave for qualifying events (birth, serious health condition, military family). Applies to employers with 50+ employees.
As of 2026, 13 states and DC have mandatory paid family and medical leave programs: CA, CO, CT, DE, MA, MD, ME, MN, NJ, NY, OR, RI, WA. Benefits range from 60 to 90% of wages for 4 to 26 weeks. Your EOR manages enrollment and payroll deductions in each state.
15+ states and many cities mandate paid sick leave (1 hour per 30 worked is common). Arizona, California, Colorado, Connecticut, Maryland, Massachusetts, Michigan, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont, Washington, and DC all have statewide requirements.
While not federally mandated, most US employers offer 10 to 20 days of paid time off per year. The market norm for professional roles is 15 days PTO plus 10 federal holidays. Unlimited PTO policies are increasingly common in tech.
11 federal holidays: New Year’s Day, MLK Day, Presidents’ Day, Memorial Day, Juneteenth, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving, Christmas. Private employers are not legally required to observe them but most professional roles get them off.
The ACA requires employers with 50+ full-time equivalent employees to offer affordable health insurance or pay penalties. EOR provides access to group health plans covering medical, dental, and vision. Employer typically covers 50 to 80% of premiums.
No federal mandate but highly expected. A 401(k) with employer match (typically 3 to 6%) is standard for professional roles. The SECURE 2.0 Act requires new plans to auto-enroll employees. 2026 contribution limit is $23,500 ($31,000 if age 50+).
Benefits are how you compete: In the US, salary is only part of total compensation. A competitive offer includes health insurance (employer pays 50–80% of premiums), 401(k) with match, 15+ days PTO, and increasingly, equity or RSUs for tech roles. Without strong benefits, you will lose candidates to employers who offer them. Your EOR provides access to group health plans and 401(k) administration.
Key Federal and State Employment Laws
US employment law operates at three levels: federal, state, and local. Federal law sets the floor; states and cities can add protections but cannot reduce them. The most important federal laws for employers are the FLSA (wages and overtime), Title VII (anti-discrimination), ADA (disability accommodation), ADEA (age discrimination), and FMLA (unpaid family leave).
At-will employment
49 states follow the at-will doctrine — either party can end employment at any time, for any legal reason, with no notice required. Montana is the only exception (requires good cause after probation). However, at-will does not mean “fire for any reason.” Terminations for discriminatory reasons (race, sex, age, disability, religion, national origin), retaliation, or in violation of public policy are illegal everywhere.
FLSA (Fair Labor Standards Act)
Sets the federal minimum wage ($7.25/hour, unchanged since 2009, though 30+ states have higher minimums), overtime rules (1.5x for hours over 40/week for non-exempt employees), and the salary threshold for exempt status ($58,656/year as of 2025). Misclassifying a non-exempt employee as exempt triggers overtime back-pay liability.
State-specific complexity
California and New York are the most complex employment law states. California requires meal and rest break compliance, has strict final paycheck timing (immediate on termination), bans most non-compete agreements (effective 2024), and applies the ABC test for contractor classification. New York has unique wage theft protections, predictive scheduling in NYC, and state paid family leave. Your EOR ensures compliance with whatever state your employee is in.
Termination Rules
Under at-will employment, no notice period or severance is legally required for individual terminations (unless specified in an employment contract). However, several federal and state laws apply to mass layoffs, and best practices dictate how terminations should be handled to minimize legal risk.
WARN Act
The federal Worker Adjustment and Retraining Notification (WARN) Act requires 60 days' written notice for mass layoffs (100+ employees) or plant closings. Several states have “mini-WARN” acts with lower thresholds: California (75 employees), New York (25 employees), Illinois (25 employees), and others. Failure to provide WARN notice triggers 60 days of back pay and benefits per affected employee.
Final paycheck rules
Final paycheck timing varies by state. California requires immediate payment upon involuntary termination. Many states require payment by the next regular payday. Some states require payout of accrued but unused PTO; others do not. Your EOR handles final paycheck compliance based on the employee's state.
COBRA health insurance continuation
Terminated employees (and their dependents) have the right to continue their employer-sponsored health insurance for up to 18 months at their own cost plus a 2% administration fee. The employer must provide COBRA notification within 14 days of the termination date.
Non-compete agreements: Enforceability varies dramatically by state. California, Minnesota, North Dakota, and Oklahoma ban most non-competes. The FTC proposed a nationwide ban in 2024 but it was blocked by courts. Many states limit non-competes by duration (typically 1 year max), geographic scope, and consideration requirements. Your EOR advises on what is enforceable in each state.
Frequently Asked Questions
Total employer cost above gross salary runs roughly 20 to 35% depending on the state, benefits package, and industry. The major components are FICA (7.65%), state unemployment tax (2 to 5%), workers’ compensation (0.5 to 3%), and health insurance ($500 to $800/month employer share). The EOR management fee is additional.
If you use an EOR, no. The EOR is the legal employer and handles all state tax registrations, workers’ compensation, and unemployment insurance in each state where employees are located. Without an EOR, you would need to register separately in every state where you have employees.
Under the ACA, employers with 50+ full-time equivalent employees must offer affordable coverage or pay penalties ($2,880 per employee in 2025). Smaller employers are not legally required but offering health insurance is a strong expectation in the US job market. EOR provides access to competitive group health plans.
Most US states follow the at-will doctrine, meaning either party can terminate employment at any time, for any reason (or no reason), without notice. Exceptions: you cannot terminate for discriminatory reasons (Title VII, ADA, ADEA), retaliation, or in violation of a contract. Montana is the only state without at-will employment.
Each state has its own income tax rates (9 states have no income tax), unemployment insurance programs, workers’ compensation requirements, paid leave mandates, and employment laws. An employee in California faces very different compliance requirements than one in Texas. Your EOR handles all state-specific requirements.
The IRS uses a multi-factor test to determine worker classification. Misclassification triggers backdated FICA taxes (employer and employee shares), penalties, interest, and potential state-level penalties. The DOL’s 2024 final rule tightened the economic reality test. California’s AB5 uses an even stricter ABC test. EOR eliminates this risk.
None under federal law (at-will employment). However, the WARN Act requires 60 days’ notice for mass layoffs (100+ employees) or plant closings. Some states have mini-WARN acts with lower thresholds (e.g., California: 75 employees, New York: 25 employees). Individual employment contracts may also specify notice periods.
No. Nine states have no state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. California has the highest top rate at 13.3%. New York City adds a local income tax on top of New York State tax. Your EOR handles withholding in every state.
Typically 3 to 5 business days from signed agreement. This includes state registration, benefits enrollment, and payroll setup. Incorporating your own C-Corp or LLC takes 2 to 6 weeks depending on the state, plus additional time for EIN, state tax registration, and bank account setup.
