Expanding into a country or hiring a workforce abroad can lead your business to great profits, but unfamiliar laws and regulations can counteract your company’s goals and plans. At Bradford Jacobs, we want to eliminate this complicated part. By using our PEO service, we can arrange all needed visas and permits including the entire application process without your physical presence. People wishing to visit, live or work in the United States require some form of documentation, as with all countries. The onus is on all travellers to investigate which visa, work permit or residence permit is required as there are many rules, regulations and government departments involved in processing the paperwork.
People from all over the world are looking to live and work in the US and foreigners will be required to apply for a US work visa/permit; applicants need to know how to apply correctly and prepare the relevant documentation. The US State Department have introduced the Visa Wizard to advise which visa category might be appropriate for entering the US. Our team is trained to research the latest information on US visas and work permits – therefore, we created a guide to introduce you to the rules and requirements. By reading this guide you will get familiar with all the requirements so you or your employees can start working in the USA in no time.
What types of Work Visas and Permits for US are there?
There are a number of visa options when wanting to work in the US with distinct requirements, processes, and fees. There are also other considerations when deciding on the appropriate visa such as education and qualifications, nationality and how long the period of employment will be.
There are two main types of visas for foreign nationals who wish to travel to the US:
An Immigrant Visa (prior to obtaining Permanent Residence Visa – Green Card) for those who intend working and living permanently in the US.
A Non-immigrant Visa (also called a Temporary Resident Visa) issued for entering the US for tourism, business, temporary work, medical treatment, study, or similar reasons.
An Immigrant Visa allows permanent residency upon US entry followed by receipt of a Green Card. A Green Card is not easy to acquire as it permits people to live and work anywhere in the US without restriction.
However, employers must first file a petition with the US Citizenship and Immigration Services (USCIS). An approved petition is required from them to apply for this work visa and approval does not automatically mean the applicant will be accepted. There are five categories with various sub-groups of employment-based immigrant visas:
EB-1 For priority workers with special skills, multi-national business managers and executives
EB-2 For foreign nationals holding advanced degrees or with exceptional abilities
EB-3 For professionals, skilled and unskilled workers
EB-4 Special immigrants
EB-5 For foreign national investors
There are four main ways to obtain a Green Card:
Employment-based Green Cards
Family-sponsored Green Cards
Green Card lottery or Diversity Green Card
A non-immigrant visa allows people to visit the US for short perm periods for tourism, medical reasons, study purposes and for business trips and temporary work. Temporary worker visas are for persons entering the US for employment; these are intended for a fixed period. Employers need to first petition the US Citizenship and Immigration Services (USCIS) for approval to apply for the visa, although acceptance is not automatic.
Temporary Worker visa types of interest to company employers:
H-1B for those with a specialty occupation and higher educational qualifications
H-2B for non-agricultural employees from designated countries relevant to the interests of the US
L – for managers or executives to work at a branch, subsidiary, or associated company of their employer (blanket petition)
– For highly skilled people regarding ability or achievements in certain areas including business
There is also a Visa Waiver Program, which allows nationals from countries in the scheme to stay up to 90 days for business or tourism if they have prior ESTA (Electronic System for Travel Authorization) approval. Countries included in the VWP, and requirements can be found here.
Dealing with tax, payroll, and employment regulations for your staff from overseas is a tricky process. The US is no exception, with fines, sanctions and other penalties applying for not complying with the complex and many-layered aspects of taxation. Global expansion is a great way to grow your business and the USA offers many appealing opportunities. However, the tax laws can be complex and require time-consuming research. By using our PEO service we will take care of the complicated legwork so that you can focus on your business goals in America.
We have made it our goal to keep track of the latest changes in tax policies to always ensure complete compliance. To keep you informed and updated too we created this guide which includes the basic facts regarding tax regulations in the US.
Overview of Taxes in the US
Individual Income Tax: Seven tax rates applied in 2021. 10% to 37%; within each band different taxable limits apply to individuals, joint-filing couples and “Heads of households”. The Biden Administration’s 2022 budget plan proposed a new top rate for high-earners at 39.6%
Social Insurance Taxes: Employers’ and employees’ contribution to OASDI, known as ‘social security tax’ – 6.20%(On first US$142,000) of earnings; Hospital Insurance, known as ‘Medicare’ – 1.45%; Surcharge for individuals earning over US$200,000 and joint filers over US$250,000 – 0.9%
Corporate Income Tax (CIT): Federal standard rate – 21.0%. States also apply CIT at varying rates up to 11.0%
Withholding Tax (WHT): Dividend interest on US-sourced income for foreign individuals and companies – 30.0%
Consumption Tax: Applied by states at varying rates, roughly between 4%-10%
Capital Gains Tax: In 2021 long-term gains taxed at US$40,001-US$248,300 – 15.0%; Above US$248,300 – 20.0%.
Short-term gains are taxed as regular income within applicable bands
US Individual Tax – Single, Married
US citizens are taxed on their worldwide income, regardless of where they live. They also must pay federal taxes regardless of which state they live in and whether that state also imposes individual income taxes. The tax year begins on January 1 with returns filed by April 15 of the following year. Here are the following rates for individuals, married joint returns, and the head of families:
Income Tax: Individuals (US$)
Up to 9,950 – 10%
9,951 – 40,525 – 12%
40,526 – 86,375 – 22%
86,376 – 164,925 – 24%
164,926 – 209,425 – 32%
209,426 – 523,600 – 35%
523,601 or more – 37%
Married Joint Returns (US$)
Up to 19,900 – 10%
19,901 – 81,050 – 12%
81,051 – 172,750 – 22%
172,751 – 329,850 – 24%
329,851 – 418,850 – 32%
418,851 – 628,300 – 35%
628,301 or more – 37%
Head of Family (US$)
Up to 14,200 – 10%
14,201 – 54,200 – 12%
54,201 – 86,350 – 22%
86,351 – 164,900 – 24%
164,901 – 209,400 – 32%
209,401 – 523,600 – 35%
523,601 or more – 37%
* The Biden Administration’s 2022 budget plan proposed a new top bracket of 39.6%. This would apply to joint-filing married couples with a taxable income exceeding US$509,300 and individuals with more than US$452,000 in taxable income.
Global expansion into the US generally means that you need to set up an in-country entity. However, by partnering with us you create the possibility to bypass this process and utilize our American entity. By using our PEO service we take care of the complicated paperwork. Expanding into a new country is always an adventure, but we believe this adventure should be exciting instead of just frustrating and time-consuming. Therefore, we have been supporting companies in over a hundred countries with their expansion plans.
In this guide, we will share which documents you need to establish an entity in Italy, but also where you will need to register your business address and company’s name. We will also break down the advantages and disadvantages of setting up an entity in the USA.
How to set up a US Subsidiary
The first step to setting up a subsidiary in the US would be to choose the company type, which most typically will be a Limited Liability Company (LLC), with other options being the C Corporation or S Corporation. Careful consideration must go into the choice of subsidiary vehicle, as each attracts different taxation regulations. These are some of the boxes that need to be ticked at the outset:
Select a state to locate the new company, which does not have to be the same state where the subsidiary is incorporated.
Select a unique name for the company, confirm the business address.
File the new business via the Secretary of State’s office, download and complete authorized templates for Articles of Association and pay the due fees.
There is no legal requirement for this, but you have the option transfer funds from the parent company as share capital.
Compile an agreement indemnifying management from company liabilities. Specify how the parent company can appoint or change directors of the subsidiary, prohibiting changes without the parent company’s permission.
Draw up the Operating Agreement and install the manager or directors who will manage the subsidiary as an independent entity.
What you need to set up a US Subsidiary The following documents are needed to register the subsidiary:
Documentation confirming status of the parent company, including its address in the home country.
An extract from that country’s trade register or equivalent, confirming the parent company’s commercial operation in the home country.
Articles of Association with full information concerning the owners, board or managers, the company’s planned activities, the business address, and the registered official for dealing with official correspondence.
The Operating Agreement detailing the responsibilities of the owners.
The Employer Identification Number (EIN) enabling the company to pay taxes to the Internal Revenue Service (IRS) in the chosen state of operation.
Opening a company bank account by presenting all the company’s legal documents.
Different governance regulations apply to individual states. For example, in Delaware foreign companies can benefit from an accommodating tax regime without needing a physical business address or bank account as it can conduct financial operations from abroad.
Benefits of setting up a US subsidiary
Among the legal advantages of setting up a US subsidiary is that the shareholders and directors of the parent company have limited liability and the parent company itself is not liable for the activities, responsibilities, or debts of the subsidiary. The subsidiary also has the freedom to engage independently in more types of business than the parent company.
Opening a subsidiary makes a statement of a company’s commitment to expanding into foreign markets. The US is a popular target for expansion as the world’s most powerful economy, with a vibrant business culture. Geographically, the US’s location is another plus for further expansion with Pacific and Atlantic coastlines, plus cross-border access to Canada and Central and South America.
Using a global Professional Employer Organization (PEO) such as Bradford Jacobs means staff can be sourced, placed in their roles, and be up and running within days, rather than months, and with all the difficulties of payroll, taxation, and compliance under control thanks to our Employer of Record (EOR) services.
Foreign companies who wish to expand into the USA will be met with an attractive business hub that includes a highly educated workforce, attractive tax rates and incentives, as well as low labor and administration costs. However, setting up shop in an unfamiliar place comes with its own challenges. Foreign businesses must comply with employment, tax, payroll, and corporate legislation whilst ensuring that their employees are working productively and efficiently.
Work alongside our Professional Employer Organisation (PEO) recruitment specialists, then our Employer of Record (EOR) in-country experts to handle every aspect of compliance. Employers can depend on our in-depth knowledge of the US, its work culture and business practices. Here we have written out some basic summaries of what you need to make the transition into America’s market, no matter the industry you are in.
Starting a Business in the US
The usual choice for companies establishing a subsidiary in the US is to establish a limited liability company. This is a separate legal entity to the parent company by having its own capital and administration. Another advantage is that the parent company generally has no responsibility for the liabilities or debts of the subsidiary.
Set procedures include the following steps:
Decide on the company type that suits the nature of your business, your business goals and matches your own capabilities to meet establishment requirements.
Select a state to locate the new company, which can be different to where the subsidiary is incorporated
Select a unique name for the company, confirm the business address
File the new business with the Secretary of State’s office, download and complete authorized templates for Articles of Association and pay fees due
Capitalize the subsidiary by transferring funds from the parent company, although there is no legal requirement to initially deposit share capital
Compile an agreement indemnifying management from company liabilities. Specify how the parent company can appoint or change directors of the subsidiary, prohibiting changes without the parent company’s permission
Draw up the Operating Agreement and install the manager or directors who will manage the subsidiary as an independent entity
Once the company has been cleared to operate, in order to employ and payroll staff other procedures must be followed, including:
Ensuring employees have correct documentation, including Form I-9, allowing them to work in the US
Completing Form W-4 for remitting employees’ tax payments to the authorities
Registering the employee with the relevant state’s Labor Agency
Putting worker’s compensation insurance in place, requirements can vary between states
Expanding Business into the US
As the strongest economy in the world, the United States of America is a major target for companies planning international expansion. The US market is innovative and inventive with 50 states each offering opportunities in manufacturing, industry, services, and hi-tech sectors. Main industrial areas feature petroleum, natural gas, automotive, aerospace, telecoms, electronics, food processing, pharmaceutics, consumer goods, mining, defense manufacturing, healthcare, information technology, construction, retail, real estate, and financial services.
Generally, companies expanding into the US take the route of opening a subsidiary as either an LLC (Limited Liability Company) or a C-Corporation, but both represent a complicated journey which involves complying with federal and state laws as they apply to hiring and recruitment, payroll, paying taxes, compensation, and benefits plus every other aspect of employment. The simple alternative? By considering their plans in partnership with a Professional Employer Organization (PEO) and Employer of Record (EOR) such as Bradford Jacobs, companies can plot a time-efficient and cost-effective path to locating and employing staff in the US.
US Business Facts
Capital City – Washington DC
Population – 333 million approximately
Regions – 50 states plus Washington DC. Economic regions include New England, the Mideast, Southeast, the Great Lakes, the Plains, Southwest, the Rocky Mountains, and the Far West
Official Language – many States have declared English as their official language, although there is no official language at federal level
Economy – US$ 22 trillion, the world’s largest economy
Leading Sectors – petroleum, automotive, aerospace, telecommunications, lumber, mining, construction, and financial services
Main exports – include refined petroleum, aircraft, helicopter and spacecraft, cars, crude petroleum, integrated circuits
Main imports – include cars, crude petroleum, broadcasting and electrical equipment, computers, pharmaceuticals
Main trading partners – Mexico, China, Canada, Japan, UK, and Germany
Government – a federation of states, a federal republic, democracy, and presidential system
Currency – US$
Advantages and Challenges of the US Market
Advantages of expanding into the US market include:
Logistics: The US is equipped to supply markets nationally and globally through air, sea, rail and road networks and features half of the world’s top 10 airports for moving cargo
Market: The US is the world’s largest economy, with the greatest private sector and consumer numbers
Legal: Low regulatory barriers to setting up a business; US Patent Office strictly enforces Intellectual Property rights
Staffing: The US’s 5,000-plus universities and colleges are a production line for well-educated and skilled workers to enter the employment market
Business: All US-based businesses are treated equally, whether foreign-owned or not, plus all 50 states are committed to attracting investment
Locations: Expanding companies have seemingly unlimited choices and can benefit from a variety of geographical and climate characteristics that can best suit their line of business
Attitudes: Innovation and new ideas are encouraged, and lines of personal communication are open and direct
Benefits: Foreign companies can attract incentives, such as tax credits, and lower commercial real estate prices
Challenges of entering the US market include:
Workforce: The multi-ethnicity of the workforce can create challenges for incoming companies as the cultural diversity is very different from the largely culturally homogenous European employment market
Taxation: The Internal Revenue Service strictly applies federal taxes, plus there are also tax collection authorities at state and local level
Recruitment: The multinational corporations tend to choose the best of the best of the employment market, making it very competitive to find the right fit for you
Bureaucracy: The steps needed to obtain property in the States involves multiple documentation procedures. For example, electricity connections can take up to two months to sort out.
Limited Company / Subsidiary or Branch in the US?
International companies targeting the US for expansion will generally choose a limited liability company (LLC) subsidiary, as they have independent legal status from the parent company, which is generally free from responsibility for any debts or liabilities of the subsidiaries. Subsidiaries can have a totally different name from the parent company, pursue different business activities and form their own contracts. Branches, in comparison, are an extension of the parent company and are not generally a popular choice for expanding into the US.
A successful business largely depends on its employees. By creating working contracts that include the right terms and benefits there will be no misconception and the perfect work-life balance can be created. At Bradford Jacobs, this is our aim, and we support companies in over 100 countries with creating compliant and balanced labor contracts. Our team keeps track of the Italian laws and regulations on a daily basis to be duly aware of updates that can be implemented in working contracts. By using our PEO and Employer of Record (EOR) services, we can provide compliant labor contracts for employees in Italy, including local benefits.
To support your plans, we made this guide including the basics of employment contracts in the US. After reading this guide you will know everything about social security, notice periods, and the average working hours.
How Do You Hire US Employees?
International companies hiring employees for their expansion into the United States of America must deal with wide-ranging federal and state laws as well as local regulations. Another unique feature surrounds contracts – fixed-term, full-time or part-time, temporary, and seasonal contracts are familiar concepts worldwide. But, the ‘at-will’ contracts that prevail in the US mean either employer or employee can terminate with or without notice or cause, as long as termination is not discriminatory or retaliatory. Federal and state laws cover payroll, tax, social insurance, and benefits including minimum wages, working hours, overtime, and maternity leave. The US, however, is less federally regulated than other countries in such areas as termination and severance, notice periods, sick leave, and holiday pay. These areas can be dealt with contractually, or by agreement, as part of the employment relationship but depending on state and municipality regulations.
These issues must be considered before companies move into the ‘recruitment phase’. This involves:
Ensuring Form I-9 is in place allowing employees to work in the US.
Completing Form W-4 so the employer knows how much withholding tax to remit for federal and state taxes.
Registering the employee with the relevant state’s Labor Agency.
Putting worker’s compensation insurance in place.
Deciding on payroll method to pay employees, pay withholding tax to the Internal Revenue Service (IRS) and the state’s tax agency if applicable and file tax returns. This process will operate more efficiently by employing payroll specialists such as Bradford Jacobs.
Employers must have an Employer Identification Number (EIN) before remitting forms and withheld taxes to the Internal Revenue Service (IRS). Employers can apply for an EIN online using the IRS website. Employers must also register to pay federal taxes electronically through the Electronic Federal Tax Payment System.
Outsourcing the recruitment and hiring process through Bradford Jacobs’ Professional Employer Organization (PEO) network will give you the security that our in-depth know-how can deal with all these potential problems. Trusting our Employer of Record (EOR) services to handle every aspect of payroll compliance will guarantee a trouble-free move into your new territory.
Employment Contracts in US
US laws set no minimum requirements for contracts and most employment relationships are ‘at will’ and can be terminated by either party, without notice or cause. However, termination must not be discriminatory or retaliatory and cannot contravene any rules dictated by individual states or municipalities.
Fixed Term or Open-ended Contracts: No laws govern these.
Probation/Trial Periods: These usually depend on company policy and typically provide for an evaluation after 90 days.
Recruitment Agency Contracts: These contract types have the potential to be problematic in their execution.
Attention must be paid to the classification of worker being supplied to a company as this has tax implications for the IRS. In placing staff, the agency must also ensure contracts with the employer observe all relevant laws pertaining to overtime, working hours, discrimination etc.
In drawing up employment contracts, if applicable, or in the written agreements that go with an ‘at will’ employment relationship, general considerations include:
Contracts are not a legal requirement in the US, nor need any terms be explicitly covered.
Unlike the employment laws of most countries, the US has no restriction on the length of a fixed-term contract.
There is no law governing probation periods although many employers have an internal policy regarding ‘introductory periods’. These typically provide for an evaluation after 90 days, but in the case of ‘at-will’ employment they have little point legally as either party can terminate when they like without cause.
Senior managers and executives do tend to have formal written contracts, particularly dealing with compensation and severance terms.
US law does not provide for notice periods, except where a contract provides for one or in the case of mass dismissals governed by the Worker Adjustment and Retraining Notification Act (WARN Act).
Happy and satisfied employees make your business thrive and lead to even better profits. However, the specific benefits for employees in Italy might not all be familiar to you yet. By using our PEO and Employer of Record (EOR) service we can provide compliant labour contracts for employees in the USA, including local benefits. When expanding your company’s presence in a new country, you need to ensure compliance both in your employment contracts and benefit guarantees. These involve social security contributions, sick leave, health insurance, and unemployment, to name a few.
Workers’ compensation programs in the US vary between states and sectors; employers and employees have to deal with their relevant state’s rules. Many states have their own versions of laws, while case law can also apply where issues are not covered by mandatory regulations. Our guide will explain what benefits and employee compensation are guaranteed, and what can be modified, for any employer who wishes to expand their business into the USA.
What Compensation Laws exist in the US?
Workers’ compensation programs vary between states and sectors and employers must comply with the relevant federal and state laws, as the US Department of Labor’s Office of Workers’ Compensation Programs do not have a role in workers’ compensation schemes as applied by individual states. The US employment market is less regulated than most in some areas. For example, The Fair Labor Standards Act (FLSA) does not require payment for vacations, sick leave, federal or other holidays. These benefits are matters of agreement between employer and employee. However, many states have their own laws on sick leave. It is still vital to fulfil responsibilities to your employees over those benefits, compensation and minimum requirements that are governed by law. Do not take the risk of ignoring them. Compensation and benefits include:
National Minimum Wage: The federal minimum wage is US$7.25 per hour, but this varies across the states. California has different minimum hourly rates depending on the size of a company – US$14 per hour for more than 26 employees and US$13 per hour for employers with fewer staff. In 2021 Hawaii had a rate of US$10.10, Illinois US$11 and Washington DC US$15.20 per hour. Georgia has a minimum of US$5.15 per hour, but employers who come under the Fair Labor Standards Act employers must pay the federal minimum of US$7.25. Where employees are subject to both state and federal regulations the higher rate applies.
Overtime: This is paid at one-and-a-half times above the usual hourly rate if the employee works more than 40 hours a week on average over a 168-hour period.
Maternity and Family Leave: US law does not allow for paid maternity leave. However, the Family and Medical Leave Act (FMLA) guarantees employees can take up to 12 weeks of job-protected leave for pregnancy and child rearing. Only around 60% of workers are eligible. The Act also stipulates unpaid job-protected leave for the serious illness of the employee, spouse, or a child.
Termination and Severance Entitlement: Unless terms of notice, termination, and entitlements or ‘garden leave’ are contracted, employees working ‘at-will’ are not usually entitled to a notice period. Eligible employees have the right to continued healthcare coverage for a subsequent period and to receive government unemployment benefit.
They may be entitled to severance pay according to state laws if it can be proved the employer led the employee to believe they would receive severance.
‘At-will’ employment can be terminated by either party without notice but can be unlawful if there was an implied contract, if it violates public policy, federal, state, or local laws, and if it is based on discrimination or retaliation.
Employers that come under the Worker Adjustment and Retraining Notification Act (WARN) must follow termination regulations if closure forces laying off more than 50 workers at a single site. In this case workers must be given 60 days’ notice. https://iclg.com/practice-areas/employment-and-labour-laws-and-regulations/usa
Working Hours and Breaks: The typical 40-hour week comprises five eight-hour days with at least eight hours rest between. Hours exceeding 40 in a 168-hour period are considered overtime. Flexible working hours depends on individual contracts. Lunch or coffee breaks are not mandatory and depend on employer / employee agreements, usually do not exceed 20 minutes, and are paid as working time. Authorized breaks are considered part of working hours when calculating any overtime. Some states have their own regulations for breaks or meal periods.
Social Security in the US?
Social Security is run by the federal government, using taxes paid into a trust fund to provide benefits to people who are eligible and provides support for such as retirement and disability.
The fund builds from taxes withheld during employment. The employer withholds tax from the employee to comply with the Federal Insurance Contributions Act (FICA). This federal payroll (employment) tax is used to fund Social Security and Medicare.
Employee Social Security Taxes?
OASDI, known as ‘social security tax’ – 6.20% (On first US$142,000 of earnings)
Hospital Insurance, known as ‘Medicare’ – 1.45%
Surcharge for individuals earning over US$200,000 and joint filers over US$250,000 – 0.9%
Employer Payroll Taxes for Social Security
Paid under the Federal Insurance Contributions Act (FICA).
OASDI, known as ‘social security tax’ – 6.20% (On first US$142,000 of earnings)
Hospital Insurance, known as ‘Medicare’ – 1.45%
Statutory Employer Costs in the US
Corporate Tax: This is set at 21% for 2021 (having been cut from 35% in 2017 in the Tax Cuts and Jobs Act) and is levied against the profits of resident corporations in the US. This may change as in the Biden Administration’s 2022 budget plan announced in May 2021 it was proposed to increase the rate to 28% at the federal level. Individual states also apply corporate taxes at varying rates up to 11% in addition to the federal rate.
National Minimum Wage: The federal minimum wage is US$7.25 per hour, but this varies across the states. Where employees are subject to both state and federal minimums the higher rate applies.
For example, Georgia has a minimum of US$5.15 per hour, but under the Fair Labor Standards Act (FLSA) employers must pay the federal minimum of US$7.25.
Other statutory employment costs include:
Federal Unemployment Tax (FUTA) – which is paid at US$42 per employee.
State unemployment tax – which varies between states.
Workers’ insurance compensation – varies from state to state and professional liability coverage may be required.
Health insurance, unpaid family leave, and medical leave – Under federal law, employers with more than 50 staff must provide this for their employers. Some states enforce paid leave laws, with the burden on the employers.
As the strongest economy in the world, spanning six time zones, the United States of America’s free enterprise system encourages invention and innovation. With a GDP of over US$22 trillion and 333 million population, this is the largest consumer market in the world. The US is a magnet for attracting the cream of international talent, with a fast-moving economy and ‘level playing field’ for business that demands companies move swiftly and positively if they want to extend their international reach into this rewarding market.
This potential underlines why Bradford Jacobs’ global experience in recruiting the best candidates for your company is indispensable for taking the smartest route into the US – the major player in the global economy, but one with particular challenges. Bradford Jacobs’ benchmark platforms as a Professional Employer Organisation (PEO) have worldwide reach and include a total understanding of the challenging complexities of the US economy and employment market. You can trust Bradford Jacobs to put the brightest talent in place for your company. You need your staff to be ‘up and running’ as soon as possible – and this guide highlights everything an employer needs to understand the recruitment process in the US.
The Recruitment Process in the US
Recruitment is the first stage of making your company operational in the US. It is vital to know where to locate the best talent to be a perfect fit for your company’s plans.
Foreign companies opening a legal entity subsidiary must follow a strict procedure to register and onboard employees. These include:
Ensuring the employee has completed Form I-9, allowing them to legally work. This must be completed with contact details and social security number on or before their first day and presented with ID and employment authorization no later than the third day.
All employers must complete Form W-4 highlighting how much tax is withheld from employees’ salaries and must be completed before the employee receives the first salary payment.
New employees’ details must be forwarded to the relevant state’s Labor Agency, who oversee any issues between employees and employer and handle unemployment benefits.
It is mandatory in most states for employers to hold Workers’ Compensation Insurance, covering employees becoming ill or injured due to work.
The recruitment process is time-consuming and requires dedication – a difficult task when facing a host of other complicated issues involved in international expansion. Partner with Bradford Jacobs as your Employer of Record (EOR). We will provide all the answers. We will convert your expansion blueprint for the US into an action plan, with additional support including:
Advising on payroll method – This involves paying employees and payroll tax to the Internal Revenue Service (IRS) and the state’s tax agency, if applicable, and filing tax returns.
Bradford Jacobs locates the ideal employees for your company, then steps in as EOR to ensure they comply with US employment contracts law, payroll, HR, visa requirements and permits (if required).
We manage all work-related registration formalities and on-going employment issues while you have daily control of your employees.
The employees complete their time sheets, and any expenses claims – and we invoice you, the client. Once paid, we deduct all contributions to the relevant US authorities and transfer the balance into the employees’ accounts.
Within a few days your company has an international presence in the United States of America, in prime position to explore expansion throughout the US and further afield into South America and Canada without risking the initial expense, commitment or hassle of setting up your own subsidiary or branch office. Make contact today.
Legal Checks You Can Make on US Employees
There are no legal requirements for pre-employment checks in the US. Some regulated sectors may require fingerprinting, background checks, motor vehicle history and drug/alcohol screening, although the legalization of recreational drugs in some states makes this area problematic. A general framework for pre-hire screening is also hard to apply as regulations vary between federal, state, and local jurisdictions. Criminal Record Checks: Generally, one can only be asked after a job offer has been made and staying within local laws. Discrimination: Employers should beware asking questions that reflect discrimination. Civil Rights Laws protect employees against discrimination based on race, color, religion, gender, nationality, pregnancy, age, and disability and are enforced at federal level.
These are all governed by the applicable federal, state, and municipal regulations but can be allowed in these categories.
References and educational qualifications
Credit checks, generally only permitted after a job offer
Basic Facts on hiring in the US
There are no legal requirements to carry out pre-hire screening in the US, although some regulated sectors do allow for background checks regarding drug and alcohol use and driving records.
Questions regarding credit or criminal history should only be raised after making a job offer. Questions should not reflect discrimination as workers’ rights are protected by Civil Rights Laws.
US laws set no minimum requirements for contracts and most employment relationships are ‘at will’ and can be terminated by either party. A written agreement need only outline basic terms of the relationship.
If the employer is not operating under the ‘employment at-will’ provisions, employees should receive a comprehensive contract detailing their role, location and any bonuses, benefits, commission, termination, and severance payments.
Employers must ensure correct documentation, including Form I-9, is in place confirming the employee’s legal right to work in the US.
Employers must complete Form W-4 relating to how much withholding tax they deduct for federal taxes.
Employees must be registered with the relevant state’s Labor Agency.
Employer must have workers’ compensation insurance; however, requirements can vary between states.
Employer must establish payroll system to pay employees, pay taxes to the Internal Revenue Service, the state’s tax authority if applicable and file tax returns.
US employers withhold tax and social insurance contributions from employees’ salaries and pay the IRS on their behalf. Payroll regulations apply at federal and state levels, though federal authorities let states decide how frequently employees are paid.
The federal tax year runs from January 1 and returns must be filed by April 15 of the following year. Individual states have varying deadlines. Some municipal authorities also impose taxes.
For federal taxes, employers file a quarterly Form 941 to reconcile all wages and taxes paid during the three-month periods of Jan-Mar, Apr-Jun, Jul-Sep, and Oct-Dec. An annual Form 940 is filed to report and pay federal unemployment taxes due. Monthly, quarterly, and year-end processes for state and local jurisdictions vary by taxing authority.
To do business in the USA, it is vital to have a good understanding of its business or work culture. Making the right impression with the right people is the key to success in the USA, and it is important to back this up with the right research on the market and potential business associates. As a global PEO (Professional Employment Organization) it is our goal to be familiar and updated with the business culture in the country we work with and in. By sharing our knowledge about the American work culture, we want to support your global expansion plans. Therefore, we will address all the aspects of the work culture in the US to start your expansion well-informed.
Work Culture in the US
The US is the most powerful economy in the world and spans six time zones, with Atlantic and Pacific coastlines and land borders with Canada to the north and southwards to Mexico and Central America and the nations of South America. The US’s free enterprise system encourages invention and innovation. American workplace culture blends teamwork and individual responsibility and it is not uncommon for professionals to identify strongly with their work. Higher level management typically draw on their university and college contacts for business.
US office environments can be intensely competitive, with workers striving to be the ‘employer of the year’ or in line for other recognition. Hierarchical office structures can nevertheless be quite open in the relationship between employees and managers. It is time to ‘get down to business’ so here are a few tips on taking the right steps, and avoiding the pitfalls! Here are some tips and information on the work culture in the US:
Punctuality: It is important to be on time or even a little early, as it displays you are eager to make a start on the negotiations.
Business Meetings: These follow defined agendas and, because of the ‘time is money’ philosophy, negotiations can quickly conclude. Communication should be direct, straightforward and to the point. Conflicts tend to be dealt with directly and openly. Switch off the mobile and do not send emails from your phone or laptop.
Hierarchy: structure is clear from the number of acronyms attached to positions in a company. From vice-presidents downwards there are SVPs, EVPs, AVPs and EDs before you reach the more usual MDs. It is as well to get them in the right order.
Introductions and Greetings: Firm handshake with a friendly smile. First names are often used even at initial meeting, with a little small talk.
Business Cards: These can be swapped but in the digital age, not everyone uses them – it is no longer standard practice but may still be performed.
Dress Code: Varies with location and sector. Business attire tends to be formal for men and women, but whereas Wall Street banks expect suits, California’s Silicon Valley techies will not be out of place in shorts and t-shirts. If unsure, err on the side of caution. Casual smart is growing increasingly in office dress code.
Gift-giving: This is rare, and any gifts should be modest and symbolic.
Sealing the Deal: Handshakes are largely symbolic; signing the contract is the closer.
Business Meals: Business is often conducted over breakfast, lunch, or dinner – the golf course is another popular venue.
US Minimum Wage
The national minimum wage of US$7.25 per hour varies across the 50 states and Washington DC. For example, in California the minimum hourly rate is US$14 for companies with more than 26 employees and US$13 per hour for companies with fewer. In 2021, Idaho applied the national minimum, but Hawaii had a rate of US$10.10, Illinois US$11 and Washington DC US$15.20 per hour. Where employees are subject to both state and federal regulations the higher rate applies. For example, Georgia has a minimum of US$5.15 per hour, but companies who are covered by the Fair Labor Standards Act must pay the federal minimum of US$7.25. These are employers who have yearly sales totaling US$500,000 or more or those who engage in inter-state trade, which encompasses most companies.
Probation in the US
Probation, trial, or introductory periods are not covered by federal law, but employers may use them to evaluate new staff before permanent employment. A typical period of 90 days depends on mutual agreement or whether a collective bargaining or union agreement is in force. United States employment is generally ‘at will’, meaning the employer or employee can terminate without reason or cause, as long as it does not violate an individual’s rights on such as race, gender, age, pregnancy, or religion and is not retaliatory. Companies implementing a probationary period must ensure policies and procedures are carefully worded and new hires understand that during and after this trial period the employment remains ‘at will’.
All states have the same ‘at will’ policy, except for Montana – where employees, following a probationary period, can only have their employment terminated for good cause. If no time period has been agreed between the parties, then the default probationary period is six months from the date of hiring.
Working Hours in US
Normal working hours or standard shift is a 40-hour week comprising five eight-hour days with at least eight hours rest in between, although employees often work longer hours. Under the Fair Labor Standards Act (FLSA), hours exceeding 40 in a 168-hour period are considered overtime. Flexibility in the standard nine to five working hours or ‘flexi-time’ depends on individual contracts.
Break times for lunch or dinner are not mandatory under federal law but state laws may provide for minimum meal periods. In states which does not mandate breaks or meal periods, benefits are agreed between employer and employee. Employer / employee agreements for coffee breaks usually do not exceed 20 minutes and are paid as working time. If agreed, breaks are considered part of working hours when calculating any overtime. Unauthorized breaks are not counted.
Overtime in US
US employees generally work more hours annually compared to the rest of the world, working longer shifts and taking fewer vacations. Except for a few occupations (such as transportation) there is no federal restriction on hours worked. Overtime is paid at one-and-a-half times above the usual hourly rate if the employee works more than 40 hours a week averaged over a 168-hour period as covered by the Fair Labor Standards Act. Work on Saturdays, Sundays, holidays, or regular days of rest is not automatically overtime unless overtime is worked on such days.
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