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Employer of Record (EOR) in USA

Key Takeaways

  • A United States EOR (United States Employer of Record) enables international companies to hire in the US quickly and more cost-effectively than setting up a subsidiary company.
  • A US EOR benefits most companies expanding into the United States, saving companies money and time and ensuring full compliance with US tax and employment laws. 
  • Our picks for the best United States EORs in 2024 are Horizons, Alariss Global, Foothold America, Next Generation Payroll, and Headcount Management.

What is a USA Employer of Record?

In the United States, an Employer of Record (USA EOR) is a service provider or organization that takes on the responsibility of being the legal employer for an individual or group of employees. The EOR assumes various employer-related obligations, such as payroll processing, tax withholding and reporting, benefits administration, and compliance with labor laws and regulations.

When a company engages an EOR, it allows them to outsource the administrative and legal responsibilities associated with employing workers. This arrangement can be particularly beneficial for companies expanding into new markets or operating in multiple jurisdictions, as it helps them navigate complex employment laws and regulations without establishing a legal entity in each location.

The EOR typically handles tasks such as:

  1. Payroll: Calculating wages, processing payments, and managing payroll taxes.
  2. Human Resources (HR) and Benefits: This includes administering employee benefits, managing employment contracts, handling HR-related issues, and ensuring compliance with employment laws.
  3. Compliance: Staying up-to-date with labor laws, regulations, and tax requirements.
  4. Risk Management: Mitigating employment-related risks and managing workers’ compensation insurance.
  5. Taxation: Withholding and remitting payroll taxes, including federal, state, and local taxes.

By engaging an Employer of Record, companies can focus on their core operations while leaving employment’s administrative burden and legal complexities to the EOR. It provides flexibility, scalability, and expertise in managing employment-related matters, allowing businesses to streamline operations and expand their workforce efficiently.

Top 5 United States EOR Companies

  1. Horizons is an international Employer of Record, with extensive experience in hiring, visa support and contractor management in the US and throughout North America. With coverage in 180+ countries and a leading SaaS platform, Horizons is the ideal choice for any company hiring US employees as part of a global distributed team. 
  2. Alariss Global (Alariss) provides a unique US hiring platform through combining US EOR services with a talent marketplace and recruitment service. Alariss is especially suitable for global companies looking to build their Sales and Business Development teams in the United States. 
  3. Foothold America is a US EOR provider that offers company incorporation services alongside its EOR and payroll solutions. This makes Foothold a useful choice for any company seeking to expand into the US but unsure as to the size of its operations. 
  4. Next Generation Payroll is a US payroll, staffing and EOR firm that can hire and pay your staff anywhere in the US. They can also support your company with payroll financing, HR consulting and premium healthcare and benefits. 
  5. Headcount Management is a United States EOR company that also provides extensive back-office support services to companies expanding into the US. Headcount is the ideal choice for any company needing additional outsourcing alongside EOR. 

What Services Does a United States Employer of Record Provide?

An Employer of Record (EOR) in the USA provides services to companies that need assistance with their employment-related obligations. These services typically include:

  1. Payroll Processing: EORs handle payroll calculations, issue paychecks or direct deposits, and ensure accurate and timely payment of wages to employees. They also manage payroll taxes, including withholding and remittance of federal, state, and local taxes.
  2. Employee Benefits Administration: EORs often administer employee benefits such as health insurance, retirement plans, and other perks. They manage enrollment, handle employee inquiries, and coordinate with insurance providers or benefit vendors.
  3. HR Administration: EORs may handle various human resources functions, including employee onboarding, offboarding, and personnel record management. They help maintain compliance with employment laws and regulations, provide guidance on HR policies, and assist with performance management and disciplinary actions.
  4. Compliance Management: EORs ensure compliance with federal, state, and local employment laws and regulations. They stay updated on changes in labor laws, tax requirements, and reporting obligations. This includes managing employee tax withholding, unemployment insurance, workers’ compensation insurance, and other compliance-related matters.
  5. Employment Contracts and Documentation: EORs can assist with drafting employment contracts, offer letters, and other employment-related documents. They ensure the necessary legal provisions are included, and the documentation meets local employment laws.
  6. Risk Management: EORs help mitigate employment-related risks by ensuring compliance with employment laws, providing guidance on labor disputes or claims, and managing workers’ compensation insurance. They may also support handling workplace safety issues and implementing risk management strategies.
  7. Tax Reporting and Filings: EORs handle tax reporting and filing requirements, including preparing and distributing W-2 forms to employees at the end of the year. They also handle tax-related inquiries and respond to government audits if required.

It’s important to note that the specific services an Employer of Record provides may vary depending on the provider and the client company’s needs. You should consult with an EOR directly to understand their full scope of services and how they can tailor their offerings to meet your specific requirements.

How to Engage a United States Employer of Record?

To engage a United States Employer of Record (EOR), you typically follow these steps:

  1. Identify Your Needs: Determine your specific requirements and the scope of services you need from an EOR. Consider factors such as the number of employees, the states in which you operate, the level of HR support required, and any specialized services you may need.
  2. Research and Shortlist EOR Providers: Conduct thorough research to identify reputable EOR providers that align with your needs. Look for companies with experience in your industry, a strong track record, and positive client reviews. Consider factors such as service offerings, pricing, customer support, and expertise in compliance with U.S. employment laws.
  3. Initial Consultation: Reach out to the shortlisted EOR providers to schedule an initial consultation. During this consultation, discuss your specific requirements, ask questions about their services, and understand how they can meet your needs. It’s an opportunity to assess their expertise, responsiveness, and ability to address your concerns.
  4. Proposal and Agreement: After the initial consultation, EOR providers typically provide a proposal outlining the services they will provide and the associated costs. Review the proposal carefully, ensuring that it covers all the services you require and that the terms and conditions are acceptable to you. Once you have selected an EOR, sign an agreement that clearly defines the terms of the engagement, including service levels, responsibilities, and fees.
  5. Onboarding Process: The EOR will guide you through the onboarding process, which may involve providing employee information, setting up payroll accounts, and sharing relevant documentation. They will work with you to ensure a smooth transition and provide guidance on any additional steps required from your end.
  6. Ongoing Communication and Collaboration: Maintain regular communication with the EOR to address any concerns, provide updates on employee changes or new hires, and seek assistance with any employment-related matters. It’s crucial to maintain an open line of communication to ensure a successful partnership.

It’s important to note that engaging an EOR is a significant decision, and it’s advisable to consult with legal and financial professionals to understand the implications and ensure compliance with relevant laws and regulations. Additionally, each EOR may have its own specific processes, so it’s important to follow their guidance throughout the engagement process.

What are the Benefits of a United States Employer of Record?

Engaging a United States Employer of Record (EOR) can offer several benefits to companies, including:

  1. Streamlined Employment Processes: EORs handle the administrative tasks associated with employment, such as payroll processing, tax withholding, and benefits administration. This allows companies to focus on their core business operations while offloading time-consuming HR and compliance tasks.
  2. Compliance with Employment Laws: EORs have expertise in navigating complex employment laws and regulations in the United States. They help ensure compliance with federal, state, and local employment laws, reducing the risk of penalties or legal issues arising from non-compliance.
  3. Scalability and Flexibility: EORs provide scalability, allowing companies to quickly expand their workforce without the need to establish legal entities in new jurisdictions. This is particularly beneficial for companies expanding into new markets or those with project-based staffing needs.
  4. Cost Savings: Engaging an EOR can result in cost savings compared to establishing and maintaining legal entities in multiple jurisdictions. EORs typically leverage their expertise and economies of scale to manage employment-related costs more efficiently.
  5. Access to HR Expertise: EORs often provide HR support and guidance, offering expertise in areas such as employment contracts, onboarding, and performance management. This can be valuable, especially for companies without a dedicated HR department or those seeking specialized HR knowledge.
  6. Reduced Administrative Burden: EORs handle payroll processing, tax filings, and other administrative tasks, saving companies from the burden of managing these functions internally. This can free up time and resources, allowing companies to focus on strategic initiatives and core business activities.
  7. Risk Mitigation: EORs help mitigate employment-related risks by ensuring compliance with employment laws, managing workers’ compensation insurance, and providing guidance on HR best practices. They can help navigate labor disputes, minimize the risk of legal claims, and provide support in managing workplace safety.
  8. Local Expertise: EORs often have in-depth knowledge of local employment practices, regulations, and cultural nuances. This is particularly advantageous for companies operating in multiple states or regions, as it ensures compliance with local employment requirements and fosters good employee relations.

It’s important to note that the benefits of engaging an EOR can vary depending on the specific needs of each company. It’s advisable to assess your requirements and conduct thorough research to determine if utilizing an EOR aligns with your business objectives and long-term strategy.

What are the Disadvantages of a United States Employer of Record?

While engaging a United States Employer of Record (EOR) can offer several benefits, there are also potential disadvantages to consider:

  1. Less Control over HR Functions: When you engage an EOR, you are entrusting the management of certain HR functions to a third party. This means you have less direct control over HR processes and decision-making. Some companies may prefer to have full control and oversight of their HR operations.
  2. Potential Communication Challenges: Depending on the arrangement and the EOR’s location, there may be communication challenges due to time zone differences or language barriers. It’s important to establish clear lines of communication and ensure effective collaboration with the EOR.
  3. Limited Customization: EORs often offer standardized service packages, which may not fully align with your specific requirements. Customization options may be limited, and you may need to adapt your HR processes to fit within the framework provided by the EOR.
  4. Cost Considerations: While engaging an EOR can result in cost savings compared to establishing legal entities in multiple jurisdictions, it still involves additional expenses. EORs charge fees for their services, which can vary depending on the level of support and the number of employees. It’s important to carefully evaluate the costs and compare them to the potential benefits.
  5. Potential Dependency on a Third Party: By engaging an EOR, you become reliant on their services and expertise. If there are any issues or disputes with the EOR or if you decide to switch providers, transitioning away from their services can be complex and time-consuming.
  6. Cultural and Employment Law Differences: If your company operates internationally, engaging a U.S.-based EOR may introduce challenges related to cultural differences and understanding local employment laws. It’s crucial to work closely with the EOR to ensure that they are well-versed in the specific employment requirements of your target jurisdictions.
  7. Limited Employer Branding: When employees are technically employed by the EOR, it can create challenges in terms of establishing and promoting your company’s employer brand. Employees may feel disconnected from the client company’s culture and identity, which could impact engagement and loyalty.
  8. Potential Service Limitations: The range of services offered by EORs may vary. Some EORs may not provide certain specialized services or may have limitations on the industries or types of workers they can support. It’s important to evaluate whether the EOR’s service offerings align with your specific needs.

Before engaging an EOR, it’s crucial to conduct thorough research, assess your company’s unique circumstances, and carefully evaluate the advantages and disadvantages to make an informed decision.

Choosing a US EOR Company

Engaging a United States Employer of Record (EOR) can provide numerous benefits, such as streamlined employment processes, compliance with employment laws, scalability, cost savings, access to HR expertise, and risk mitigation. By outsourcing administrative and compliance responsibilities, companies can focus on core business operations and expand their workforce efficiently.

We recommend going with a US EOR that has an established record for hiring and paying employees in the US, and an excellent understanding of the laws that apply to EOR service there. 

FAQs

No, Employers of Record (EORs) can benefit a range of companies, regardless of their size or expansion plans. While EORs are particularly advantageous for companies expanding into new markets or operating in multiple jurisdictions, they can also assist companies that want to streamline their employment processes, focus on core business operations, ensure compliance with employment laws, or access specialized HR expertise. EORs offer scalability, cost savings, and risk mitigation, making them a viable option for various organizations.

Engaging an Employer of Record does not alter the daily working relationship between employers and employees. The EOR becomes the legal employer of record for administrative and compliance purposes, managing payroll, taxes, benefits, and other employment-related tasks. However, the client company (the employer) maintains control over the day-to-day work, job responsibilities, performance management, and employee supervision. Employees continue to work directly with their managers and carry out their duties as before. The client company maintains a strong influence over the employee's job-related decisions, while the EOR focuses on the administrative and legal aspects of employment.

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