How to hire and pay employees in The United States
Looking to hire remote workers to join your team? No matter where in the world your employees work, Oyster makes it easy for you to hire, pay, and take care of employees hassle and worry-free.
Before hiring
Before Hiring
Before employing workers in the United States, you'll need to make a critical decision: will you hire employees or engage contractors?
This isn’t just a classification question—it’s a strategic decision that shapes compliance risk, cost structure, and hiring speed.
Misclassifying workers carries serious consequences, including back taxes, penalties, and legal claims that can cost far more than getting it right from the start.
The US operates under at-will employment, meaning either party can end the relationship at any time for almost any reason (with important exceptions for discrimination, retaliation, and public policy violations).
But at-will doesn't mean "anything goes"—federal laws like the Fair Labor Standards Act, Title VII, and the Americans with Disabilities Act still apply, and state laws often add requirements for sick leave, meal breaks, and final pay timing. You'll also need to navigate the distinction between exempt and non-exempt employees for overtime purposes, a classification that depends on salary level, job duties, and how much discretion a worker has in their role.
Recent News
You can do everything “right” when hiring—then a rule changes, a court vacates it, or a state updates its wage floor, and your offer letters suddenly look outdated.
In the U.S., economic factors like wage inflation, overtime eligibility costs, and immigration filing fees don't just hit Finance—they change how you scope roles, set pay, and manage risk. Staying current keeps you from redoing onboarding at the worst possible moment: right after a candidate says yes. See a few significant changes below:
Overtime rules are still a moving cost line item
The Department of Labor's 2024 overtime rule raised federal salary thresholds, but a federal district court struck those increases down on November 15, 2024—pushing many employers back to the prior federal levels (commonly summarized as $684/week and $107,432/year for HCE).
If you made offers assuming the higher thresholds, you may need to re-check exempt vs. non-exempt classifications and adjust budgets for timekeeping and overtime. This is one of those "small change, big payroll impact" moments—especially for mid-level roles that sit near the line.
Minimum wage increases continue into 2025 and 2026
State minimum wage increases on January 1, 2025 and additional increases on January 1, 2026 mean your labor costs can shift simply because an employee works in a different state (or city).
For hourly roles, that's an immediate payroll impact; for salaried roles, it can also affect state-level exempt salary "floors" in jurisdictions that tie exemptions to minimum wage. Action item: refresh wage tables by work location and bake those rates into requisitions before Finance signs off.
Pay transparency laws are expanding—affecting job ads and internal mobility
Pay transparency keeps spreading, and it's not just a "nice-to-have" anymore—it's becoming a posting requirement that can create real compliance exposure.
Illinois, for example, requires employers with 15+ employees to include pay scale and benefits in job postings starting January 1, 2025, and to notify current employees of promotional opportunities.
The practical move: build defensible pay ranges (not guesses), align recruiter scripts, and define how remote roles are handled based on employee location.
Immigration costs are rising—plan for higher fees and longer budgeting cycles
USCIS filing fee increases that took effect April 1, 2024 (including the Asylum Program Fee for many employer petitions) continue to raise the all-in cost of hiring sponsored talent.
Premium processing is also set to increase again effective March 1, 2026 (for many I‑129 classifications, reported as $2,805 to $2,965), which can change whether you expedite and how you commit to start dates. If you sponsor, treat immigration fees as a predictable operating cost—forecast them early and avoid leaving recruiters to negotiate timelines without a budget owner.
Work authorization and onboarding workflows need updates (I‑9 / E‑Verify)
USCIS introduced a new Form I‑9 edition (01/20/25, exp. 05/31/2027) and E‑Verify updated citizenship status selections starting April 3, 2025.
These are "minor" changes until they break your onboarding checklist, create rework, or show up in an audit. Action item: confirm your templates, HRIS/e-onboarding, and training materials match the current acceptable form edition and terminology.
If you're trying to hire employees in United States while also managing global growth, the real challenge isn't finding a rule—it's keeping up when rules and costs shift under your feet. Oyster is built for that reality: software to run hiring and payroll workflows, plus real human support when the edge cases show up and the stakes are high. Start hiring globally.
At a glance
CURRENCY
USD
OFFICIAL LANGUAGE
ENGLISH
PAYROLL FREQUENCY
WEEKLY, BI-WEEKLY, MONTHLY
EMPLOYER TAXES
10-15%
13th / 14th SALARY
N/A
Good to know
Good to know
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Top countries hiring in
United States of America
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Labor laws in
United States of America
Working hours and overtime
The Fair Labor Standards Act requires employers to pay non-exempt employees 1.5 times their regular rate for hours worked beyond 40 in a workweek.
There's no federal limit on how many hours an employee can work, but overtime kicks in after 40 hours regardless of whether work happens across five days or seven. Some states add daily overtime requirements (like California's overtime after 8 hours in a day) or different overtime thresholds, creating compliance challenges when you employ workers in multiple locations.
Minimum wage
Employment contracts
At-will employment means written contracts aren't legally required in most situations—the employment relationship exists whether or not you formalize it.
But that doesn't mean you should skip documentation. A well-drafted employment agreement clarifies expectations around compensation, benefits, intellectual property ownership, confidentiality, and grounds for termination, reducing disputes and protecting your interests even in an at-will state.
Probationary period
There's no legal requirement for probationary periods in the United States, and at-will employment means you can terminate an employee at any time regardless of probationary status.
That said, many employers still use probationary periods (typically 60-90 days) to set clear evaluation milestones, delay certain benefits, or establish a formal review process. Just be clear that a probationary period doesn't create additional termination rights—it's a management tool, not a legal shield.
Pensions
IP protection and non-compete agreements
Employers' ability to enforce non-compete agreements varies from state to state.
Right now, no state law requires an employer to pay its former employees remuneration during the period of the non-compete agreement. However, some employers can choose to compensate their former employees for this with an amount that varies by state and position.
Estimate your savings when using Oyster
Use this calculator to get an estimate of employment costs using Oyster.
(Spoiler alert: It’s much cheaper than setting up entities around the world!)
Benefits and leave in
United States of America
Vacation time
The United States has no federal requirement for paid vacation time—it's entirely at the employer's discretion. Industry standards typically range from 10-15 days annually for new employees, increasing with tenure.
In states like California, accrued vacation time is considered earned wages and must be paid out upon termination, so your policy design has real cost implications.
Sick leave
Sick leave requirements vary dramatically by state and even by city. States like California, New York, and Washington require employers to provide paid sick leave (typically one hour for every 30-40 hours worked), while others have no mandate at all.
The federal Family and Medical Leave Act provides up to 12 weeks of unpaid, job-protected leave for serious health conditions, but only for employees who've worked 1,250 hours in the past year at companies with 50+ employees. Tracking different state accrual rates, carryover rules, and usage rights is where compliance gets complicated.
Maternity and paternity leave
Parental leave
FMLA provides eligible employees with 12 weeks of unpaid, job-protected leave for the birth or adoption of a child, but it's unpaid and only available at larger employers.
A handful of states (California, New York, New Jersey, and Rhode Island) operate paid family leave programs funded through payroll taxes, offering partial wage replacement during leave. Beyond these state programs, parental leave benefits are voluntary—but offering competitive paid leave (often 12-16 weeks or more) is increasingly expected for talent attraction, especially in tech and professional services.
Holidays
View a list of recognized public holidays in the United States here.
Employer tax
US employers pay 7.65% for Social Security and Medicare (FICA), plus federal unemployment tax (typically 0.6% on the first $7,000 of wages) and state unemployment insurance (rates vary by state and employer experience, typically 1-5%).
Total employer tax burden generally ranges from 9-13% of gross wages, though state-specific additions can push this higher.
Individual tax
Employers must withhold federal income tax, Social Security (6.2%), and Medicare (1.45%) from employee paychecks based on W-4 elections. State and local income tax withholding applies in most jurisdictions.
Employees receive W-2 forms annually documenting wages and withholding, and employers must remit withheld taxes on strict schedules—semi-weekly or monthly depending on total tax liability.
Termination in
United States of America
Severance pay is not legally mandated in the US and is typically a matter of agreement between an employer and an employee. When agreed upon, it can be included in employment contracts. Some employers choose to offer severance pay based on the employee’s length of service.
At-will employment means you can generally terminate employees at any time for any lawful reason—or no reason at all.
But at-will isn't absolute. You cannot terminate employees based on protected characteristics (race, gender, religion, age, disability, etc.), in retaliation for whistleblowing or filing complaints, or in violation of public policy (like firing someone for jury duty). Wrongful termination claims carry significant liability, including back pay, front pay, emotional distress damages, and attorneys' fees.
The Worker Adjustment and Retraining Notification (WARN) Act requires employers with 100+ employees to provide 60 days' notice before mass layoffs or plant closures affecting 50 or more workers. The U.S. Department of Labor provides guidance on this topic but clarifies that its resources are not an official interpretation of the regulations, underscoring the act's complexity. Failing to provide WARN notice means you owe affected employees 60 days of pay and benefits. Many states have their own "mini-WARN" acts with broader coverage or different thresholds, so multi-state employers need to track varying requirements.
Best practice is to document performance issues, follow progressive discipline where appropriate, and ensure termination decisions are consistent and well-justified. Even in at-will states, a clear paper trail protects you if a terminated employee files a discrimination or retaliation claim.
When terminating employees in sensitive situations—discrimination allegations, whistleblower complaints, workers on protected leave—consult legal counsel before acting.
At-will employment means there's no legal requirement for either employers or employees to provide notice before termination. Many employers ask for two weeks' notice from departing employees as a professional courtesy, and some offer severance in exchange for a signed release agreement.
Employment contracts can specify notice requirements for either party, but absent a contract, notice is discretionary. Some states require immediate payment of final wages upon termination, while others allow payment by the next regular payday—timing matters for compliance.
Start hiring employees in
United States of America
You have two main options for employing workers in the United States: establish your own legal entity or use an Employer of Record (EOR) like Oyster.
Setting up a US entity (LLC or corporation) gives you full control but requires registering with state authorities, obtaining an EIN, setting up payroll systems, registering for state taxes and unemployment insurance, and maintaining ongoing compliance—a process that takes weeks or months and carries setup costs of $5,000-$15,000 plus ongoing accounting and legal fees. If you're planning significant US expansion or need full operational presence, entity setup makes sense.
For most companies hiring their first US employees or building distributed teams across multiple states, an EOR is faster, lower-risk, and more cost-effective.
Oyster becomes the legal employer, handling payroll, tax withholding and remittance, benefits administration, compliance with federal and state regulations, and ongoing HR support—all while your new team member works for you day-to-day. You avoid entity setup costs, compliance complexity, and the risk of getting multi-state employment wrong. With Oyster, you're up and running in days instead of months, and you get expert support when compliance questions come up—not just self-service software that leaves you guessing.
The total cost of employing a US worker includes salary, employer taxes (9-13% of gross wages), benefits (health insurance, retirement contributions, paid leave), and administrative overhead.
When comparing options, factor in the hidden costs of entity maintenance, payroll systems, legal counsel, and the time your team spends managing compliance. Oyster's transparent, pay-as-you-go pricing means no surprises, no asterisks, and access to experienced employment specialists who've handled thousands of US hires.
Disclaimer: The information provided in this resource is for general educational purposes only and shall not be construed as legal advice. While Oyster strives to provide current and accurate information, Oyster makes no warranties or representations as to the correctness of the content provided and accepts no liability or responsibility for any errors or omissions in the content provided. By using this resource you acknowledge and agree that you do so at your own risk. The content of this resource is subject to change without notice.
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FAQs
What's the difference between an employee and a contractor in the US?
The distinction comes down to control and economic dependence. Employees work under your direction, follow set schedules, use company equipment, and are economically dependent on your business. Contractors control how they complete work, serve multiple clients, provide their own tools, and operate as independent businesses.
The IRS, Department of Labor, and courts apply different tests, but the core question is always: does the worker function as part of your business or as an independent service provider? Getting this wrong triggers payroll tax liability, penalties, and potential worker claims for benefits and protections.
How much does it cost to employ someone in the United States?
Total employment cost equals salary plus employer taxes (typically 9-13% of gross wages) plus benefits. Health insurance alone averages $7,000-$8,000 annually per employee for employer-sponsored coverage, and competitive benefits packages include 401(k) contributions (often 3-6% employer match), paid time off, and other perks.
For a $100,000 annual salary, total cost might reach $125,000-$140,000 when you include taxes, benefits, and administrative overhead—though exact figures vary by location, industry, and your benefits strategy.
Do I need to provide health insurance to US employees?
Companies with 50+ full-time equivalent employees must offer affordable health insurance that meets minimum value standards under the Affordable Care Act or face penalties.
Smaller employers aren't legally required to provide health insurance, but it's often essential for attracting talent in a competitive market. Most professional roles come with the expectation of employer-sponsored health coverage as a baseline benefit. You may want to consider Oyster's US PEO solution.
Can I terminate a US employee at any time?
At-will employment allows termination at any time for any lawful reason, but you cannot fire employees based on protected characteristics (race, gender, age, disability, religion, national origin, etc.), in retaliation for protected activities (filing complaints, whistleblowing), or in violation of public policy. You also cannot violate the terms of an employment contract if one exists.
Even in at-will states, wrongful termination claims are common and costly—document performance issues and consult legal counsel for high-risk terminations.
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