Hiring employees in the United States and their management
We understand the current trends in the US labor market. We can help you find and retain the best talent.
Our experience in the US labor market allows us to advise you not only on the best hiring processes but also on employee management. Here are a few of the most important things to know about managing and hiring employees in the United States.
Just like many other aspects of doing business in the US, hiring employees in the United States works differently than it does in Europe. But the good news is that HR in the US is not usually as administratively demanding. Of course, there are exceptions for a few regulated industries. Most employees are hired on so-called “at-will” contracts that can be terminated by the employer or the employee at any time. On its merits, you can hire or fire employees much faster and easier than in Europe. But the disadvantage is that employees can also leave their jobs just as quickly. A best practice is to set employee conditions at least at the same level as your competition in order to provide employees with fewer grounds to leave “for better opportunities.”
Salaries and working conditions aren’t the only costs you will need to be aware of when employing a workforce in the US. Employees also expect a large number of benefits for their efforts with the most common being contribution to an employee’s retirement savings account, or 401k plan. A health insurance contribution is also quite often expected. The amount often depends on the employee’s position in the company structure. For entry positions, the employer usually splits the costs in half with the employee. But at the management level, an employer is likely to pay the entire amount. Employee benefits also include vacation and sick days, which are not provided by US law. There are other less common benefits that you may contribute to, like an employee’s children’s savings account or college fund, etc.
The correct setup of salaries and employee benefits will have a significant impact on your competitiveness in the US market; therefore, we recommend that you speak with experienced professionals in this area to create the right balance.
Choosing and hiring employees in the United States
First, make sure you have been assigned an Employer Identification Number (EIN). Next, you will have to fill in applications for several different types of taxes:
Federal income tax withholding
Using a W-4 form, each employee will report to the federal tax authority and determine the amount of advance payment they will pay based on their salary. This sum is also dependent on the number of family members claimed, marriage status, etc.).
Federal Wage and Tax Statement
Using a W-2 form, an employee will state the amount of federal tax withholding they paid last year. An employer will then be able to determine the amount of advance payments for the current year.
Each state has its own employment requirements, but it is always required to register to pay taxes and obtain a tax ID number. The overall tax amount and its frequency is calculated based on the amount that you are required to pay for employee’s salaries. For example, mid-size companies usually pay their taxes on a quarterly basis.
Regarding record keeping, we advise any company operating in the US to keep six years of taxes. Some industries require longer record keeping.
Hiring employees in the United States, let alone finding the right ones, is never an easy task. Clearly describing the required skills for an open position and your expectations is always a good start. For the search itself, you can use professional job websites, like Craigslist, LinkedIn or Indeed.
You can also find new employees based on a recommendation from your current employees. In so-called referral programs, employees receive financial compensation for finding and suggesting new candidates. If the said candidate is hired and stays on for a specified period of time, the employee is rewarded for the referral.
After finding an experienced and suitable candidate, you conduct the interview itself. Before hiring employees in the United States, it is common to perform a background check on the candidate. This means checking the job applicant across various federal and state databases. The goal is to confirm their integrity. Do not underestimate this step, as it is vital for the safety of your employees, customers, and the company itself. In some business sectors, this step is mandatory. Similarly, in some industries, it is necessary to have an employee’s certificate of authorization or a negative drug test.
Also as an employer, you need to verify if the job applicant is eligible to work in the US as you are obligated to make sure that employees are authorized to legally work in the country. Complying with this requirement is not a complicated process, and usually filling an I-9 (Employment Eligibility Verification) form will suffice.
Insurance, employee management and HR in the US
Once you hire an employee, even if they are rehired, you need to report them to the Labor Department office of the relevant state. There are different requirements among different states, which are often modified, so it’s always a good idea to check the terms while reporting new employees.
Furthermore, you will need to provide employees with workers’ compensation insurance in case of injury or illness. The conditions differ from state to state. General liability insurance and professional liability are also quite common and some of your clients may require specific limits. When it comes to insurance and your employees, there are many options that could be beneficial and worth exploring.
Overall, employee management, insurance, and HR are incredibly important to the health of your business in the US, which means having the right HR processes in place and employment contracts tied down. All this will save you time and money in the future. Experienced HR managers or external professionals can help you avoid and minimize difficult situations like sensitive employee communications – termination of employment, overtime pay, or the level of employee benefits – as well as limit the opportunities for former employees to pursue legal proceedings against your company, which, depending on the industry, can be quite common in the US.
Considering possible legal issues, we offer our clients consultations and cooperate with experts that will help draft employment contracts, handle damages caused by employees, or the termination of the employment contract. Managing and hiring employees in the United States, is however quite easier than in Europe, as most of these tasks can be automated in the long run.
In the US, salaries are usually paid every two weeks and it is quite common for payroll to be processed manually despite being time-consuming and costly. We suggest hiring specialized HR services that will automatize the entire process for you. Such services include monitoring hours worked, calculating taxes, managing insurance and employee benefits insurance as well as other employee benefits, and mailing paychecks or ordering online payments. We can do this as part of our accounting services.