4 Key Points to be Aware of When Engaging a US Worker from Abroad
We are often approached by companies asking ‘How do I place an employee or contractor in the US?”, or ‘How do I manage my international workforce’. The U.S. is a complex employment maze with laws changing from state to state. Here are 4 points we think you should consider before engaging with a worker in the U.S. from abroad:
1. Your ability to engage
If you are looking at employing a worker in the U.S., you will need to have the ability to legally engage with them. US law requires your company to be set-up and compliant in a number of areas before employing anybody. In each state that you want to employ a worker, you would need to be registered, have a license, and maintain compliance.
For instance, if you want to place a worker in New York you will need to go through the process of registering your company in New York (withholding, unemployment, the authority to do business, etc.), obtaining licenses that the state or city may require, and ensuring compliance across the different laws in New York – then if you are looking at placing a worker in a different state, you will need to repeat the process particular to that state’s laws. It’s key to keep in mind that every state has different requirements for setting up your business along with different reporting and compliance aspects.
2. Management of taxes
With a fractured tax system, there are many complications you’ll want to consider to ensure you’re paying any of the approximately 200 or so taxes to the right department, within the correct time frames whilst keeping abreast of any tax law changes/updates.
Taxes vary on a federal, state, and city-level with some states, such as San Francisco, charging an extra 1.5% just to employ someone within the city's geographical limits. Some taxes relate to you as the employer – for instance, SUTA (State Unemployment Tax) is a rate selected, based on a variety of factors including your experience as the employer, previous workers who have claimed unemployment, and that particular states unemployment ratings.
Often if you are a new employer who has just set-up you will be allocated a higher bracket than an experienced employer with a good history
3. Insurances
You’ll want to ensure that you have the insurances required to engage with your workforce. The 2 insurances you’ll want to consider:
a. General Liability (GL)/Professional Indemnity (PI) Insurances
These are the insurances that cover your general business practices and the errors and omissions of your workforce, from a third-party claim
b. Workers Compensation
Most employer’s in the U.S. are required to have workers’ compensation coverage which covers claims that arise from an injured employee which provides for lost wages and medical expenses. Different industries will be provided with a particular classification code.
The classification code that is selected is based on a combination of factors that relate to the role, the employer, and the perceived risk. If you are unable to find a carrier willing to write you a policy across the US for workers’ compensation, then you may have to search state by state to find an insurance broker willing to source an insurance company that will write you a policy.
4. Compliance and Employment law
The US has various employment laws that are vastly different from a lot of other countries - for example, it is common in a lot of countries to offer a termination notice, not so in the US where you can essentially terminate your workforce without notice under the theory of “at-will” employment.
There can be strict regulations around how to properly handle a termination, with discrimination always a factor to consider. It’s key to consider that the way in which termination is handled varies state by state. For example, some states require all hours worked are paid out on the final day otherwise the worker can be entitled to a regular days’ pay for every day until they receive their final pay, regardless of the fact that no hours were worked on these days.
The time, obvious costs, and potential risk of managing any of the above functions incorrectly means a lot of companies seek assistance to expertly guide them through this process. An Employer of Record solution like that of PGC enables your company to make placements from your current country. This removes your need as the employer to manage all of the above functions.
By outsourcing these factors you can rest assured that the risk has been mitigated and that compliance in all areas is taken care of, resulting in a cost-effective way to manage your workforce.
If you would like to discuss the above in any more detail then feel free to reach out to the team at PGC so we can talk you through the nuances of US employment law and how it could affect you as the employer.
Disclaimer: All information written here is for general informational purposes only and is not intended to be a substitute for professional and/or legal services.