Employer of Record in the United States

In a US employer of record arrangement, the provider is the contracted employment counterparty, while your business directs the work within the agreed division of responsibilities. Before choosing this route over direct hiring, review the actual employing entity, the rules of the employee’s work state and the tax and workplace duties that may still apply to your business. For genuinely independent services, 4dev.com is a global contractor platform that works with contractors in the United States.

What an employer of record does in the United States

The employer of record, or EOR, is the provider named as the employing party in the proposed arrangement. Your service agreement and the employee’s offer or employment terms should identify who issues the terms, administers wages and employment taxes, handles benefit enrollment and receives your work records. Read them together with the client’s work-direction responsibilities to establish the agreed division of tasks.

The provider’s onboarding process, employment documents and benefit-plan terms show which administrative tasks you can delegate, including while you establish your own employment infrastructure. Use those documents and the individual’s work-authorization position to assess the proposed start date. The contract identifies the agreed services; employer responsibility under each applicable law needs the assessments below.

US EOR legality depends on the arrangement and the state

Permission to operate and employer responsibility depend on the actual arrangement and the employee’s work state. Identify the provider’s employing entity, your business’s role, the work location and the powers each party exercises before assessing the applicable rules. Form W-2 reports employee wages; neither that reporting form nor an EOR label determines all the permissions and duties the arrangement requires.

Federal employment tax and workplace duties use different tests

Federal employment-tax common law examines the right to control what is done and how. Ordinary payroll outsourcing generally leaves the common-law employer responsible for federal employment-tax duties, even when the provider fails to perform them. With voluntary IRS certification as a certified professional employer organization, or CPEO, the specified federal employment-tax allocation depends on the employee category and the remuneration the provider pays: for remuneration it pays qualifying worksite employees, the CPEO is generally solely liable for employment taxes; for remuneration it pays non-worksite employees, both it and the customer can be liable. Establish that scope before relying on CPEO treatment.

The FLSA wage-law definition includes a person acting directly or indirectly in an employer’s interest in relation to an employee; assess which parties meet it in the actual relationship. Title VII separately prohibits covered employers from discriminating in hiring, dismissal, compensation and employment conditions because of race, color, religion, sex or national origin. Its general employer definition requires fifteen or more employees on each working day during at least twenty calendar weeks of the current or preceding year, with statutory exclusions. Wage, discrimination, benefit, immigration and corporate-tax duties each need their own determination.

California’s paid-sick-leave law covers staffing-agency employees, with the employer or joint employer responsible for qualifying employees’ leave. FMLA joint employment considers the whole relationship; a PEO’s payroll, benefits and paperwork administration alone does not establish it. A secondary employer must comply with FMLA’s prohibited-acts provisions for its jointly employed employees even if it is not otherwise covered by FMLA. For ACA employer shared responsibility, identify the common-law employer and assess whether a third-party coverage offer qualifies on its behalf; these law-specific tests do not establish that every EOR client is a joint employer.

When Florida employee-leasing rules apply

Florida’s employee-leasing definition and exclusions determine whether an arrangement enters that state’s leasing regime. Review how the employees are assigned, the client function they perform and the parties’ allocation of control. Among the excluded arrangements are:

• Temporary help that supplements the client’s workforce for specified situations such as absences, temporary skill shortages, seasonal workloads or special assignments and projects.
• Assignment of only one employee category to perform its inherent function, where that function is separate and divisible from the client’s primary business.
• Ongoing facilities staffing of a specific client function, subject to both limits: the assigned individuals comprise no more than 50 percent of the workforce at the client’s worksite, and no more than 20 percent of those assigned to the particular function were employed by the client immediately before the arrangement began.

Where Florida’s employee-leasing licensing rules apply, a leasing company or controlling person must obtain the required departmental licence before engaging in business, subject to the applicable registration or exemption route. The out-of-state de-minimis registration route has cumulative conditions concerning domicile permission, client location, the provider’s Florida office and solicitation, and the number of leased workers in the state. A foreign client’s location alone does not establish eligibility; the registry section sets out the conditions and identity checks.

Florida’s licensed leasing regime establishes the employment relationship through a written provider–client agreement and requires written notice to each assigned worker. The client agreement must place wage payment on the leasing company even if the client has not paid it, assign payroll-tax responsibility and retain the company’s authority to hire, terminate, discipline and reassign workers. The client may retain the right to accept or cancel an assignment. Match the proposed responsibilities to that state arrangement and obtain the applicable legal basis for any other work state.

Check the contracting entity in federal and state registries

Check the contract’s legal entity under the employee’s applicable work-state rules, and check IRS certification separately if the provider relies on CPEO status. Start with the proposed signatory’s legal name, employer identification number, or EIN, and the entity that will fulfill the employment obligations. If a group brand or another company appears in the proposal, ask for the documents connecting that name to the actual contracting and employing parties.

Match the CPEO name and EIN

Use the IRS CPEO public listings to inspect the claimed certification and its effective date. A CPEO contract must contain the exact name and EIN of the CPEO fulfilling the covered federal employment-tax obligations. Have the provider reconcile those contract details with the listed organization before relying on its certification.

Certification begins on its effective date and continues until the IRS revokes it or the organization voluntarily terminates it earlier. Ask how the provider will notify you of a suspension, revocation or voluntary termination, and what records and transition assistance it will supply if its status changes. For a CPEO/customer contract, Form 8973 must notify the IRS of both the start and the end of the contract; obtain confirmation of who will complete that reporting.

Check Florida permission separately

For a Florida work location, apply the leasing definition and exclusions before searching for permission. If the arrangement falls within the licensing regime, obtain the actual company licence and any required controlling-person permission, or identify the registration or exemption relied on. Use the Florida DBPR licensee search to inspect the relevant entity; it supports searches by name, licence number, city or county, and licence type.

Florida’s out-of-state de-minimis registration route requires all of the following conditions:

• The leasing company is domiciled outside Florida and is licensed or registered as an employee leasing company in its state of domicile or residence.
• It does not supply leased employees to a client whose business is located or domiciled in Florida.
• It maintains no office in Florida.
• It does not solicit clients located or domiciled in Florida.
• It has no more than 50 leased employees working in Florida.

Ask for evidence supporting every condition, including the company’s Florida worker count and the client-business location. The route provides registration rather than a Florida business licence; hiring a small number of workers or having a foreign client addresses only part of the test. For an initial Florida employee-leasing licence, the applicant must have at least $50,000 in tangible accounting net worth: that is a provider licensing requirement, not a required client deposit.

Check	Match these fields	What it establishes
IRS CPEO identity and status	Exact contract name and EIN; listed organization; certification effective date and current status	Whether the provider’s claimed IRS certification matches the contracted entity; assess the covered employee and remuneration separately
CPEO contract reporting	CPEO/customer parties and the contract’s start or end; Form 8973 reporting responsibility	The notification required for that CPEO/customer contract, rather than state employment permission
Florida licence	Actual leasing company and any relevant controlling person; licence number and record	The permission record for the identified party, after establishing that the arrangement enters Florida’s licensing regime
Florida de-minimis registration	Registered entity; domicile permission; client-business location; office and solicitation facts; Florida leased-worker count	Whether the documented arrangement meets every condition for this particular registration route
Another work state	Employee’s actual location; employing entity; applicable arrangement category and permission basis	The separate state assessment needed before relying on the Florida example

Retain both registry records and the basis for the applicable route with the signed terms. The federal and Florida checks answer separate questions about certification, tax treatment and state permission.

Who signs the employment, service and IP documents

Match each document to the party it binds: your business and the provider for service terms, the employing entity and employee for employment terms, and the relevant rights owner for IP transfers. Read the offer, service agreement and rights documents together to reconcile names, responsibilities and scope. This document-review checklist sits alongside the legal requirements of the arrangement.

Client	EOR	Employee
Service agreement: Agree the services with the identified provider and establish which entity will employ the worker.	Identify the contracting and employing entities, including any partner, and provide the proposed service terms.	Obtain confirmation of the employing entity and the client assignment rather than assuming the service agreement contains the employee’s terms.
Employment terms or offer: Check that the proposed duties, work location, schedule and compensation match the agreed role.	Provide the actual employment documents and identify who issues and signs them for the employer.	Review and accept the applicable employment terms; confirm the employer, work location and points of contact.
Work direction and records: Agree who supplies hours, work-location changes, leave requests and performance information, and who can approve changes.	Record the employer’s retained powers and the process for implementing client instructions and maintaining work and wage records.	Know where to submit hours and requests, report changes and obtain employment decisions.
Tax and benefit duties: Request the allocation of statutory responsibility and administrative tasks, the benefit-plan documents and any CPEO contract-reporting confirmation.	Identify the responsible tax entity and benefit-plan parties; for a CPEO contract, include its exact name and EIN and assign Form 8973 reporting.	Supply the required withholding and enrollment information, and obtain the actual eligibility and coverage terms.
IP documents: Obtain the rights chain reaching your business, with deliverables, existing-material exclusions and any onward transfer identified.	Establish which rights it owns or receives and provide the instrument conveying the relevant rights to the client.	Identify any rights that remain personally owned and the documents conveying rights from their owner.
Exit cooperation: Agree how employment instructions, final amounts, records and rights documents will be handled when work or the service relationship ends.	Identify the employer’s exit process, responsible contacts and record-delivery commitments.	Receive the applicable employment communications and know how to obtain the records and benefit information relevant to the exit.

Follow the IP chain to the client

Qualifying employee work made for hire gives initial copyright ownership to the employer or other person for whom it was prepared, unless the parties expressly agree otherwise in a signed writing. Identify that owner for the actual deliverables; the provider’s wage administration does not establish that your business owns the output. Then inspect the documents through which the relevant rights reach your business.

Outside qualifying work made for hire, initial copyright ownership rests with the author or authors. A transfer, unless it occurs by operation of law, needs an instrument, note or memorandum in writing bearing the rights owner’s or its duly authorized agent’s signature. Trace rights from the employee if they start there, or through the provider’s onward transfer to your business if it owns or receives them. At each step, reconcile the deliverable scope and exclusions with the rights actually obtained.

Specially ordered or commissioned work has a separate work-made-for-hire route requiring both a statutory category and an express agreement in a signed written instrument. Those conditions do not replace the assessment of qualifying employee work. Patent applications, patents and interests in them are assignable by an instrument in writing, so review the patent assignment separately from the copyright provisions.

Read liability and subcontracting clauses

The indemnity provisions should identify covered claims, parties and losses, exclusions or limits, and the notice and cooperation required after a claim. Establish who selects counsel, controls settlement and bears losses outside the agreed coverage. Assess that contractual allocation alongside each party’s statutory duties.

If the provider uses another employing entity or reserves a substitution right, establish which entity must sign, what notice or consent applies, and how employee records and IP rights will reach replacement parties. Compare the actual insurance policies or coverage evidence with the risks and contractual obligations; a group brand or subcontracting clause does not supply that evidence.

The document review also needs employee-data provisions, any cross-border transfer documentation and security evidence for the systems holding employment records. For equity awards, establish the issuer, required documents and each party’s administrative role from the actual contracts and plan documents.

Hiring through an EOR: steps and statutory deadlines

Plan the start date around provider readiness and the individual’s eligibility. The provider’s timetable should cover documents, any screening, benefit enrollment, payroll cutoff and work authorization, distinguishing pre-start dependencies from duties triggered by the hire.

Before the agreed start date

Give the provider the actual duties, work address, schedule and compensation for its wage and exemption assessment; salary alone does not decide overtime exemption. Before finalizing the offer, reconcile the employing entity’s work-state permission basis, itemized terms, benefit eligibility and documents establishing your rights to the work.

A hire needing sponsorship also requires the proposed petitioner, immigration category, supporting documents and lawful-start conditions, assessed separately from Form I-9 verification. Confirm this person’s screening and benefit-coverage dates in the timetable.

Step	Who supplies or completes it	Timing / dependency
Establish location, status and duties	Client and individual supply the intended work location and role; provider identifies the employing arrangement and applicable requirements	Resolve the proposed relationship, duties and work-state scope before finalizing the offer
Confirm the provider entity and permission	Provider supplies the actual employer’s identity and the relevant state licence, registration or other legal basis	Complete the arrangement and permission review for the proposed location before relying on provider readiness
Agree the itemized offer and benefits	Provider supplies wage terms and plan documents; client confirms the role and budget; individual reviews the offer	Confirm the applicable wage and exemption treatment, plan eligibility, enrollment dependencies and coverage-start terms
Complete employment and IP documents	Actual contracting parties complete the documents applicable to the arrangement and the rights chain	Agree a document-completion schedule before the proposed start; use the applicable state requirements rather than a universal national employee-contract form
Assess work authorization and arrange verification	Individual supplies eligibility information; employer or authorized representative completes its verification duties; proposed petitioner handles any sponsorship process	Necessary authorization must support the start; the I-9 completion clocks below are separate from immigration processing
Collect withholding information and assign notices	Employer obtains the new employee’s 2026 Form W-4; provider identifies applicable state forms and delivery or posting responsibilities	Complete withholding setup and assign each notice by its own applicable requirement; confirm the individual’s form and work-state needs
Confirm payroll readiness	Provider gives its cutoff, required inputs, first-payroll schedule and responsible contact; client supplies agreed records	Obtain the documented commercial schedule for this hire, including any missing input or authorization dependency
Report the California hire where applicable	Employer reports a new or qualifying rehired employee working in California to the New Employee Registry	Within 20 calendar days of the first day services are performed for wages; the rehire rule includes separation of at least 60 consecutive days

Deadlines that begin when work starts

The employee must complete and sign Form I-9 Section 1 no later than the first day of employment for pay; it can be completed after accepting the offer. For Section 2, the employer or an authorized representative has three business days from hire to complete and sign the verification under the USCIS employer-review instructions. For a job lasting fewer than three days, that employer step is due by the first paid workday.

California’s electronic new-hire reporting also has a submission cadence: two monthly reports spaced at least twelve and no more than sixteen days apart. No report should be submitted when there are no new or rehired employees to report. Configure that cadence alongside each covered employee’s reporting deadline, without making it a condition that extends the individual deadline.

These deadlines run in parallel from the first day of work for pay; they do not add up to provider preparation time. Keep the proposed first-payroll date and immigration or benefit-activation dependencies on the provider’s separate schedule.

California’s annual workplace-rights notice follows a recurring calendar deadline. The law took effect on 1 January 2026 and requires yearly individual written notice by 1 February in languages normally used at the workplace, while required postings continue. Assign both delivery and posting responsibilities rather than treating one as completion of the other.

The same law required employers to allow emergency-contact designation by 30 March 2026. Where required by law, the employer must notify that contact if a worker is arrested or detained at work and the employer knows about it. Include designation and notification in the operational handoff.

What an EOR costs, line by line

An EOR quote needs the agreed gross salary, applicable employer charges, benefits and the provider’s contracted service price. Keep employee withholding within gross wages rather than adding it again as an employer contribution. Request the employing entity’s rates, the employee’s work-state assumptions and an explanation of what each commercial charge includes.

Component	Employer cost or employee withholding	What to request
Gross salary	The employee’s agreed gross compensation, before withholding	Annual or hourly amount, pay period, schedule and the treatment of variable compensation
Ordinary employer FICA	For covered 2026 wages, employer Social Security is 6.2% up to the $184,500 annual base; employer Medicare is 1.45% without a wage-base cap	The applicable covered-wage assumptions and the annual cap calculation, separately from the employee shares
Federal unemployment tax, FUTA	Employer tax of 6.0% on the first $7,000 paid to each employee during 2026; 0.6% only with the maximum qualifying credit	The credit assumptions, relevant state credit-reduction treatment and how any later adjustment will be reconciled
State employer charges	Applicable unemployment, training and leave charges; California UI and ETT are employer contributions	The provider’s assigned UI rate and taxable base, applicable training charge and the employer share of any covered leave premium
Employee deductions	Employee income-tax withholding and employee tax shares reduce gross wages; California SDI and personal income tax are employee withholding	Separate employee deductions from the charges added to salary; identify each deduction’s applicable base
Workers’ compensation and other insurance	Actual applicable insurance costs; California requires workers’ compensation for employers with one or more employees	The policy, coverage relevant to the role and work location, and the amount included in the quote
Statutory and agreed benefits	Employer cost depends on legal coverage, employee eligibility and the actual plan or employment commitment	Employer and employee premium shares, enrollment conditions, coverage dates, leave commitments and retirement-plan terms
Overtime, bonus and equity arrangements	Costs depend on the employee’s applicable wage rules and agreed compensation	Exemption assessment, overtime assumptions, bonus treatment and the issuer’s and provider’s roles for any equity award
Provider service charge	The agreed price for the provider’s specified services	Pricing basis, included tasks, exclusions and the contract provisions governing changes
Onboarding, exit or deposit terms, if quoted	Conditional commercial items determined by the actual contract	Each charge’s trigger, any refund or credit terms, and whether it is included in the service price

The maximum FUTA credit is 5.4%, subject to state unemployment taxes being paid in full, on time and on the same wages subject to FUTA, and to the state not being a credit-reduction state. California EDD’s FUTA guidance for wages paid in 2025 warns of rising costs while its federal loan remains unpaid. For a 2026 quote, obtain the applicable credit-reduction assumption and filing reconciliation rather than treating the full-credit rate as established for California.

California’s 3.4% new-employer UI rate applies for two to three years; it does not establish the EOR’s assigned rate. The state’s 2026 UI taxable base is $7,000 per employee per calendar year, and ETT is 0.1% on the first $7,000. Its 2026 SDI rate is 1.3% on all wages under the uncapped rule, but SDI is withheld from the employee. Additional Medicare withholding is also employee-only: 0.9% on Medicare wages the employer pays above $200,000 in the calendar year, with no employer share.

Minnesota’s announced 2027 Paid Leave premium illustrates why the share matters: the total is 0.88% of covered wages, and employers may collect up to 0.44% from employees. Qualifying small employers have a reduced employer share. Ask for the applicable coverage, wage base and employer category before incorporating a leave premium into the quote.

Annual employer FICA with the Social Security cap

The manager illustration uses the BLS May 2025 national annual mean for computer and information systems managers as a hypothetical ordinary FICA-covered salary in 2026. The survey measures gross straight-time wages for full- and part-time employees, rather than an individual offer or employer benefit costs. At that assumed salary, Social Security reaches its annual ceiling while Medicare continues on the covered wages.

Hypothetical gross annual salary	$192,160	BLS — May 2025 national wage table
Annual employer Social Security	$11,439.00	BLS — May 2025 national wage table; IRS — Employer’s Tax Guide
Annual employer Medicare	$2,786.32	BLS — May 2025 national wage table; IRS — Employer’s Tax Guide
Annual salary plus employer FICA only	$206,385.32	BLS — May 2025 national wage table; IRS — Employer’s Tax Guide
Effective employer FICA on the assumed salary	7.40%	BLS — May 2025 national wage table; IRS — Employer’s Tax Guide
Annual overstatement if the Social Security ceiling were ignored	$474.92	BLS — May 2025 national wage table; IRS — Employer’s Tax Guide

This illustration rounds each annual tax component to the nearest cent, with exact half-cent ties rounded to the even cent, before adding the components to salary. It is an annual budget calculation; actual pay-period withholding and tax-return rounding require their applicable rules. The subtotal excludes unemployment taxes, state payroll charges, workers’ compensation, other insurance, leave and benefits, overtime, additional compensation and provider charges.

Add the actual remaining components to the agreed salary and applicable employer taxes. The US hiring guide has the full salary references and employment-cost scenarios.

Compare like-for-like quotes

Give providers the same work location, duties, salary, pay period and benefit requirements, then reconcile their employer rates and plan terms. Compare service prices against included tasks, input cutoffs and treatment of changes or corrections. For any quoted currency conversion, funding-currency choices or exit charges, require the contractual calculation and trigger.

For sponsorship, request a separate itemized immigration estimate from the proposed petitioner, including the legal and processing assumptions. Assess any flat surcharge against the petition category and agency and court implementation discussed under immigration. Keep conditional items separate from recurring costs when comparing the complete quote with direct-employer setup.

The employee’s work location changes the provider’s obligations

The provider must assess the employee’s actual work location when setting wage, overtime and leave terms. Supply the state and locality, duties, schedule and planned moves for that assessment and its implementation. The selected-state examples below need a separate assessment for other locations.

Work-location issue	Provider evidence to request	Why it changes the offer
Wage floor and covered category	The wage determination for the actual address and role: California’s general statewide floor is $16.90 per hour from 1 January 2026; Washington’s is $17.13 per hour for most workers in 2026; Florida’s general floor reached $15.00 per hour on 30 September 2026	California can require a higher applicable industry or local floor, and Washington local minimums can be higher. Florida’s statutory definitions and tip-credit scope require their own review.
Workday and consecutive-day scheduling	The nonexempt pay calculation and timekeeping rules for the proposed schedule, including California daily and seventh-day overtime	California generally requires 1.5 times the regular rate for hours beyond eight through twelve in a workday, then double time beyond twelve; a weekly total alone does not capture those daily triggers.
Paid leave	The employee’s covered leave policy and accrual/use configuration: qualifying California employees must generally be allowed at least five sick days or forty sick hours annually, whichever is more; Illinois has covered any-reason leave	Apply the California greater-of rule to the employee’s workday. Illinois covered workers can earn up to forty paid hours annually at one hour per forty hours worked, subject to exclusions and local regimes.
Earned vacation and exit	The vacation ledger, lawful accrual policy and final-wage process for the employee’s state	California treats earned vacation as wages and prohibits forfeiture at a specified date. Discharge generally requires immediate wages, including accrued vacation; quitting has separate notice and contract conditions.
Employer permission, accounts and insurance	The employing entity’s permission basis and confirmation that the proposed worksite is addressed in its account and insurance arrangements	The provider must establish the applicable arrangement and requirements for that location; a record from another state supplies only that state’s permission evidence.
Benefits and employment documents	Plan coverage, eligibility and leave information for the proposed location, plus any necessary changes to the employment terms	Confirm the actual commitments before accepting an offer or move; a provider’s national brand does not establish an individual’s plan eligibility.

For covered, nonexempt employees, the ordinary FLSA rule generally requires at least 1.5 times the regular rate after forty hours in a workweek, subject to special statutory categories. That is an overtime-pay trigger. The FLSA sets no daily or weekly hours limit for employees aged sixteen or older, so review applicable state and category restrictions when approving the schedule.

Check duties before treating salary as overtime-exempt

Obtain the provider’s exemption assessment for the actual role, including the duties, salary basis and relevant category conditions. The federal executive, administrative and professional salary-basis test generally requires a predetermined fixed salary without reductions for variations in work quality or quantity. The technical amendment effective on 15 May 2026 restored the pre-2024 federal text; the ordinary mainland thresholds below retain their duties requirements and category exceptions, with separate territorial rules.

Federal EAP — ordinary salary condition	$684 per week or more on a salary basis; qualifying duties and the category’s other conditions remain required	DOL — Federal exemption restoration
Federal highly compensated employee — compensation conditions	Total annual compensation of at least $107,432, with at least $684 weekly on a salary or fee basis; retain the relevant duties test	DOL — Federal exemption restoration
Washington covered exemption categories — 2026, all employer sizes	$80,168.40 annually, with the relevant duties requirements	Washington L&I — 2026 exemption announcement
Washington covered exemption categories — announced from 1 January 2027, employers with 51 or more employees	$92,196.00 annually, with the relevant duties requirements	Washington L&I — 2027 wage and exemption announcement
Washington covered exemption categories — announced from 1 January 2027, employers with up to 50 workers	$82,976.40 annually, with the relevant duties requirements	Washington L&I — 2027 wage and exemption announcement
California applicable exemption — announced from 1 January 2027	$72,384 annual salary, plus the duties and other requirements for the particular exemption	California DIR — 2027 wage and exemption announcement

For a Washington offer extending into 2027, keep the provider’s employer-size determination with the exemption assessment. California’s announced general statewide hourly minimum also increases to $17.40 on 1 January 2027, subject to higher applicable industry or local requirements. Its listed salary condition applies to the particular exemption; computer-professional and other occupational exemptions need their own category assessment.

Record moves before the next payroll

Have the employee report planned work-location changes before the next payroll inputs and seek the provider’s assessment before agreeing the move. Record the actual worksite and dates; the provider’s office address cannot substitute for them. Cover:

• The proposed state and locality, duties, schedule and exemption or wage changes.
• The employing entity’s applicable permission, payroll-account and insurance arrangements.
• State and local leave requirements, the accrued balances and the relevant benefit-plan coverage.
• Any necessary changes to the employment terms, notices, time records and payroll instructions.
• The worker’s authorization position and any separate employer business-presence or tax review.

Multi-state withholding, unemployment localization and residency questions need their own supporting basis. Agree responsibilities and effective dates with the provider, including whether it can accept the relocation; the location record alone does not resolve these questions.

Benefits depend on the actual employer and the worker’s eligibility

Before describing benefits in the offer, establish the employer under each relevant law, the worker’s eligibility and the plan terms. Record the plan sponsor and responsibility for enrollment and leave. Apply each regime’s counting rule to the relevant client and provider workforce.

Employer counts and employee eligibility

Identify the employer and counting period for each regime, and obtain the calculations and employee records supporting the proposed treatment. ACA aggregation, FMLA joint employment and plan participation use different tests:

Regime	Employer / aggregation test	Worker or worksite test
ACA employer shared responsibility	Generally an average of at least 50 full-time employees, including full-time equivalents, in the preceding calendar year; related employers can be aggregated to determine applicable large employer status	Common-law employees; full-time generally means at least 30 hours of service weekly or 130 in a calendar month for this regime
FMLA — ordinary private-employer coverage	Fifty or more employees on each working day during at least twenty calendar workweeks of the current or preceding year; count jointly employed workers where required	At least twelve months with the employer and 1,250 service hours in the previous twelve months; the employee’s relevant worksite must meet the fifty-employees-within-seventy-five-miles condition
Title VII — general employer coverage	Fifteen or more employees per working day over at least twenty calendar weeks in the current or preceding year, with statutory exclusions	Apply the relevant employment relationship and discrimination protections; the ACA full-time definition and FMLA worksite radius are not Title VII eligibility conditions
COBRA — ordinary private group-health-plan coverage	Generally plans maintained by an employer with at least twenty employees on more than 50% of typical business days in the preceding calendar year; government and church-plan rules differ	A qualifying event must cause loss of coverage; termination other than gross misconduct or reduced hours can qualify for covered employees and beneficiaries

For FMLA, jointly employed workers count for both employers. A client counts PEO employees or workers assigned to other clients only where it jointly employs those people. Temporary-agency placements ordinarily involve joint employment under that regulation, while a PEO performing only administrative functions does not thereby become a joint employer; apply the actual relationship before selecting the count.

For a remote employee, use the reporting or assignment office in the FMLA worksite assessment, rather than the person’s home. A jointly employed worker’s site is normally the primary employer’s assigning or reporting office; physically working for at least one year at the secondary employer’s facility makes that facility the relevant worksite. The distance test measures surface miles, so obtain the worksite and employee-location records supporting it.

Eligible employees can generally take twelve workweeks of FMLA leave within a twelve-month period for the specified birth, placement, care, serious-health-condition or military-exigency reasons. The leave can be unpaid, with statutory interactions with paid-leave policies. In joint employment, the primary employer handles required notices, leave, health-benefit maintenance and primary restoration responsibility; the secondary employer’s restoration duty depends on continued use of an agency worker and the agency placing the returning employee with it. Record who will carry out each applicable task when a leave request arrives.

Whose health coverage offer counts

The IRS employer shared-responsibility questions and answers distinguish the common-law employer from the entity administering benefits. Common or related ownership can combine employers to determine applicable large employer, or ALE, membership, while any shared-responsibility payment is assessed separately for each related ALE member.

A qualifying coverage offer can be made on an ALE’s behalf by another employer in its aggregated group, certain welfare arrangements or, in some cases, a staffing firm. Where the staffing firm is not the individual’s common-law employer and offers its plan on the client employer’s behalf, the offer counts under the relevant rule only if the client’s fee for that employee enrolled in coverage exceeds the fee for the same employee without enrollment. The plan and fee terms must support that condition. CPEO certification concerns its covered tax allocation, leaving the common-law employer and qualifying coverage-offer determinations to these separate tests.

Read the benefit plan before agreeing the offer

The plan documents and policies should identify the proposed employee’s coverage and the provider’s implementation tasks. The FLSA does not require paid vacation, sick leave or holidays, but state and local rules and agreed terms can create commitments. Describe the applicable holiday policy in the offer; the federal-employee calendar does not establish private paid-holiday entitlement.

California Paid Family Leave may provide eligible claimants up to eight weeks of benefits in a twelve-month period, while FMLA or CFRA may separately protect the job. Coordinate the employee’s income, leave and restoration information under the applicable regimes.

Washington Paid Leave has another employer-count and eligibility test. From 1 January 2026, job protection generally reaches eligible workers with 180 calendar days’ tenure at most employers with at least twenty-five employees, without a separate restoration-hours requirement. That size test counts employees on the Washington payroll each workday for twenty or more calendar weeks in the current or preceding year; the restoration employer threshold reduces to fifteen in 2027 and eight from 2028. Eligible employees’ existing health insurance must be maintained as if they were working, with their premium contributions able to continue, subject to the applicable exceptions; benefit eligibility remains separate.

ERISA imposes minimum standards on covered retirement plans that are established; it does not require every employer to establish one. Review coverage, participation, vesting and disclosures, retaining the exclusions for governmental, qualifying church and specified other plans. Establish separately whether state savings-access requirements apply and whether any offered 401(k) plan admits this employee.

For covered COBRA termination or reduced-hours events causing a coverage loss, the ordinary maximum continuation period is eighteen months for the employee, spouse and dependent child, with extensions and other events governed separately. Obtain the plan’s general-rights and qualifying-event notice procedures, beneficiary election deadline and initial-premium terms. Assign those clocks to their actual trigger and responsible party, including any different rule where the employer also administers the plan.

Before accepting the benefit portion of the offer, request:

• The employer, plan sponsor and administrator, plus the basis for any coverage offer on the client’s behalf.
• The employee’s eligibility class, enrollment requirements, waiting period and actual coverage-start date.
• Employer cost and employee contributions for the selected coverage, and the relevant payroll instructions.
• The applicable sick-leave, vacation and holiday policies, with accrual, use and exit treatment.
• Coordination of statutory leave, paid benefits, existing health coverage and job restoration.
• The treatment of health and retirement coverage, equity documents and accrued balances if employment ends or moves to another employer.

The US hiring guide contains the full employment-entitlement tables.

Payroll, work records and HR tasks continue after onboarding

The client and provider need a recurring exchange of work records and approved changes. Set the input cutoff, contacts and correction process alongside payday, distinguishing your record-supply tasks from the provider’s services and each party’s statutory responsibility.

For FLSA-covered employees, employers must keep accurate hours-worked and wages-paid records; the law does not itself require a pay stub. Establish applicable federal and state record categories, wage-statement duties and retention periods, with a process for correcting errors and retrieving underlying records.

California generally requires at least two wage payments per calendar month on regular paydays fixed in advance, with category exceptions. Confirm a compliant schedule for the employee’s actual category; other work states need their own assessment.

Payroll filing and deposits are separate

Use the IRS employment-tax due dates for return filing, and obtain the employer’s deposit schedule separately. An employer paying wages subject to federal employment taxes generally files Form 941 for each quarter by the following month’s last day. Timely deposit of all taxes when due permits ten additional calendar days for that filing; weekend or legal-holiday due dates move to the next business day. That filing allowance does not extend a deposit deadline.

Prior-year wage and withholding reporting uses Forms W-2 with W-3 sent to the Social Security Administration, generally by 31 January; employees must generally receive their W-2 statements by that date, subject to applicable due-date adjustments. Employee wage compensation is reported on W-2; Forms 1099 generally should not be used for it. Confirm which employing entity supplies the records, who submits them and how the employee obtains a correction.

For ordinary outsourcing, retain filing and deposit confirmations because the employer generally remains responsible even if the provider fails to act. If CPEO treatment is relied on, keep the covered-remuneration and employee-category assessment with those records.

Plan for changes and complaints

Agree how changes enter the employment terms and payroll inputs, including your information and approval tasks and the provider’s implementation duties. Cover:

• Actual hours, wage adjustments and corrections, with a process for resolving differences before the relevant payroll run.
• Changes in duties, work location or schedule that need an exemption, permission, insurance or wage review.
• Leave requests and changes in benefit participation, with the responsible employer and plan contacts identified.
• Expenses, variable compensation or equity instructions requiring approval, and the documents each party needs to act.
• Employment decisions, complaints and regulatory correspondence that require coordinated action and preservation of records.

Give the employee a documented route for payroll questions, leave or accommodation requests and complaints, with agreed escalation. FLSA protections prohibit discharge or discrimination for protected complaints, proceedings or testimony; review any proposed employment decision for applicable protected activity. The US hiring guide covers the wider accommodation, safety, employee-voice and anti-retaliation rules and their coverage.

Assign responsibility for monitoring notices and employment-rule changes and updating records and terms where required. Maintain a recurring-notice calendar and procedures for individual events, including during leave or at exit. Use the applicable authority and provider commitments to establish delivery, retention and response periods.

Ending EOR employment and moving to your own payroll

Assess the employee’s exit separately from termination of the provider agreement. Give the actual employer the proposed action, reason and timing before changing the service relationship. Agree a final-wage, benefit, records and IP handover plan alongside contractual notice or charges.

Employment exit and service-agreement exit have separate terms

Cancelling a client assignment does not by itself establish a lawful employee dismissal. For example, Florida’s licensed leasing arrangement allows the client to accept or cancel an assignment while the leasing company retains termination authority. Ask the employing entity to document the employee action and assess the applicable discrimination, protected-activity, leave and state-law constraints.

The FLSA imposes neither a general advance employee-notice requirement for termination or layoff nor a severance requirement. Other laws, employment commitments and collective terms can impose obligations. Review those separately from the provider agreement’s notice, minimum term, exit charges and any proposed employee release; obtain the actual provisions before scheduling the exit.

Montana’s probation rule supplies a state-specific qualification. A twelve-month default applies when the employer has neither established a specific probation period nor expressly provided for no probation before or when work starts. Extensions must be made before expiry, and the original period plus extensions cannot exceed eighteen months. These are Montana rules, not a national probation allowance.

Under Montana’s Wrongful Discharge from Employment Act, dismissal without good cause can be wrongful after the employer’s probation period has been completed. During probation, either party may terminate at will on notice to the other, within the applicable statutory scope and other protections. The Act also addresses material violations of express written personnel policies that deprive the employee of a fair and reasonable opportunity to remain employed, and termination solely for legal expression of free speech. An at-will description alone does not settle the proposed decision.

Final wages and qualifying layoffs

For a California discharge, wages generally fall due immediately, including accrued vacation, subject to applicable category exceptions. Prepare the calculation and payment arrangements before termination takes effect, separately from severance and any disputed provider charge.

For a California employee without a definite-term written contract who quits without seventy-two hours’ notice, the general final-wage deadline is seventy-two hours after quitting, including accrued vacation. If that employee gives at least seventy-two hours’ notice and leaves on the notified day, final wages are due at quitting. Establish the actual notice and employment terms before selecting the deadline.

Federal WARN generally requires sixty days’ written notice for a qualifying covered plant closing or mass layoff, subject to its exceptions. Employer coverage generally requires at least 100 employees excluding part-time workers, or at least 100 employees who collectively work 4,000 or more non-overtime hours weekly. Obtain the determination of the responsible business enterprise and the employee population rather than assuming the client’s assignment count or the provider’s total workforce supplies the legal count.

A plant closing generally involves at least fifty non-part-time employees losing employment because of a shutdown at a single employment site within thirty days. A mass layoff that is not the result of a plant closing generally needs at least fifty non-part-time workers and at least 33% of the relevant non-part-time workforce, or at least five hundred non-part-time workers, at a single site within thirty days. Ask the provider to assess the site, part-time definitions, employment losses, aggregation, exclusions and statutory exceptions, plus applicable state notification requirements. These event tests are separate from notice for an ordinary individual exit.

The US hiring guide has the full termination and final-pay tables.

Move employment to your registered business

Moving to your own employment infrastructure needs coordinated end and start dates and a new employer ready to perform its duties. Agree the employee documentation and both employers’ actions; the provider relationship does not transfer automatically. The direct-hiring setup section covers the foreign-employer route and registration reviews.

Before the agreed change, obtain:

• The new employer’s identity, applicable accounts, permission and insurance readiness, and the accepted employment terms.
• Final wages and vacation calculations, leave balances and the proposed treatment of service, seniority and other accrued commitments.
• The old and new benefit plans’ coverage dates, eligibility and enrollment steps, plus the responsible parties for any applicable continuation notices.
• Wage, withholding and employment-tax records, with filing ownership and the employee’s access to statements or corrections.
• The completed copyright and patent rights chain and the provisions needed for future work under the new employer.
• The actual immigration petitioner and any required review or action before the worker starts for the new employer.
• Provider termination, release, transfer-charge and record-delivery terms, including cooperation if the provider closes or its certification changes.

For a CPEO/customer contract, assign the required Form 8973 end notification separately from the new employment documentation. W-2 wage reporting and any applicable Form 941 obligations still need their responsible entity and records; ending the service contract is not the filing itself. Obtain specific advice and supporting authority before relying on predecessor wage-base treatment or an unemployment-rating transfer, and confirm equity and benefit-continuation terms in the actual documents.

For a covered health-plan event causing coverage loss, assign the employer’s and plan administrator’s COBRA notices and the beneficiary election process. Confirm new-plan eligibility and recognition of prior service independently of continuation coverage. Retain these records with the IP documents and export commitments.

EOR limits: assignment duration, tax presence and liability

An EOR agreement leaves duration, business-tax exposure, rights and statutory duties to be assessed under their applicable rules. Base that assessment on the work state, employee’s duties, parties’ powers, business activity and actual contracts.

Duration and state arrangement limits

Establish which rules govern the proposed assignment length and document the term, renewal and exit assessment. Include what happens if work continues, duties change or local business activity expands. Reconcile the commercial term with the applicable state category and employment requirements.

Florida’s facilities-staffing exclusion describes an ongoing, indefinite arrangement subject to its specific conditions. It does not establish the permitted duration of every leasing or EOR arrangement. Require the provision and facts supporting the proposed term in each work state, including any limit or renewal reassessment.

Foreign-company filings and state nexus

A foreign corporation engaged in a US trade or business generally must file Form 1120-F even if it receives no US-source income from that business or the business income is treaty-exempt. Treaty treatment for income not attributable to a US permanent establishment is separate, and protective-return rules can matter for preserving deductions and credits. Establish the federal filing and treaty position from the actual business activity.

Oregon’s Department of Revenue says independent representatives performing customer services such as repair or warranty work establish nexus for the corporation. That example concerns the specified activity; it supplies no universal result for a remote developer or every EOR hire. Assess state nexus from what the worker actually does for your business.

Understanding the difference between these standards is crucial for foreign companies in managing their state tax risks and liabilities.

— Daniel P. Sieburg, CPA, and Donald R. Dennis, CPA, tax practitioner contributors, Crowe Horwath LLP (2017 affiliation)

The commentary was published on 1 September 2017. It explains the distinction between federal and state tax standards; the current filing and activity-specific nexus determinations remain necessary.

IP and post-employment restrictions

Keep the completed rights chain to your business and the terms for future deliverables, including existing-material exclusions. The document section explains qualifying work-made-for-hire ownership and the written copyright and patent transfers needed to convey the relevant rights onward.

For restrictive covenants, the FTC’s federal Noncompete Rule is not in effect or enforceable. Washington’s employee earnings threshold is $126,858.83 in 2026; meeting it alone does not establish enforceability of a particular clause. The regulator’s announced employee threshold for January–June 2027 is $131,326.59, distinct from the enacted change that follows.

Washington’s enacted noncompetition law takes effect on 30 June 2027. Covenants within its amended definition become void regardless of when they were agreed, and entering, enforcing or threatening enforcement of those covenants violates the chapter from that date. Review the actual clause against the definition: specified nonsolicitation, confidentiality and trade-secret or invention covenants are excluded, as are qualifying business-ownership transactions involving at least a 1% ownership interest. Specified franchise and conditional educational-expense repayment arrangements also have exclusions.

Proceedings begun before effectiveness use the prior chapter; later proceedings use the amended provisions irrespective of when the cause of action arose. By 1 October 2027, employers must make reasonable efforts to notify affected current or former employees and independent contractors in writing that their noncompetition covenants are void and unenforceable, where the covenant is still within its effective period. Ask which party will identify the affected agreements and deliver the notices, and preserve the review of pending proceedings.

What a mistake costs and who can face it

Liability follows the party responsible under the breached law and the conditions for its remedy. Each amount below applies to its specified breach; unrelated maxima do not form a combined charge.

Party	Risk	Amount / condition
Party meeting the applicable FLSA employer definition	Unpaid covered minimum wages or overtime	The unpaid amount plus an equal amount in liquidated damages; a prevailing employee may also recover attorney fees and costs, subject to the applicable statutory and court qualifications
California employer responsible for final wages	Willfully missing the applicable final-pay deadline	The employee’s daily wage for each day payment remains outstanding, up to thirty calendar days; willfulness and the applicable statutory conditions matter
Employer responsible for a qualifying WARN closing or layoff	Covered notice breach causing the employee’s employment loss	Back pay and benefits for the violation period, limited to sixty days and no more than half the employee’s tenure measured in days, with statutory offsets and possible good-faith reductions
Employer responsible for WARN local-government notice	Breach of the notice obligation to the unit of local government	Up to $500 per day; the penalty does not apply if each aggrieved employee receives the amount for which the employer is liable within three weeks of the shutdown or layoff order
Party responsible for federal employment-tax deposits	Required deposits made late or through an incorrect route	Generally 2% for one–five days late, 5% for six–fifteen days, 10% for sixteen or more days within the initial notice window, and 15% under the notice or demand conditions below; exceptions apply
Responsible person identified by the IRS	Willful failure to collect, account for or pay over trust-fund taxes	A penalty equal to 100% of unpaid trust-fund tax may be imposed personally when those taxes cannot immediately be collected from the employer or business, with responsibility and willfulness determinations

For the deposit penalty, the 10% late-deposit band applies at sixteen or more days late but before ten days have elapsed from the first IRS notice asking for the tax due. The 15% band applies when the amount remains unpaid more than ten days after that notice or on receipt of notice and demand for immediate payment, whichever occurs earlier. A 10% penalty can also apply when an amount that should have been deposited is paid directly to the IRS or with a return, subject to the stated exceptions. Use the employer’s payment and notice records to select the applicable condition.

Assess any indemnity’s scope, exclusions and claims procedure alongside the applicable statutory exposure. Employee data, regulated work and client-specific compliance requirements also need their own legal assessment and contractual task allocation.

Work authorization and sponsorship follow the actual employer and job

Sponsorship depends on the petitioner, job and individual’s eligibility. Identify the employing entity, proposed petitioner, category and lawful-start conditions before committing to the hire; an EOR agreement grants no US work authorization.

Form I-9 verifies employment eligibility through the employee’s and employer’s steps, with deadlines covered under onboarding. H-1B sponsorship requires a separate petition: USCIS guidance requires evidence of a DOL-certified Labor Condition Application, Form ETA-9035/9035E, with the prospective petitioner’s Form I-129, Petition for a Nonimmigrant Worker.

H-1B requirements for third-party placements

The H-1B modernization rule effective on 17 January 2025 removed the employer–employee relationship reference from the US-employer definition. USCIS no longer requires proof of the petitioner’s right to control the beneficiary’s work under that definition. The client and provider still need the separate employment-law and tax assessments.

The revised definition retains a qualifying person or organization in the US, with US legal presence and amenability to service of process. Establish the petitioner’s legal-presence and business-authorization basis under applicable state law; a brand, EIN or address alone does not establish it.

For a client placement, USCIS examines whether the employer or third party receiving the worker normally requires a US bachelor’s or higher degree in a directly related specific specialty, or its equivalent, for the role. Gather the client’s and provider’s actual duties, worksite and job requirements for that assessment. An EOR label does not establish job eligibility.

Agree the petitioner’s tasks and your document responsibilities, recording job location, assignment terms, the eligibility specialist and conditions for starting or continuing work. A change of employing entity needs its own immigration assessment.

H-1B selection, fees, court orders and entry restrictions

The fiscal year 2027 registration season uses weighted selection for cap-subject H-1B registrations and petitions under the rule effective on 27 February 2026. The weighting generally favors higher skill and pay while retaining an opportunity at all wage levels. Selection does not establish petition eligibility or work authorization; use the applicable route to assess the start date.

The 9-11 Response and Biometric Entry-Exit Fee rule effective on 9 September 2026 applies to covered H-1B and L-1 petitioners. Its employer test uses at least fifty people employed in the US, with more than 50% in H-1B, L-1A or L-1B status. An amended petition that does not seek an extension of the person’s currently authorized H-1B or L-1 status is excluded from that fee requirement. Ask for the petitioner’s count, filing type and itemized applicable charges; this employer test is distinct from the benefit counts above.

The separate $100,000 requirement has a court-order implementation qualification. USCIS reports that a Massachusetts district court vacated agency guidance implementing it for certain H-1B petitions on 8 June 2026, and the First Circuit denied the government’s stay motion on 24 July 2026. DHS says it will comply while considering next steps and still plans to collect the amount if the order is lifted. Establish petition-specific implementation before budgeting the amount as payable.

A September 2026 presidential proclamation separately extends the earlier H-1B entry restriction until 21 September 2027, with covered categories and exceptions. Review that executive instrument alongside the agency’s court-order implementation alert for the actual petition and entry. Its end date does not resolve litigation or establish an unconditional charge for every hire.

Before agreeing the immigration portion of the provider proposal, obtain:

• The actual petitioner and employing entity, proposed immigration category and specialist eligibility assessment.
• The role, worksite and client-assignment documents needed to support the proposed filing.
• The petition and authorization conditions for starting or continuing work, including any change of employer or location.
• The applicable filing charges and assumptions, with court-affected or other conditional items identified separately.
• The provider’s contractual scope, each party’s document responsibilities and a schedule tied to the individual case.

The US hiring guide provides broader employment and work-authorization context. Another visa category, processing duration or claimed sponsorship capability needs separate support before inclusion in the offer.

Changes that affect EOR onboarding and the next employment budget

Schedule offer, payroll, leave and notice updates from each rule’s operative date and scope. Track announced and proposed changes separately, retaining detailed eligibility and employer tests in the implementation plan.

Operative changes

• 1 January 2026 — California individual rights notices. The yearly written notice is due by 1 February in workplace languages, alongside continued postings.
• 1 January 2026 — Washington Paid Leave restoration and health coverage. Most employers with at least twenty-five employees must protect eligible workers with 180 calendar days’ tenure, without a separate restoration-hours requirement. Use the Washington payroll-count and existing-health-maintenance conditions in the benefits section.
• 1 January 2026 — Minnesota Paid Leave launch. Benefits became available and deductions of the employee premium portion could begin. Confirm the covered wage and employee-share treatment in payroll.
• 30 March 2026 — California emergency-contact designation deadline. Confirm the designation process and responsibility for the legally required notification when the employer knows of an arrest or detention at work. The onboarding section gives the event conditions.
• 30 April 2026 — Minnesota first premiums due. The first payment used January–March 2026 wage detail. Keep premium reporting distinct from employee deductions and benefit eligibility.
• 15 May 2026 — federal overtime text restored. Apply the restored executive, administrative and professional exemption conditions, including duties and salary basis. Use the work-location section’s assessment when reviewing the provider’s exemption and pay assumptions.
• 30 September 2026 — Florida general minimum wage reached $15.00 per hour. Update the covered wage terms, retaining the statutory definitions and tip-credit scope. Provider permission remains a separate state-arrangement question.

Apply the preceding section’s cap-selection, filing-fee, court-order and entry-restriction conditions to the actual petitioner and category when budgeting immigration.

Announced rates and future duties

• 1 January 2027 — Washington wage and exemption schedules. The announced statewide floor for most workers is $17.73 per hour; covered exemption salary conditions differ for employers with 51 or more employees and those with up to 50 workers. Use the exemption comparison and retain the duties assessment.
• 1 January 2027 — California wage and applicable exemption. The announced general floor is $17.40 per hour, with higher applicable industry or local rates still relevant. The applicable exemption’s $72,384 annual salary condition also requires its duties and other category conditions.
• 1 January 2027 — New York general schedule remains unchanged. The inflation off-ramp keeps $17.00 per hour in New York City, Long Island and Westchester County and $16.00 elsewhere in the state.
• 2027 — Washington Paid Leave restoration expands to most employers with at least fifteen employees. Apply the program’s employer-count and 180-calendar-day tenure conditions; benefit eligibility has its own test. Review the provider’s leave and health-maintenance process for newly covered cases.
• 2027 — Minnesota announced total premium stays at 0.88% of covered wages. Up to 0.44% can be collected from employees, and qualifying small employers have a reduced employer share. The cost section explains why the total cannot simply be added as an employer-only charge.
• 1 February 2027 — California yearly individual rights notice due. Schedule delivery in the languages normally used at the workplace and keep required posters maintained.
• 30 June 2027 — Washington noncompetition law takes effect. Review clauses against the amended definition, exclusions and proceeding-transition rules in the model-limits section. The change concerns covered covenants rather than every confidentiality or other restrictive provision.
• 1 October 2027 — Washington covenant-notification deadline. Employers must make reasonable efforts to give affected current and former employees and independent contractors written notice that covered covenants are void and unenforceable, where the covenant remains within its effective period.

Federal contractor classification: regulation, enforcement, proposal and review

These developments govern assessment of the independent-service alternative; they do not establish status from a contractor label or supply a universal EOR joint-employer test.

• 11 March 2024 — effective FLSA classification regulation. The economic-reality rule remains applicable to private litigation pending further action; the later WHD policy addresses investigations.
• 1 May 2025 — WHD investigation policy changed. WHD stopped applying the 2024 analysis in investigations, using the 2008 Fact Sheet 13 and cited opinion letter for specified matters without back-wage or civil-money-penalty payment to individuals or DOL by that date. The 2024 rule remained applicable to private litigation pending further action.
• 27 February 2026 — replacement proposal published. DOL proposed rescinding the existing analysis and adopting one similar to its 2021 rule, with modifications. Treat the publication as a proposal when assessing a contractor alternative.
• 28 September 2026 — replacement received for OIRA review. The OIRA listing shows RIN 1235-AA46 at Final Rule stage with Pending Review status. That entry establishes neither a published replacement nor an effective date.

The US contractor guide covers the separate federal and state status tests.

When you can hire directly without an EOR

Foreign direct employment is an option where the business can meet the requirements for its activity and the worker’s location. IRS guidance expressly addresses US employees of foreign employers, generally subject to that employer’s Social Security and Medicare withholding. Assess applicable exceptions, including totalization agreements, alongside the remaining federal and state duties.

Federal and state setup for direct employment

Under the IRS EIN application guidance, an applicant with its principal place of business outside the US must apply by phone, fax or mail. It cannot use the online tool.

The Form SS-4 instructions estimate EIN receipt generally within four business days by fax and approximately four weeks by mail. These cover the EIN only; arrange a separate schedule for state business qualification, payroll accounts, insurance, employment documents and first payroll.

California’s EDD employer process separately covers payroll-account registration, worker reporting, withholding and tax administration, returns, wage reports and notices. Enroll in e-Services for Business as an employer or representative to manage the account, and establish which processes the proposed employment needs.

Before choosing direct employment, document:

• The actual foreign employing entity and the business qualification, licences or other permission applicable to its activity and location.
• The EIN route and status, the relevant payroll and unemployment accounts, and the people authorized to operate them.
• The applicable insurance arrangements and the employee’s wage, leave and benefit terms.
• Withholding-form collection, wage records and responsibility for employee W-2 reporting, any applicable Form 941 returns and separate deposits.
• The foreign corporation’s Form 1120-F, treaty and protective-filing assessment, with state business-presence and tax questions reviewed separately.
• Employment-authorization readiness and the employer or petitioner documents needed for the actual job.

The US hiring guide has the full registration process and employment tables. Compare the direct employer’s readiness and setup and ongoing-cost estimates with the provider’s documented schedule and quote.

When an employee moves to the US

Record the US work location and move date, then reassess the foreign employer’s withholding and work-state arrangements. Income from personal services physically performed in the US is US-source regardless of where the agreement was made, payment occurs or the payer resides. Overseas payroll or an account does not resolve source or employment tax; residency, treaty relief and credits need separate analysis.

The move also needs work-authorization and benefit-plan review. The income-source rule does not decide those conditions or automatically require a new company’s incorporation. Assess the existing foreign entity’s business and employment obligations for the planned work.

For the independent-services route, apply the IRS, FLSA and state classification tests; remote work, an LLC or a contract label alone does not establish independence. For employment, choose between direct-employer readiness and the provider and state checks developed above.

Alternatives: EOR, PEO, payroll outsourcing, staffing and independent services

Choose the route from the actual relationship, employing party and tasks to be delegated. Compare contracts and statutory responsibility with the budget and your capacity for direct employment. Independent services must satisfy the applicable status tests.

Model	Who employs / contracts	What you must establish first	When it fits
Direct employment through a US entity	The identified US employing entity, with statutory employer responsibility assessed for the arrangement	Work-state readiness, wage and benefit terms, insurance, records and reporting ownership	Your entity can perform or arrange the employment tasks and you want to keep that operating structure
Direct employment through a registered foreign employer	The existing foreign business identified as the direct employer	Applicable business qualification, tax presence, EIN route, payroll accounts, insurance and individual authorization	The foreign business can meet the requirements for the actual US work and take responsibility for direct employment
EOR arrangement	The provider named to employ under the proposed documents; assess the client’s statutory role separately	Actual employing entity, applicable state arrangement, service scope, employee terms and rights chain	You want the provider to perform agreed employment tasks and its proposed arrangement meets the relevant requirements
PEO / proposed co-employment	Identify the client employer’s and PEO’s actual roles and powers under each relevant law	Administrative functions, retained employment powers, state category and law-specific employer treatment	An identified client employer needs payroll, benefits, paperwork or policy administration, with any additional provider powers documented
Payroll provider / reporting agent	The common-law employer remains identified separately from the firm performing tax administration	Whether the firm is a payroll service provider or reporting agent, filing authorizations, EIN use, deposit controls and retained employer duties	Your employer needs specified payroll or employment-tax administrative support
Recruitment / staffing proposal	Establish whether the firm sources candidates, employs and assigns workers, or performs another agreed function	Candidate-sourcing scope, actual employee documents, assignment purpose, control and applicable state arrangement	You need documented sourcing or staffing functions, with the employer and client duties established for that proposal
Genuinely independent services	The client or other identified service counterparty contracts with the independent service business under the actual arrangement	Applicable federal and state status tests, service terms, rights and each party’s tax duties	The work is an independent service relationship that meets those tests in contract and practice

CPEO is voluntary IRS certification for specified employment taxes. It can apply to a model in the table, subject to the registry, remuneration and employee-category checks; it is not another universal hiring route or state permission.

PEO and staffing proposals need the employer analysis under the law governing each duty. Under FMLA, administration alone does not create joint employment, while temporary-agency placement ordinarily does, subject to the actual relationship. Florida separately excludes specified temporary-help arrangements from employee leasing. Compare the firm’s proposed recruiting, placement and administrative functions under those rules.

Contractor status must fit the work

Assess the IRS behavioral-control, financial-control and relationship factors for the actual service, including any right to direct how it is performed. The FLSA economic-reality analysis is separate, and state tests can produce a different result. Working from home does not establish independence under the IRS test, while a California contract label or Form 1099 does not decide state employment status.

Where California’s ABC test applies, the hiring entity must establish freedom from its control in both the agreement and practice, work outside its usual business, and an independently established business performing the same kind of work. Some occupations or relationships instead use Borello, sometimes only after additional statutory conditions are met. The business-to-business exception requires each listed condition; an LLC by itself does not supply them. Obtain the assessment before choosing a service contract for a role integrated into your business.

The regulation’s private-litigation treatment and WHD’s investigation policy remain distinct, as explained under recent changes. The proposal and Pending Review entry do not establish an effective replacement. The US contractor guide develops the full tests and documentation.

Convert to employment when the relationship requires it

If the duties and control require employment, reassess the relationship and choose an employer ready to perform the required tasks. Agree employee terms and the change date with the parties, covering:

• The work location, duties, schedule and applicable wage or exemption assessment.
• The chosen direct employer or provider arrangement, required accounts and insurance.
• Employment documents, withholding and reporting setup, benefit enrollment and work authorization.
• Leave and service-record treatment, rights to prior work and the documents covering future deliverables.
• Historical classification, tax and wage questions, any necessary corrections and the actual contract’s ending provisions.

Treating an employee as a contractor without a reasonable basis can create employment-tax liability; any federal tax relief has conditions and does not establish contractor status. Assess historical treatment alongside the new terms. Compare the direct-hiring readiness tasks above with the provider’s proposed scope.

How to choose a US EOR provider

Select a provider from the documents for the actual employer, location and role. Reconcile the offer, service agreement and supporting records before signing, using the following questions.

Identify the employer and state permission

• What are the exact legal name and EIN of the contracting provider and the employing entity? If an owned entity or partner performs employment, which documents bind that entity and which party signs the employee’s terms?
• What is the employee’s actual state and locality, and what legal category applies to this assignment? Obtain the relevant licence, registration or documented exception and the underlying authority, including any required controlling-person permission.
• If a Florida de-minimis registration is proposed, what records establish every condition, including domicile permission, client-business location, office and solicitation facts, and the company’s Florida leased-worker count?
• If the provider relies on CPEO status, how do the exact contract identity and claimed IRS status match? Obtain its covered-remuneration and worksite-employee assessment, Form 8973 reporting responsibility and explanation of any client duties that remain.
• Which responsibilities follow ordinary outsourced administration, and which have a separate statutory allocation? Ask for the client’s corporate-filing and state business-presence review separately from provider employment permission.
• For a worker needing sponsorship, who is the actual petitioner, which category is proposed and what job, worksite and client documents are needed? Obtain the specialist assessment and lawful-start conditions for that individual.

Obtain the full offer, benefit plan and cost breakdown

• Which wage floor and exemption category apply to the role? Request the duties and salary-basis assessment, current and scheduled salary conditions, and overtime calculation for the proposed working pattern.
• What payday, input cutoff and correction process will be used? Identify the hours and wage records, applicable wage-statement requirements, retention basis and responsible record custodian.
• Whose headcount and employee definition support the benefit treatment? Obtain the ACA common-law employer and related-group assessment, plus the basis for any qualifying coverage offer on the client’s behalf, including the staffing-plan fee condition where applicable.
• What supports FMLA employer coverage, employee service eligibility and the relevant worksite? Identify the primary and any secondary employer’s tasks and apply the particular state leave-count and eligibility rules separately.
• Which health, retirement and other plans admit this employee? Request plan documents, enrollment and waiting conditions, coverage-start dates, employer and employee contributions, and treatment during leave or reduced hours.
• What workers’ compensation and other relevant insurance cover the role and location? Obtain policy or coverage evidence, exclusions, limits and the claims-notification process rather than relying on a general insurance statement.
• How do the copyright and patent documents convey the required rights to the client? Inspect the actual owner’s documents, onward transfers, deliverable scope, existing-material exclusions and terms for future work.
• For bonuses or equity, what is agreed, who issues the award and which parties administer the documents and payroll inputs? Obtain the actual plan and compensation terms before adding them to the offer or budget.
• What is included in the service price, and which items are additional or conditional? Request employer tax rates and bases, employee deductions shown separately, benefit and insurance costs, and any quoted onboarding, deposit, currency-conversion or exit terms with their triggers and calculation basis.

Agree responsibilities, support and exit

• Who receives employee payroll questions, leave or accommodation requests and complaints, and who escalates them? Establish the client inputs, employer decisions, plan contacts and any agreed response commitments.
• Who monitors work-state changes and recurring notices, and what happens when the employee’s location, duties, hours or compensation change? Assign the review, implementation and communication tasks.
• Which claims and losses does an indemnity cover, and what exclusions, limits, notification or cooperation conditions apply? Identify control of counsel and settlement and how responsibility is handled outside the agreed coverage.
• Can the provider subcontract tasks or substitute an employing entity? Obtain the identity, notice or consent provisions and the process for preserving employee records, benefits and the client’s IP chain through a change.
• What employee information is collected, where is it held and how can it be retrieved or exported? Request the relevant data-processing, cross-border transfer and security documentation, with evidence for any certification relied on.
• What separate terms govern employee dismissal, service-agreement termination and a proposed release? Obtain the final-wage and accrued-leave process, benefit-continuation responsibilities, record-delivery commitments and actual notice or exit charges.
• What is the contingency plan if the provider closes or its relevant permission or certification changes? Identify access to wage and tax records, employee communications, benefits coordination, open claims and completed rights documents.
• If employment moves to your own business or another provider, who completes the old and new records and plan steps? Obtain the actual terms for service recognition, leave balances, equity, immigration review, tax reporting and any transfer charge.

Retain these documents with the signed terms and agreed dates, costs and handover commitments.

Frequently asked questions

How much does an employer of record cost in the USA?

The quote depends on the agreed salary, work-state employer charges, benefits and the provider’s actual service terms. In the hypothetical annual illustration, a $192,160 ordinary FICA-covered salary in 2026 produces $206,385.32 in salary plus employer FICA, excluding unemployment taxes, state payroll charges, insurance, leave and benefits, additional compensation and provider charges. Request the itemized quote using the actual employer’s rates and plan, with employee withholding shown separately from employer additions.

What is the difference between an EOR and a PEO?

Compare the employing party and delegated tasks: an EOR proposal names a provider to employ the worker, while a PEO proposal can supply administration for a client employer with any additional powers documented. Under FMLA, payroll, benefit and paperwork administration alone does not make the PEO a joint employer; the actual relationship and powers matter. CPEO certification is a separate voluntary IRS tax status whose covered allocation needs its own employee-category and remuneration assessment.

Is an employer of record the same as a staffing agency?

The answer depends on whether the proposed firm employs and assigns workers, sources candidates or performs another contracted function. Florida, for example, distinguishes specified temporary-help arrangements from employee leasing, so a staffing label alone does not identify the applicable state category. Obtain the actual employer, assignment purpose, recruitment scope and employee and client documents before comparing the proposal with an EOR arrangement.

Can we employ someone in the USA without an EOR?

Direct employment through an existing foreign business is an alternative, subject to the requirements applicable to that employer and the US work. If its principal place of business is outside the US, the EIN application route is phone, fax or mail rather than the online tool. Review the business and payroll registrations, corporate-filing and treaty position, insurance and individual work authorization; the US hiring guide covers setup in more detail.

How long does it take to start an employee with an EOR?

Obtain a proposed start date tied to the provider’s documents, payroll readiness, benefit enrollment and the individual’s authorization conditions. After accepting the offer, the employee completes and signs I-9 Section 1 no later than the first day of employment for pay. The employer or authorized representative completes and signs Section 2 within three business days of hire, except that a job lasting fewer than three days requires that step by the first paid workday. These verification deadlines do not measure the provider’s preparation time or establish the first-payroll date.

What happens if I want to terminate an employee hired through an EOR?

Have the actual employer assess the proposed dismissal, work-state protections and amounts due separately from your service-contract cancellation. A California discharge generally requires immediate wages, including accrued vacation, subject to applicable category exceptions. Obtain the employee communication, any applicable notice or severance, benefits and record-handover plan together with the provider agreement’s actual ending terms and charges.

Can an EOR sponsor a US work visa?

Sponsorship needs a case-specific assessment of the actual petitioner, job and individual, rather than a conclusion from the EOR label. The H-1B petitioner definition no longer requires proof of a right to control the beneficiary’s work, but US legal presence, amenability to service of process and applicable job requirements remain relevant, including the client role for a third-party placement. Ask for the proposed petitioner and category, certified LCA and Form I-129 scope where applicable, and the documents and specialist assessment for that filing. Obtain the lawful-start conditions and the provider’s actual contractual capability, with court-affected and other conditional charges reviewed separately.

How do I find an employer of record that can employ someone in my state?

Identify the entity in the proposed employment arrangement and ask for the legal category and permission basis for the employee’s actual location. If CPEO status is claimed, match the exact contract name and EIN to the IRS certification records and assess the covered-tax scope separately. For Florida, establish leasing scope or an exclusion, then obtain the actual licence or evidence of every condition for the de-minimis registration route. Use the provider registry checks rather than treating a national brand or federal tax status as permission for every state.

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