How to Hire Remote Employees In 

USA

The Basics

Currency
United States Dollar (USD)
Employer Taxes
15.15% - 19.85%
Payroll Frequency
Bi-Monthly
Official Language
English

Employment in 

USA

Hire Independent Contractors

Independent contractors or freelancers are self-employed individuals who provide services to companies as a non-employee. This is one of the most common ways companies tend to hire non-local designers, engineers, support reps, etc.

For legal and tax purposes, independent contractors are not classified as employees. They may work for multiple clients, set their own work hours, negotiate their pay rate, and decide how a job gets done.

For example, the IRS says that if an independent contractor or freelancer does work that can be controlled (what will be done and how it will be done) by an employer then they are, in fact, classified as an employee.

As you can imagine, hiring someone as an independent contractor versus an employee is a fine line to tread.

While there are benefits when you choose the contractor route, there are quite a few drawbacks to consider and you’ll need to weigh them carefully to determine the best fit for your company.

Benefits of Hiring Independent Contractors
Reduced overhead: Lower cost in expenses, payroll, benefits, and more.
Greater flexibility: Contractors can be brought on as-needed. If not a good fit, you simply don’t have to move forward with the contract.
Reduced legal risk: Contractors aren’t usually protected by employment anti-discrimination and workplace safety laws.
Disadvantages of Hiring Independent Contractors
Risk of Misclassification: Not only does this deny workers their proper protections, it can also result in steep penalties and damage to your company. If the IRS determines that employee misclassification has occurred, you will be liable for a percentage of the employees wages, FICA contributions, penalty fines, unpaid taxes, up to a year in prison, and more.
Lack of Control: Contractors are drawn to being independent because it gives them greater control over the work they perform and who they work with. Because they’re not employees, you can’t tell them what to work on and how it should be done.
Lack of Loyalty: Contractors come and go as-needed. Many companies hire contractors for short-term work, which makes it difficult to cultivate loyalty.
Increased Scrutiny: Using Independent Contractors typically leads to an increased risk of being audited.

Set up a subsidiary in 

USA

A foreign subsidiary is a company that operates overseas as part of a larger company who’s HQ is in another country.

Establishing a foreign entity is great for having an international presence and accessing new markets. Though, setting up a subsidiary in USA can be expensive, stressful, and time-consuming. It's not for the faint of heart.

To set up a subsidiary in USA, you have to:

  1. Register your business name and file articles of incorporation
  2. File for local bank accounts
  3. Learn and keep track of the local employment laws
  4. Set up local payroll
  5. Hire local accounting, legal, and HR people

If you're lucky, this process can take months. If you're not so lucky, it can take up to a year. And on average, it costs about $50k-$80k, all-in-all, to get setup. And that's just for USA.

Use an Employer-of-Record (EOR)

An employer-of-record (EOR) is a company that hires and pays an employee on behalf of another company.

An EOR is typically used to overcome the financial and regulatory hurdles that often come with employing remote workers.

Each country has its own payroll, employment, and work permit requirements for non-resident companies doing business in their jurisdiction. Meeting those demands can be a huge obstacle when it comes to hiring remotely.

At Panther, we help companies employ and pay people in over 160 countries, without having to set up a foreign subsidiary. Payroll, benefits, taxes, compliance, and more are all handled by us, at a fraction of the cost.

Outside of saving you months and tens of thousands of dollars, other advantages of using Panther are:

  • Ability to attract talented and motivated employees from all over the world.
  • Full legal compliance: There is no risk of violating local employment laws.
  • Transparency: Employees are still your employees. All the work, processes, operations and day-to-day business belong to you, the company, just like with any other employee. Panther just takes on all of the responsibilities, obligations and admin work related to your team's employment.
  • No risk of misclassification

Because you no longer have to set up your own subsidiary, you’ll save a ton of time and tens of thousands of dollars using Panther.

Paying Remote Employees

Paying employees in USA is not the same as paying workers in your own country. Employees have to be paid using USA’s employment and payroll standards.

This means that you have to know, understand, and keep up with 1) fluctuating currency changes, and 2) local payroll and tax laws in the countries you’re looking to hire in.

Outside of the laws and regulations around payroll, there may be different conditions surrounding leave, overtime, termination, and more. As you can imagine, maintaining this kind of regulatory knowledge can be challenging. But it is crucial and necessary to follow local legislation.

After, you’ll have to determine the best way to pay your international employees. This can be done in a number of ways, including but not limited to:

Pay through a local entity

One of the most challenging (and expensive) parts of paying international employees is setting up the infrastructure to do so.

Before you start to run payroll, you have to register your company as the local employer in the country the worker resides in. As you can see in the “Set up a subsidiary” section, this is a multi-step process that can take up to a year and put you on your way to bankruptcy.

Work with an EOR

Outside of EORs acting as the full admin employer, many also provide remote payroll.

For example, at Panther, in just 1-click, you’re able to pay your entire global team, anywhere in the world. We send you an invoice each month, charge you in US Dollars, and pay your employees the same amount in their local currency.

We factor in currency fluctuations and use the mid-market rate plus any applicable fee passed on by our provider at cost at the time of billing.

USA

 Specific Information

Working Hours

The standard work week in California is 40 hours per week or 8 hours per day.

Overtime

California adheres to the Fair Labour Standards Act (FLSA), and work in excess of 40 hours per week is considered overtime and paid at the rate of 150% of the regular pay.

If employees are scheduled to work on weekends or rest days, no additional payment is required.

However, should an employer request an employee to work in exceptional circumstances on these days, then overtime is paid at the rate of 150% of the regular pay.

Payroll Tax

Employer

Employer

  • Unemployment (State)
  • Unemployment- New Employer (State)
  • FICA Social Security (Federal)
  • FICA Medicare (Federal)
  • FUTA Unemployment (Federal)

Minimum Wage

The minimum wage in California is 14.00 USD per hour. However, for employers with 25 or fewer employees, the minimum wage and cash wage are reduced to 13.00 USD per hour. There are also other minimum requirements: Minimum cash wage (tipped employee): 14.00 USD per hour Maximum tip credit: Not permitted

Payroll

Pay Cycle

Employees are paid semi-monthly, with requirements for the payments to be made on the 26th of the month for work undertaken between 1st and 15th of the month and the 10th of the following month for work undertaken between 16th and end of the month.

13th Salary

There are no provisions in the law regarding 13th salaries.

Leave

Paid Time Off (PTO)

California does not have any state laws that govern paid time off.  However, it is common for employers to decide whether to offer paid or unpaid vacation leave.  

This must comply with employment law and must be stipulated in the collective bargaining agreements.

Public Holidays

There are 11 public holidays.

Sick Days

An employer to follow the Family and Medical Leave Act (FMLA) which provides certain employees with up to 12 weeks of unpaid, job-protected leave per year for certain family and medical reasons (maternity leave, serious illnesses, or if the employee needs to care for a spouse or child).

Employees are eligible for FMLA if they have worked for their employer for at least one year, completed a minimum of 1,250 hours over the past year, and worked at a location where the company employs 50 or more employees within 75 miles.

Maternity Leave

Female employees are entitled to 12working weeks of leave in any one year for a child’s birth and to care for the newborn child within one year of birth.

For employers with 5 or more employees, the Pregnancy Disability Leave entitles employees who have disabilities related to pregnancy or the child’s birth up to four months of unpaid maternity leave.

Paternity Leave

In California, there are three laws regarding Paternity Leave:

  • Family and Medical Leave Act (FMLA)
  • California Family Rights Act (CFRA)
  • The New Parent Leave Act (applies to employers with 20 – 49 employees)

All three entitle new fathers to 12 weeks of unpaid leave.

Parental Leave

In California, 26 working weeks of leave during a single one-year period to care for a covered servicemember with a serious injury or illness if the eligible employee is the service member’s spouse, son, daughter, parent, or next of kin (military caregiver leave).

Other Leave

Voting Leave - Employees who are registered to vote receive 2 hours off from work to vote in any municipal, county, state, or federal primary or general election. Employees must provide reasonable notice to their employers to take time off to vote. Unpaid or paid leave is dependent on contract terms.

Jury Duty Leave - Full-time employees are entitled to job-protected, unpaid leave for jury duty, as a witness in a case, responding to a subpoena, or acting as a plaintiff or defendant in the courts. Employees must provide a copy of the jury summons to the employer as evidence of requirement.

Marriage Leave

No Info.

Bereavement Leave

In the US, there is no law granting workers the right to paid time off to attend a loved one's funeral or process the trauma of losing a family member.

Bereavement leave is up to the discretion of employers.

Termination

Termination Process

An employment contract or a collective bargaining agreement, U.S. law does not impose a formal notice period to terminate an individual employment relationship, and employment is stipulated “at will.”

This means that either the employer or the employee may end the employment relationship without giving either notice or reason, provided it is not illegal, notable discrimination on the grounds of a category protected by law, etc., and as per the Federal Worker Adjustment and Retraining Notification Act (WARN).

The employment contracts of executives and other highly skilled individuals often incorporate a “just cause termination” clause which mandates that the employer may only terminate the employee for “cause” and lists the permissible grounds. In such cases, the parties negotiate the foundations for a “just cause” termination.

Notice Period

In California, payout of unused vacation time is not required by law.  However, employers will generally pay an employee for unused vacation days, provided the employee gives some advanced notice of resignation. While there is no official notice period, general practice is 2 weeks.

Severance Pay

An employment contract or collective bargaining agreement, employers are not required to pay severance. Many employers choose to offer severance pay based on the employee’s length of employment.

Probation Period

Probation period is 90 days.