The professional talent in America has always been highly desirable for those looking to hire internationally, especially to Italian companies wanting to hire in the US.
Not only do they offer a highly-diversified and skilled talent pool, but the size of the professional talent pool and young working population is a huge benefit for European companies who want to break into the North American market.
To hire in the United States, however, there are certain things that Italian companies will need to consider. Aside from compliance with United States federal law, it’s also important to adhere to the different rules and regulations regarding labor in each separate state. These include considerations such as payroll, employee benefits, taxes, notice periods and more.
In this guide, we’ll cover the details of how an Italian company can hire in the US. We’ll also explore what Italian companies need to know if partnering with a global Employer of Record (EOR) to oversee the legalities and average cost to hire an employee in the US.
Can an Italian Company Hire in the US?
The short answer is yes. There are no rules or regulations which state that Italian companies cannot hire in the US.
However, there are many legalities that must be taken into consideration to ensure that companies adhere to United States national and state employment laws.
Here are a few ways in which an Italian company can hire in the US, and a few things to take into consideration when employing American workers.
3 Ways Italian Companies Can Hire in the US
- Hire United States Workers as Contractors
Hiring workers as independent contractors might be the easiest option for Italian companies. However, there are still certain things that Italian companies must consider to ensure that all legal working conditions are met.
Independent contractors in the United States are classified as 1099 employees. They are self-employed individuals who provide their services to the company, while choosing their own working hours and schedules.
As with Italy, a United States-based contractor is treated independently from a company’s internal employees. Contractors who are hired independently are not paid a fixed salary or expected to be provided with work equipment by the company.
This allows companies more flexibility and is more cost-effective when hiring for specialized services or one-time projects. And, contrary to popular belief, independent contractors are not solely for short-term employees — they may also provide their services to a company for extended periods of time.
However, if you are considering hiring independent contractors, you must first be aware of all legal risks associated with misclassifying contractors as full-time employees. Companies who misclassify new employees – whether accidentally or intentionally – may be liable to pay tax violation fines, including up to 3% of the misclassified employee’s wages as well as associated FICA taxes.
Italian companies might also face fines for federal labor law violations under the United States Fair Labor Standards Act (FLSA).
- Establish a Foreign Entity in the United States
Another option for Italian companies to hire in the US is to set up a local entity. Opening an entity in the United States allows you to create a branch or subsidiary to hire workers directly. Setting up a foreign entity allows Italian companies complete control when hiring local workers, managing payroll, and establishing a local branch.
Depending on the nature of the business, your company may need to obtain proper permits or licenses from local, state, or federal authorities to operate legally in the US.
Establishing a foreign entity is a good option if your company plans on hiring multiple workers or creating a more established long-term presence. It is, however, a costly and time-consuming process that requires comprehensive, in-house knowledge of the country’s legal, corporate, and payroll laws and regulations.
Consider consulting with local legal professionals or professional institutions, such as an established employer or record (US EOR) if this path is being considered by your company.
- Partner With an Employer of Record in the United States (US EOR)
The third, and arguably easiest option, is to engage an employer of record services (EOR) to hire, pay, and manage your US-based hires. Because the EOR partner is already set up as a legal entity in the United States, they will help ensure that their client company is in alignment with local laws and requirements.
A US EOR partner will act as the legal employer for your staff in the US. It will offer global payroll solutions for company employees, as well as take care of tax deductions including Federal Income Tax, Social Security Taxes and Medicare tax, and potential federal unemployment taxes.
Ultimately, a US EOR partner is the easiest option and will help streamline the entire hiring experience while protecting against any legal mishaps so you can focus on growing and expanding your business.
Things to Consider When Hiring in the United States
As the professional working landscape in the United States is quite different from Italy, there are many legalities and government requirements that will affect both the company and the individual employee.
Cultural Differences and Language Barriers
Understanding and respecting cultural differences is crucial for Italian companies who wish to hire in the US. American business culture varies greatly from Italian work culture. As such, it is crucial that you familiarize yourself with the basics of American business etiquette, communication styles, and social norms before onboarding employees in the US.
It is also important that you are skilled enough in the English language to be able to effectively communicate with employees, as many Americans do not speak Italian.
Employment Contracts
Employment contracts should clearly outline job responsibilities, compensation and other terms of employment. This includes at-will employment, which is a US employer's ability to dismiss an employee for any reason, and without warning, so long as the reason is not illegal. This is applicable to all states except for Montana.
Tax Considerations
Hiring in the US will likely pose tax implications for your company. You will need to understand and comply with US tax laws and regulations, including payroll taxes, social security taxes, medicare taxes and possible 401(k) contribution-related taxes.
Payroll processing for your global team can be a real challenge if you're unsure of how to navigate it. However, partnering with an established Employer of Record (US EOR) can help ease some of the confusion surrounding United States tax considerations.
Workplace Regulations and Local Employment Laws
You must be aware of workplace regulations related to safety, discrimination, harassment, and other labor-related matters when hiring in the US.
These regulations can vary from state to state, meaning your company will be responsible for creating a safe working environment. In order to ensure this, both the employer and the employee should be fully aware of their rights at all times.
Human Resources Management and Hiring Process
Whether hiring employees individually as contractors or establishing a legal foreign entity, your company should have a plan in place to manage human resources matters. These can include matters such as onboarding, employee training and management, and dealing with potential employment disputes.
You'll need to ensure that any United States nationals that you employ have the right paperwork in the state in which they are employed. If you're hiring foreign workers who reside in the US, it is crucial that they hold a foreign equivalent degree and labor certification to be employed by your company.
Your HR department will be responsible for such considerations as you onboard your global team, not only in the US, but potentially in other countries as well.
Average Cost to Hire an Employee in the US
In addition to possible costs incurred from establishing a legal entity to hire employees, individual employee expenses shouldn't be overlooked. You must take into consideration employee benefits, payroll taxes and government-related contributions on top of each employee's salary.
On average, the total cost of hiring is around 30% of an employee's base salary. Meaning, the average cost to hire an employee in the US can range from 1.24 to 1.4 times their base salary.
Salary and Wages
Salaries vary greatly between the US and Italy. The same position in the US often pays much higher than one in Italy. This disparity in wages is often surprising to foreign employers who are just entering the US labor market.
The minimum wage, as designated by US federal law, is $7.25 per hour. However, his rate may vary from state to state. For employees who work more than 40 hours a week, they are entitled to overtime pay; the current rate stands at 150% of their current wage.
Payroll Taxes
US employers are responsible for the following national and federal payroll taxes:
- Federal Payroll Tax: Known as Federal Insurance Contribution Act (FICA). Divided into two parts, one for Medicare and the other for Social Security.
- Social Security Payroll Tax: Shared equally by the employer and employee.
- Medicare Payroll Tax: Medicare tax is also split evenly between the employer and employee, but without an earnings limit unlike Social Security.
- Unemployment Taxes: Employers are solely responsible for paying federal unemployment tax (FUTA) on the first $7,000 earned by each employee.
- State and Local Payroll Tax: Some states and municipalities may have additional taxes for things such as short-term disability leave and paid medical leave. Check with your local US authority for specific requirements.
Employee Benefits
While only some health benefits are deemed mandatory for mid to large-sized companies, most employers offer employees some type of benefit package to stay competitive. Most benefit packages include health and retirement savings plans and paid leave, which should be factored into the total cost of hiring. Additional statutory holidays and other employee leave entitlements should also be taken into consideration.
Common Employee Benefits in the US
You should also ensure that all local employees are given appropriate paid time off and benefits as required by United States law.
In the United States, employee benefits are significant and hold great importance in the job market. It is not enough to offer just a salary as an employer in the US.
There is a general expectation for companies to provide employees with a comprehensive benefits package. This is another aspect that may add to the average costs to hire an employee in the US.
This standard differs from Italy, where the government is responsible for providing employees with healthcare coverage and other benefits.
Companies that operate in the US are accountable for providing benefits such as insurance and 401(k) plans. Employers must provide legally mandated benefits to all eligible employees.
Paid Time Off (PTO)
By law, the average American worker is entitled to 11 days of paid vacation per year. In addition, employees are allowed eight days of sick leave annually.
The United States Government also recognizes the following 10 annual holidays, as well as Inauguration Day every fourth year.
- January 1 (New Year’s Day)
- 3rd Monday in January (Martin Luther King’s Birthday)
- 3rd Monday in February (Washington’s Birthday)
- Last Monday in May (Memorial Day)
- June 19 (Juneteenth National Independence Day)
- July 4 (Independence Day)
- 1st Monday in September (Labor Day)
- 2nd Monday in October (Columbus Day)
- November 11 (Veterans’ Day)
- 4th Thursday in November (Thanksgiving Day)
- December 25 (Christmas Day)
Personal Leave Entitlements for US Workers
Holidays and Annual Statutory Leave
Although there are several national holidays acknowledged by the United States Government, there are no federal laws that require your company to provide employees with time off.
It is, however, common for companies to provide employees with paid time off to accommodate national and local holidays.
Annual vacation time allowed by employers can vary, and ranges from one week to three weeks or more per year for long-time employees. Employees who are part of a labor union might also receive additional days off depending on the terms of their labor agreement.
Maternity and Parental Leave
The Family and Medical Leave Act (FMLA) requires companies that employ 50 or more employees to provide twelve weeks of unpaid leave for employees to accommodate the birth of a child. Some state laws also provide maternity leave for employees who are not covered under the FMLA.
Though they are not required to, many states will also provide employees with partial pay during parental leave. This is to be agreed upon by the employer and employee, and must be outlined in the employment contract.
Sick Leave
In most cases, United States employees are entitled to unpaid sick leave under the FMLA. This allows employees to take up to twelve weeks of unpaid medical leave for health conditions that prevent the employee from fulfilling their assigned tasks. Routine medical care and minor illnesses are generally not covered.
Disability Leave
Employees with disabilities may be entitled to unpaid leave under the FMLA and Americans with Disabilities Act (ADA). Though the ADA is not required to compensate employees while on disability leave, it does require companies to accommodate employees with disabilities. Such accommodations may include extended employee leave, as long it is not an unreasonable amount of time that is requested.
Social Security and Medicare Contributions
By law, companies must provide retirement benefits and health insurance for employees under federal Social Security and Medicare programs. According to the United States Internal Revenue Service (IRS), all companies are required to contribute the following:
- 6.2% of every employee’s salary to Social Security
- 1.45% of every employee’s salary to Medicare
Contributions equal to these amounts should be deducted from each employee’s wage as an employee contribution.
These contributions provide benefits for retirees, disabled workers, children of deceased workers, as well as hospital insurance benefits for all United States residents and registered nationals.
Healthcare and Insurances
Both local and international companies that do not offer affordable health insurance options to full-time employees may be faced with financial penalties as stated by the Patient Protection and Affordable Care Act. Your company will be subject to a penalty of $2,570 per employee if you do not offer health insurance to the majority of your full-time employees.
Employee Pensions
While it is not legally required for employers to provide employee pension or retirement benefits, many American companies provide employees with some retirement benefits. Such benefits are most commonly offered in the form of state-sponsored retirement plans such as a 401(k) or an SEP IRA under the Internal Revenues Code.
Employees are typically given additional benefits, though these are dependent on the size of the company. These include standard health insurance and paid parental leave, as well as disability insurance, life insurance, dental insurance, vision insurance, compensation for work-related travel, and sometimes wellness benefits.
Common Risks for Companies Who Hire in the US
There are many considerations for Italian companies who want to hire in the US. This section will briefly outline a few of the most common risks that may be overlooked by international companies who hire in the US.
Employee Misclassification
Companies must ensure that all employees, whether hired as a contractor or full-time employee, are classified correctly. Misclassification is a common issue amongst international companies. As such, the IRS emphasizes the importance of proper classification so companies don’t run into unnecessary tax complications.
To avoid such fines and potential tax implications, consider working with a legal expert, such as an employer of record (EOR), who can help your company avoid misclassification through proper contracts, accurate reporting, and correct payroll deductions.
Incorrect Payroll Contributions and Deductions
Canadian companies must consider contributions such as social security and Medicare contributions, paid time off, healthcare and other insurance among others.
Companies are required to calculate, deduct, and contribute the correct amount to US authorities. Lack of deductions or incorrectness in deductions and contributions could result in legal complications or fines for the employer.
Potential Visa Requirements
Italian companies who hire in the US must check that employees have the correct legal authorization to work in the United States. This might involve obtaining a work visa if the employee does not have proper documentation to work and pay taxes in the United States.
Such visas might include H-1B visa (for specialty occupation workers), L-1 visa (for intra-company transfers), or other relevant visas based on the individual's specific circumstances.
Why Choose Borderless?
As an established EOR, we can help you hire in 170+ countries, including the US. Borderless is highly knowledgeable and experienced in assisting international companies who wish to hire in the United States. See for yourself how Borderless can help you hire quickly and efficiently. Book a demo today!
