The professional talent in the United States has long been highly desirable to those seeking international hires, particularly for European companies looking to hire in the US.
Their diversified talent pool paired with their high productivity and streamlined business methodologies create an alluring profitable landscape for many foreign companies.
To hire in the United States, however, there are certain things that German 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, which include considerations such as payroll, employee benefits, taxes and more.
For more information about legal requirements regarding taxes, we suggest contacting the local tax authorities to ensure that you have access to the most up-to-date information.
In this guide, we’ll cover the details of how a German company can hire skilled workers in the US. We’ll also explore what German companies need to know if partnering with global Employer of Record Services (EOR) to oversee the legalities, employee regulations and potential costs of hiring in the United States.
Can a German Company Hire New Employees in the United States?
Yes, a German company can hire in the United States. There are no rules or employment regulations that do not allow German companies to hire employees in the United States.
However, there are many legalities and local employment laws that must be taken into consideration to ensure you are following United States employment and federal laws.
Below are some things to keep in mind when hiring in the United States and a few ways in which a German company might go about employing skilled workers in the US.
3 Ways German Companies Can Hire US Skilled Workers
1. Hire United States Workers as Contractors
Contract staffing within the United States could potentially offer the simplest route to hiring. Still, certain aspects of the hiring process require careful attention from German companies to guarantee compliance with local labor laws.
Independent contractors within the United States are self-employed professionals who provide their services to a company while retaining the freedom to determine their own work schedules and hours.
A contractor based in the US is treated distinctly from a company's full-time employees. They are contracted professionals who do not receive a predetermined salary and are responsible for their own work tools and equipment.
These conditions allow companies more flexibility and are more cost-effective when hiring for specialized services or one-time projects. Independent contractors may also provide their services to a company for extended periods of time.
However, German companies considering hiring independent contractors must be aware of all associated legal risks with misclassifying contractors as full-time employees for which the company may be liable to pay tax violation fines, including up to 3% of the misclassified employee’s wages as well as associated FICA taxes.
German companies might also face fines for federal labor law violations under the United States Fair Labor Standards Act (FLSA).
2. Establish a Foreign Entity in the United States
Another option available to German companies seeking to hire skilled workers in the US is the establishment of a foreign entity. Establishing a foreign entity in the United States provides the opportunity to create a branch or subsidiary that allows you to directly hire workers.
The setup of a foreign entity allows German enterprises the authority needed to hire local employees, administer payroll, and create a local presence.
Depending on your business's nature, it might be necessary for your company to secure appropriate authorizations or licenses from local, state, or federal authorities to ensure your business can operate legally within the US.
Creating a foreign entity is a favorable strategy if your company intends to hire multiple employees or establish a more permanent presence. However, it's important to acknowledge that this option involves high costs and demands a substantial investment of time. It also requires a solid understanding of the legal, corporate, and payroll practices of the country.
Consider seeking guidance from local legal experts, established professionals, or an Employer of Record in the United States (EOR US) if this option aligns with your company's needs.
3. Partner With Legal Employer of Record Services in the United States (EOR US)
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 to ensure that their client company is in alignment with local labor laws and requirements.
An EOR US 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 additional private health insurance.
Ultimately, an EOR US partner is the easiest option and will help streamline everything from employee onboarding to the payroll process while protecting against any legal mishaps so you can focus on growing and expanding your business headache-free.
Things to Consider when Hiring in the United States
Although it’s easy enough for German companies to hire in the US, there are various legal issues and government requirements that will affect both the company and the individual US skilled worker.
Local Employment Laws and Employment Contracts
US employment laws can vary by state and include things such as minimum wage (set by US federal law as $7.25 per hour, though it can vary from state to state), overtime pay of one-and-a-half times their hourly rate for any hours over 40 worked by the employee per week, standard employee benefits, and more that will need to be taken into consideration when hiring in the United States.
Additionally, employment contracts should outline job responsibilities, compensation and other terms of employment including at-will employment. At-will employment is a US employer's ability to dismiss an employee for any reason, and without warning with or just cause, as long as the reason is not illegal.
Tax Laws and Considerations
Hiring employees in the United States will likely pose tax implications for German companies. Your company will need to understand and comply with US tax laws and regulations.
These include 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.
Employment Eligibility Verification (Form I-9)
All employers and hiring managers in the United States, including German companies, are required to verify the identity and employment eligibility of all of their employees by completing Form I-9.
Workplace Regulations
German companies hiring in the United States must be aware of workplace regulations related to safety, discrimination, harassment, and other labor-related matters.
These regulations can vary by state and locality, meaning your company will be responsible for creating a safe working environment where both the hiring party and employee are fully aware of their rights at all times.
Human Resources Management
For German companies in the process of contracting an individual or setting up a foreign entity, it is essential to establish a strategy for overseeing human resources affairs.
This includes employee onboarding, effective employee training and management, and addressing any potential employment disputes.
It's also essential that your company guarantees the skilled US workers you hire possess the required documentation for their employment. If your recruitment involves foreign nationals who reside in the US, you must verify that they have the equivalent work requirements and necessary labor certification.
Cultural and Language Considerations
German companies operating in the US should also consider cultural differences and language barriers that could impact their ability to effectively manage and communicate with their US-based employees.
State-Specific Regulations
Employment laws in the US can vary from state to state. It's important for German companies to consider state-specific regulations that might affect the hiring process.
Common Employee Benefits in the US
Your company should also ensure that all US-based employees are given appropriate paid time off and benefits as required by United States law.
Employers must provide legally mandated benefits to all eligible employees including:
Paid Time Off (PTO)
The average American worker is also entitled, by law, to 11 days of paid vacation per year, as well as eight days of sick leave per year. The United States Federal Government also recognizes the following 10 holidays per-year, as well as an additional Inauguration Day Holiday every fourth year.
- New Year’s Day: January 1
- Martin Luther King’s Birthday: 3rd Monday in January
- Washington’s Birthday: 3rd Monday in February
- Memorial Day: last Monday in May
- Juneteenth National Independence Day: June 19
- Independence Day: July 4
- Labor Day: 1st Monday in September
- Columbus Day: 2nd Monday in October
- Veterans’ Day: November 11
- Thanksgiving Day: 4th Thursday in November
- Christmas Day: December 25
Personal Leave Entitlements
Holidays and Annual Statutory Leave
Although there are several national holidays that are acknowledged by the United States government, there is no federal law that requires companies to provide employees with time off. However, it is common for companies to provide employees with paid time off for national and local holidays.
Annual vacation time might range from one to three weeks or more for long-time employees. Employees represented by a labor union might also receive more days off depending on the specific terms of their labor or employment 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 the birth of a child. Some state laws also provide maternity leave for employees who are not covered under the FMLA.
Additionally, though they are not required to, many states will provide employees with partial pay during parental leave.
Sick Leave
United States employees may be entitled to unpaid sick leave under the FMLA, which allows employees to take up to 12 weeks unpaid medical leave for health conditions that prevent the employee from competently carrying out their job.
Colds, headaches, and routine medical care are generally not covered.
Disability Leave
Employees with disabilities may be entitled to unpaid leave under the FMLA and Americans with Disabilities Act (ADA).
While the ADA is not required to provide for employees on disability leave, it does require companies to make accommodations for employees with disabilities, which could include employee leave, so long it is not unreasonable for the company to do so.
Social Security and Medicare Contributions
United States law provides retirement benefits and health insurance under federal Social Security and Medicare programs.
According to the United States Internal Revenue Service (IRS), all companies are required to contribute 6.2% of every employee’s salary to Social Security, as well as 1.45% to Medicare. Contributions equal to these amounts will be taken from each employee’s wages as an employee contribution.
These contributions are meant to provide benefits for retirees, disabled workers, children of deceased workers, as well as hospital insurance benefits.
Healthcare and Insurances
As outlined by the Patient Protection and Affordable Care Act, companies who do not offer affordable healthcare insurance options to full-time employees may be faced with financial penalties. Employers will be subject to a penalty of $2,570 USD per-employee if the company does not offer healthcare insurance to at least 95% of their full-time employees.
Employee Pensions
Many American companies provide some retirement benefits, though it’s not legally required, such as employee pensions and retirement benefits. These benefits are most commonly given the form of a retirement savings plan, referred to as a 401(k) plan under the Internal Revenues Code.
Depending on the size of the company, employees are also given additional benefits. These benefits include health insurance and paid parental leave, as well as disability insurance, life insurance, dental insurance, wellness benefits and various financial assistance.
Common Risks for German Companies Hiring in the United States
As mentioned before, there are many things to consider when hiring in the United States. In this section, we will briefly discuss a couple of the most common risks for German companies to consider when hiring skilled workers in the US.
Misclassification of Contractors as Full-time Employees and vice versa
When hiring a skilled US worker for a contract position or for full-time work, you should ensure that they are classified correctly.
The IRS acknowledges this as a common issue amongst international companies and advises the importance of proper classification, as well as the corresponding taxes that need to be reported in both Germany and in the United States.
To avoid fines and legal complications, 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 accurate payroll deductions.
Making Incorrect Payroll Contributions and Deductions
German 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
German companies wanting to hire employees in the US need to ensure that the potential employee has appropriate authorization to work in the United States. This might involve employees obtaining proper work visas if the person of hire does not have existing legal work authorization 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 employee’s specific circumstances.
Contact Borderless Today
As an established EOR, we can help you hire in 170+ countries, including the United States. Borderless is highly knowledgeable and experienced in assisting German employers looking to hire in the US. Book a demo today to see how Borderless can help you today.
Disclaimer
Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
