Skilled US workers have always been highly desirable for those hiring internationally. As of recently, US talent has been especially attractive to UK companies wanting to hire in the United States.
Why? Firstly, operating in the world’s largest recruitment market increases UK agencies' revenue. Secondly, it allows UK companies to gain access to a larger more diversified market of workers.
But these are not the only reasons. The US offers a highly diversified and skilled talent pool that shares English as its primary language, similar markets, and certain shared cultural norms.
To hire in the United States, however, there are certain things that UK companies will need to consider. Aside from compliance with United States federal law, it’s also important to adhere to the different employment regulations regarding labor in each separate US state. These include considerations such as payroll, employee benefits, taxes, and more.
In this guide, we’re going to explore why more UK companies than ever are entering the US recruitment market. We’ll also cover the details of what UK companies need to know if partnering with a global Employer of Record (EOR) to oversee the legalities and potential costs of hiring in the United States.
Can a UK Company Employ Staff Overseas?
The answer is yes if you are a UK company employing staff overseas. There are no rules or regulations that prohibit UK companies from hiring employees in the United States.
However, foreign companies have a legal responsibility to understand local laws and ensure that they comply with United States employment regulations.
In this article, we’ll cover things to keep in mind when hiring in the United States, the benefits of hiring employees in the US, and ways a UK company can engage US workers.
Reasons UK Companies Hire US Employees
1) The US is Number One for Global Revenue Generation in Recruitment
The United States holds the top position for revenue generation in the global recruitment industry. In 2021, the estimated revenue from the global recruitment industry was US $620 billion. Of this, the US accounted for a staggering US $186.3 billion. This surpasses the combined revenue of Australia, France, Germany, India, Saudi Arabia, Spain, Sweden, Turkey and the United Kingdom for the same year. This shows the immense scale of the US recruitment market and just how many candidates there are.
It's no wonder that UK employers are increasingly choosing to operate in this colossal market. Projections suggest that the US staffing industry is set to achieve record revenue in the following years, with temporary and contract staffing anticipated to contribute the majority of this revenue.
2. Shorter Notice Periods Create a Larger Talent Pool
What does at-will employment entail, you might ask? This is a notable distinction in the US recruitment market that consistently surprises UK employers. In the US, employment is at-will, meaning that either the employer or the employee can terminate the employment relationship at any time, for any reason. This is different from the UK, where recruiters often expect at least one month's notice, which can further increase with seniority.
Shorter notice periods in the US mean that potential candidates are available almost immediately, whether due to job loss or a desire for change. As a UK company doing business in the USA, this swift turnaround time can make it easier to hire workers. This also creates a highly dynamic market.
3. Experienced Candidates Gravitate Towards Iconic US Areas
The robust and diversified US economy excels across nearly all major industries. For successful companies aiming to tap into the best opportunities in their respective fields, hiring in the US is a natural progression.
If you are already a UK company employing staff overseas, why not seize the hiring opportunities in renowned cities like New York, San Francisco, or Los Angeles?
To further underscore the level of talent in the US market, there are approximately 52.8 million individuals aged 25 and over in the US who hold a bachelor's degree. Additionally, according to the latest US census data, 24.1 million people in the US hold a master’s degree. Regardless of the sector you specialize in, due to the sheer scale of industries in the US and the available talent pool, you are sure to have success in finding capable, qualified workers for hire.
4. 50 States to Recruit From with Different Specialized Sectors
With 50 states offering diverse economic landscapes and employment demands, the expansive market is a great place for UK employers to search for their next potential hire. The substantial size of state economies alone is an enticing factor for UK companies venturing into the US market. In the event of economic instability in one state, companies can diversify their business by hiring workers in another state.
Things to Consider When Hiring in the United States
Although it’s simple enough for UK companies to hire in the United States, there are many government requirements that both employers and employees will need to consider. Employers will have to navigate local US employment laws, fulfill contractual obligations, maintain tax compliance, and manage employees from overseas. You will also need to provide employees with all legally mandated benefits and appropriate paid time off.
Local Employment Laws
US employment laws can vary by state and include things such as:
- Minimum wage (set by US federal law at US $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
Aside from standard employee benefits, additional benefits will need to be taken into consideration when hiring employees in the United States. Depending on the size of the company and the individual employment agreement, additional benefits (though not mandatory) are usually provided. Popular employee benefits in the US include:
- Long-term and short-term disability insurance
- Health insurance
- Life insurance
- Dental insurance
- Vision insurance
- Paid parental leave
- Commuting and travel reimbursement
- Gym and wellness benefits
US Employment Contracts
The employment contract 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 without just cause, as long as the reason is not illegal. Similarly, employees are permitted by law to quit without reason and without prior notice.
Tax Considerations
Employing staff in the United States will likely have tax implications for UK businesses. It's important that your company understands and adheres to US tax laws and regulations. These include payroll taxes, social security taxes, medicare taxes, and potentially 401(k) contribution-related taxes. Effectively managing payroll for your international team can be a significant hurdle if you're unfamiliar with the process.
Workplace Regulations and HR Management
UK companies must be aware of workplace regulations related to safety, discrimination, harassment, and other labour-related matters.
These regulations can vary by state and locality, meaning your company will be responsible for researching site-specific laws and creating a safe working environment where both parties are aware of their rights and entitlements.
Matters such as contractual obligations, onboarding, employee training, and management should be addressed appropriately by employers.
Your HR department will need to keep these things in mind as you onboard your US-based team.
Paid Time Off
The United States Federal Government recognizes ten national and local holidays per year, as well as the Inauguration Day Holiday every fourth year. US holidays that are observed by many US businesses with paid time off include:
- 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
Though there are many holidays acknowledged by the US government, there is no federal law that requires companies to provide employees with time off. However, it is common and somewhat expected that companies provide employees with paid time off for such holidays.
Personal Leave Entitlements
Annual Statutory Leave
The US has no national requirement for paid holidays. However, the average American worker is allowed 11 days of paid vacation per year. That said, annual vacation time may range from one to three weeks or longer for long-time employees. Employees who are part of a labor union may also receive more days off depending on the terms of their agreement.
Maternity and Parental Leave
The Family and Medical Leave Act (FMLA) requires companies that employ fifty or more employees to provide twelve weeks of unpaid leave to accommodate the birth of a child. Some state laws also provide maternity leave for employees who are not covered under the FMLA. Paid leave in the US is not mandatory, though many states will provide employees with partial pay during parental leave.
Sick Leave
Employees in the United States may be eligible for unpaid sick leave under the Family and Medical Leave Act (FMLA). This allows employees to take up to twelve weeks of unpaid medical leave for health conditions that affect their ability to perform their jobs effectively. It's important to note that minor illnesses like colds, headaches, and routine medical care are typically not covered.
Disability Leave
Employees with disabilities may qualify for unpaid leave under the Family and Medical Leave Act (FMLA) and the Americans with Disabilities Act (ADA). While the ADA doesn't mandate specific provisions for employees on disability leave, it obligates companies to make reasonable accommodations for employees with disabilities. This may include granting employee leave, provided it is not seen as 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 must contribute the following percentage of each employee’s salary:
- 6.2% to Social Security
- 1.45% to Medicare
The specified amounts will be withdrawn from employees' wages as their designated contributions. These contributions are intended to support various benefits, including those for retirees, disabled workers, children of deceased workers, and hospital insurance benefits.
Healthcare and Insurances
As stated in the Patient Protection and Affordable Care Act, companies that fail to provide affordable health benefits options to their full-time employees may face financial penalties. Employers could face a penalty of US $2,570 per employee if the company does not extend health insurance coverage to at least 95% of their full-time workforce.
Employee Pensions
While there is no legal mandate for companies to offer employee pensions or retirement benefits, a significant number of American companies choose to provide some form of retirement benefits. This is most frequently done in the form of a retirement savings plan, commonly known as a 401(k) plan under the Internal Revenue Code.
Non-compliance Risks for UK Companies
As mentioned before, there are many things to consider when hiring in the United States. In this section, we will mention some of the most common non-compliance risks for UK companies when hiring in the US.
Misclassification of Employees
When hiring employees in the US, ensuring correct classification is vital to your company's success. The IRS acknowledges misclassification as a common issue amongst global companies and advises the importance of proper classification.
To avoid fines and legal complications, consider working with a global employment expert, such as an Employer of Record (EOR), who can help you avoid misclassification through proper contracts, accurate reporting, and accurate payroll deductions.
Incorrect Payroll Contributions and Deductions
UK companies need to take into account contributions like social security and Medicare, paid time off, healthcare, and other insurances, among other factors. It is mandatory for companies to accurately calculate, deduct, and remit the appropriate amounts to US authorities. Failure to deduct or make incorrect deductions and contributions could lead to legal complications or fines for the employer.
Improper Work Authorization
UK companies wanting to hire employees in the US need to ensure that the potential employee has appropriate United States work authorization. This might involve obtaining a work visa if the person of hire does not have existing legal authorization to work and receive payment in the United States.
Not having proper work documentation means the individual will not have access to documentation to open a bank account, contribute to US social security and healthcare systems, or legally work and earn a salary in the United States.
Three Ways UK Companies Can Hire Skilled Workers in the US
Engage United States Workers as Contractors
Contract staffing in the United States might be the easiest option. But there are still certain things that UK companies must take into consideration to ensure that all legal working conditions are met.
Independent contractors in the United States are self-employed individuals who provide their services to the company while choosing their own working hours and schedules.
As with the UK, a United States-based contractor is treated independently from a company’s internal employees. Independently hired contractors are not paid a fixed salary or provided with work equipment by the company of hire.
This allows companies more flexibility and is 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, UK companies considering engaging independent contractors must be aware of all associated legal risks with misclassifying full-time employees as contractors. If found guilty, a company may be liable to pay tax violation fines, including up to 3% of the misclassified employee’s wages and associated FICA taxes.
UK companies might also face fines for federal labor law violations under the United States Fair Labor Standards Act (FLSA).
Establish a Local Entity in the United States
Another option for UK companies to hire skilled workers 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 UK 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 local 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 knowledge of the country’s legal, corporate, and payroll laws and regulations.
Consider consulting with local legal professionals or professional institutions if this is the path your company is considering.
Partner with an Employer of Record USA (EOR USA)
The third and arguably easiest option is to engage an Employer Of Record 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 you are in alignment with local labor laws and requirements.
An EOR USA 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, Medicare tax, and potential additional private health insurance.
Ultimately, an EOR USA 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!
How Borderless Can Help
As an established EOR with experience navigating local hiring laws and regulations in over 170 countries, Borderless is highly knowledgeable in assisting UK employers navigate the US landscape. Book a demo today and see Borderless in action.
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.
