Employer of Record (EOR) & US Payroll Compliance

What Is an Employer of Record?

An Employer of Record (EOR) is a third-party company that legally employs workers on your behalf in a jurisdiction where you have no legal entity. The EOR holds the employment contract, runs payroll, withholds and remits taxes and provides statutory benefits, while you direct the employee’s day-to-day work. It is the fastest compliant route to a US employee — and, above roughly five to ten hires, usually more expensive than running your own US payroll.

An EOR is not a PEO. A PEO co-employs alongside a US entity you already own; an EOR replaces the entity entirely for employment purposes. And neither is a substitute for classifying people correctly: engaging a full-time US worker as a contractor to avoid the question is the most expensive shortcut in US market entry.

What’s Included

EOR placement & management

We employ your US staff through a vetted Employer of Record while your own entity is built — contracts, onboarding, statutory benefits and terminations handled to US standards.

Payroll set-up & processing

Federal EIN, state withholding and unemployment accounts, pay calendars, deposits and quarterly returns — configured before the first pay date, not after it.

HR compliance

Form I-9 verification within three business days, workers’ compensation cover, state leave and sick-pay mandates, handbook and policy drafting, wage-and-hour review.

Benefits administration

Health, dental and vision selection, 401(k) or state auto-enrolment retirement plans, ACA tracking where you cross fifty full-time equivalents.

Multi-state employment

Registration and rules mapping for every state an employee works in, including the nexus that a remote hire creates for the company itself.

EOR-to-entity transition

New employment agreements, benefits continuity, correct year-to-date wage transfer and a clean exit from the EOR without a gap in cover.

EOR vs. Your Own US Entity: Cost and Timeline

Indicative figures for a foreign company hiring in the United States. The crossover point usually falls between five and ten employees, earlier if salaries are high.

Factor	Employer of Record	Your own US entity
Time to first hire	3–14 days	6–10 weeks (formation, EIN, banking, state registrations)
Set-up cost	Usually none	$3,000–$12,000 including formation, banking and registrations
Recurring cost	$450–$1,000 per employee per month, or 8–15% of payroll	Largely fixed: payroll platform, accounting, filings, registered agents
Employer tax burden	Passed through (~10–15% of gross)	Paid directly (~10–15% of gross)
Who holds the contract	The EOR	You
Equity grants to staff	Awkward — usually granted by the parent	Straightforward from the US entity
Multi-state expansion	Immediate, no new registrations for you	2–4 weeks of registrations per new state
Also enables	Employment only	Contracting, banking, importing, IP, procurement approval
Best fit	1–5 hires, testing the market, distributed states	5+ hires, physical footprint, enterprise selling

US Payroll & HR Compliance: The Non-Negotiables

Federal EIN before any pay date
State income tax withholding registration in every work state
State unemployment insurance (SUTA) account per state
Workers’ compensation cover bound before the first day worked
Form I-9 completed within three business days of the start date
Correct worker classification under IRS and state ABC tests
State-mandated paid sick leave and family leave programmes
ACA employer mandate tracking at 50+ full-time equivalents
Retirement auto-enrolment where the state requires it
Wage-and-hour, overtime and final-paycheck rules per state
W-2 issuance and quarterly Form 941 filings
Nexus review — a remote employee can create company tax obligations

How the Engagement Runs

Week 1

Headcount & state model

Roles, states, salaries and start dates mapped against the EOR-versus-entity crossover, with a written recommendation and cost comparison.

Week 1–2

First hires live

EOR onboarding, employment agreements, I-9 verification, benefits election and workers’ compensation bound before the first day worked.

Week 2–6

Entity & registration track

Formation, EIN, and state withholding and unemployment registrations opened in the states where you will hold payroll.

Week 6–10

Own payroll live

Payroll platform configured, pay calendar set, deposits scheduled, policies and handbook issued, first in-house run reconciled.

Ongoing

Run & report

Monthly processing, quarterly returns, W-2s, benefits administration and a dated compliance calendar with named owners.

Employer of Record & US Payroll: Frequently Asked Questions

17 answers for foreign employers hiring in the United States.

EOR Basics

What is an Employer of Record?

An Employer of Record (EOR) is a third-party company that legally employs workers on your behalf in a jurisdiction where you have no entity. The EOR runs payroll, withholds and remits taxes, provides statutory benefits and holds the employment contract, while you direct the person's day-to-day work.

How is an EOR different from a PEO?

A PEO co-employs staff alongside your own US entity and requires you to have one; an EOR is the sole legal employer and does not. If you have no US entity yet, an EOR is the only compliant route to a payrolled US employee.

Can we just hire US staff as contractors instead?

Only if they genuinely meet the independent contractor tests, which are strict under the IRS common-law test and stricter still under state rules such as California's ABC test. Misclassification exposes you to back payroll taxes, unpaid overtime, penalties and interest, assessed from the first day of the engagement.

Is an EOR a permanent solution?

It can be, for small or distributed US teams. Most companies use it as a bridge: hire the first one to five employees through an EOR while the entity, banking and payroll registrations are built, then transition staff onto their own payroll.

EOR vs Your Own Entity

When does an own entity beat an EOR on cost?

Typically at five to ten US employees, depending on salaries. EOR pricing is usually a per-employee monthly fee or a percentage of payroll; entity costs are largely fixed. Above the crossover point the fixed cost of your own entity and payroll stack is cheaper per head.

What are the non-cost reasons to own the entity?

Contracting in your own name, holding US bank accounts and merchant rails, importing goods as importer of record, owning US IP and customer contracts, meeting enterprise procurement requirements, and controlling equity grants to US staff. An EOR solves employment only.

How fast can each option go live?

An EOR can onboard a US employee in a few days to two weeks. Your own entity route runs six to ten weeks to an operating payroll: formation, EIN, banking, then state withholding and unemployment registrations, which alone take two to four weeks per state.

Can we run both at once?

Yes, and many do. Keep staff in far-flung states on the EOR while running your own payroll in the two or three states where you have concentration. It is a common steady state, not a compromise.

US Payroll & HR Compliance

What registrations are needed before the first US payroll run?

A federal EIN, state income tax withholding registration and state unemployment insurance registration in every state where an employee works, workers' compensation coverage, and in some cities a local tax registration. These must exist before the first pay date, not after.

What is Form I-9 and how strictly is it enforced?

Form I-9 verifies employment eligibility and must be completed within three business days of the start date, with documents examined and retained. Paperwork-only violations carry fines starting in the hundreds of dollars per form and rising sharply for patterns, and I-9 audits are routine.

Which benefits are legally required?

Social Security and Medicare contributions, unemployment insurance, workers' compensation, and — for employers with 50 or more full-time-equivalent staff — health coverage under the ACA employer mandate. State mandates add paid sick leave, paid family leave and retirement auto-enrolment in a growing list of states.

How do multi-state employees complicate payroll?

Each state has its own withholding rules, unemployment rates, wage-and-hour law, overtime thresholds, final-paycheck timing and leave entitlements. Remote employees create nexus for the company as well, which can pull the entity into that state's income or franchise tax.

What does US payroll actually cost on top of salary?

Budget roughly 10–15% of gross salary for employer taxes and statutory costs — 7.65% FICA, federal and state unemployment, workers' compensation premiums that vary widely by role and state — plus whatever health and retirement benefits your offer includes, commonly another 10–20%.

Working With Seal Global

What does Seal Global provide here?

Structuring advice on EOR versus own entity, EOR placement and management for early hires, entity formation and the payroll registration stack when you transition, ongoing payroll processing, HR compliance documentation, benefits administration support and the filing calendar that keeps it all current.

Do you handle the transition from EOR to our own payroll?

Yes. That transition is a project in itself: entity and registrations in place, new employment agreements, benefits continuity, correct year-to-date wage transfer so employees are not over-withheld, and a clean termination of the EOR relationship without a gap in coverage.

How does this fit with the rest of US market entry?

Payroll and HR is one workstream inside a wider operations enablement programme that also covers incorporation, governance, banking, accounting, logistics and customs. Running them together avoids the classic failure of hiring before the entity can legally employ.

How do we get started?

Book a review. We map your intended headcount, states and timeline against the EOR-versus-entity crossover, and give you a written sequence with dates and costs before any filing is made.