Employer of Record (EOR) in the US: Benefits and How It Works

Expanding into the US comes with a level of complexity that often catches global companies off guard. Every state has its own rules around payroll, benefits, and employment standards, so even straightforward hires can trigger unexpected compliance work.

Deel partners with hundreds of companies hiring across all 50 states, supporting compliant hiring and payroll. This experience has shown us that an Employer of Record (EOR) model can be a simpler way to employ workers in the US — one that removes legal uncertainty and lets you focus on growth instead of regulatory compliance.

In this guide, we break down exactly how an EOR service works in the US, when to use this hiring model, and what to consider when choosing a provider. We’ll give you a clear framework for hiring confidently in the US without the delays and overhead of setting up a local entity.

What is an Employer of Record (EOR)?

An Employer of Record (EOR) is a third-party provider that becomes the legal employer for your US-based workers. It handles payroll, benefits, and HR compliance, while you continue to manage each worker’s day-to-day responsibilities and performance.

This model allows you to hire in the US without setting up a legal entity. Instead of navigating state registrations, tax filings, and employer obligations yourself, the EOR provides the infrastructure needed for compliant employment.

As the legal employer, EORs like Deel manage the following tasks:

• Issuing federally and state-compliant contracts
• Running payroll with accurate tax withholding
• Administering statutory programs like workers’ compensation and unemployment insurance (UI)
• Managing supplemental benefits such as health insurance and retirement plans
• Monitoring regulatory updates across all relevant jurisdictions.

It’s important to note the distinctions between EORs and other hiring models. A Professional Employer Organization (PEO) operates under a co-employment structure and requires you to have your own US entity, whereas an EOR is the sole legal employer.

How EOR and direct hiring compare

Here’s a quick look at the differences between using an EOR and hiring workers directly in the US:

When to use an EOR to hire in the US

An EOR is useful for many scenarios where you need to hire quickly or compliantly in the US. Here are some of the main reasons to use the service:

• Quick market entry: Entity formation in the US can take months and easily get delayed by federal and state registration. An EOR lets you skip this process and hire workers immediately so you can have teams on the ground within weeks
• Fast, compliant hiring: Some roles can’t wait for entity setup. If you need to fill a position quickly or you’re competing for top talent, an EOR enables onboarding in a matter of days instead of months
• Market testing: For companies validating demand, an EOR offers a low-commitment way to build a presence. You can hire for short-term needs, then scale up or down as needed, before deciding whether to establish a permanent entity
• Support with local compliance: US employment is heavily decentralized, and each jurisdiction has different requirements. If you don’t have in-house specialists, an EOR provides the legal, payroll, and HR infrastructure needed to operate compliantly from day one

Benefits of using an EOR in the US

Aside from helping businesses overcome challenges, EORs bring numerous competitive advantages. Here are some of the benefits you can expect from using the service:

• Faster time-to-hire with standardized onboarding
• Costs saved on entity setup and registration
• Predictable monthly expenses for HR and payroll
• Extra support with compliance from local experts
• Assistance in navigating mandatory employer contributions
• Access to competitive US benefits through the provider’s discounts at volume
• Stronger guarantee of accurate payroll and tax withholdings

All these advantages trickle down and impact the employee experience. Workers can benefit from accurate on-time payroll, competitive benefits, and local HR support. This makes them more engaged in the workplace and more likely to commit to the role at your organization.

How an EOR works in the US labor market

Understanding EOR processes helps you set clear expectations and integrate this model smoothly into your operations. Here’s what a provider typically takes care of, and your responsibilities as the client company:

Pre-employment setup

Before the EOR can start hiring workers on your behalf, they need you to provide all the following information:

• Roles and responsibilities
• Compensation packages
• Work locations
• Employee details, aka address, marital status, dependents

The EOR reviews these details against federal, state, and local requirements to confirm compliance. If there are any issues, they can show you what needs to change. For example, the EOR might reveal that you’re not paying employees frequently enough to meet state requirements, and they’ll have to double the number of payroll runs.

Contracts and onboarding

The EOR drafts a compliant US employment contract that covers essential details like at-will terms, compensation details, and benefits eligibility. They then send the contract to the worker to collect their signature. Providers like Deel handle this electronically through the platform to avoid delays in the onboarding process or documents getting lost in email exchanges.

At the same time, the EOR collects all the required documents, such as the I-9, W-4, and any relevant state forms. They’re responsible for verifying these before they move forward with the onboarding process and add the employee to the payroll system and enroll them in any statutory benefits programs.

Payroll and taxes

Every payday, the EOR runs payroll in USD according to local requirements. They handle federal, state, and local taxes and remit all employee contributions. Where necessary, they also manage employer liabilities under programs such as the Federal Insurance Contributions Act (FICA) and Federal Unemployment Tax Act (FUTA).

EORs with global payroll capabilities like Deel let you manage all your teams in one place. Our real-time payroll engine calculates payments and withholdings and transfers them to workers everywhere, whether that’s the US or beyond. We also enable you to review everything for employees, contractors, and EOR hires via our unified dashboard.

Benefits administration

The EOR administers state-mandated benefits such as UI and workers’ compensation. As individual program rates and thresholds change, they automatically update their system to ensure accuracy. Top services like Deel also help you broker and manage supplementary benefits like health insurance and retirement plans when offered.

Where benefits tie into employee leave, EORs handle paid time off (PTO) and sick leave. They can track employee attendance to calculate accrual rates and carry over time off according to each state’s payroll laws.

If EOR employees have any questions about mandatory or supplementary benefits, they should be able to go to the provider for assistance. For example, Deel EOR has 24/7 customer support for clients and workers and an AI assistant for quick questions.

Ongoing compliance

While you remain with the EOR, they monitor changing US regulations and adjust processes. They should keep everything updated with local laws, from payroll calculations and policies to contract terms.

Should a compliance issue ever arise, the EOR assumes full responsibility as the employer. They can shield you from most penalties and legal claims as a result of violations.

Offboarding

If employment ends, the EOR ensures the termination process complies with federal and state rules. This includes issuing final pay within the required timeframe and providing all mandated separation notices. They also manage UI claims and close out payroll and benefits according to jurisdictional requirements.

Key considerations when choosing an EOR provider in the US (and the steps to take)

As expanding into the US comes with a unique set of challenges, choosing the right EOR partner is essential. The goal is to find the one with the infrastructure, coverage, and expertise to keep you compliant everywhere you plan to hire workers.

Here’s how to assess whether an EOR is equipped to support your business:

1. Define your hiring needs: Clarify the number of employees, roles, locations, and your timeline. Understanding your requirements helps you assess whether a provider has the capacity to support your long term plans

2. Prioritize EORs with robust US legal knowledge: Choose an EOR with deep, in-house expertise so you can trust they’ll help you maintain continuous compliance. Avoid those that outsource compliance or lack dedicated legal teams, as this increases risk and reduces responsiveness

3. Look for providers with owned entities: Verify that the EOR has fully-owned entities in the US, not local partnerships that could make the setup more complicated

4. Check coverage: Ensure the EOR can handle all federal, state, and local requirements on your behalf so you don’t have to plug any compliance gaps

5. Research EOR reputation, expertise, and experience: Look for providers with a strong track record of US hiring, positive client reviews, and case studies demonstrating they can meet quality standards

6. Compare benefits: See whether your provider can not only manage statutory benefits, but also give your team access to competitive benefits packages

7. Assess security: Confirm that the platform meets international data security standards such as SOC 2, ISO 27001, and the GDPR. Additionally, check whether it supports single sign-on, granular roles and permissions, and multifactor authentication to control access to sensitive employee information

8. Review pricing: Clarify what’s included in the pricing so you’re not surprised by hidden fees from setup charges, termination costs, or benefits markups. Also, check whether there’s monthly or annual billing, and if the provider charges fixed fees or per employee

9. Consider culture and employee expectations: Think about whether the EOR will integrate comfortably into your global company’s culture while meeting US workers’ expectations about holidays, work-life balance, and communication

10. Require proof of legal compliance: Request sample employment contracts, benefits summaries, and evidence of statutory coverage. Additionally, ask how the EOR stays current with regulatory changes and whether they provide compliance audits or reporting

11. Conduct a test run: If you're hiring multiple employees, consider starting with one or two to gauge performance before committing to a longer contract

Take the complexity out of US expansion with Deel

Hiring in the US comes with layers of state-specific rules and local payroll requirements. An EOR gives you a faster, more compliant way to overcome these challenges without the extra complication of setting up a legal entity.

Deel EOR is one of the leading providers in the US. Whether you’re making your first US hire or trying to break into the market, our team can support you with:

• Fully owned entities (in the US and beyond)
• Local legal and payroll expertise
• Automated payroll processing and tax filing
• Support for employees and contractors
• One unified dashboard to manage every worker type
• Direct integrations with Deel Payroll
• Entity setup services for if and when you take that next step

Looking for a compliant way to onboard US talent fast? Book a call with the Deel team to explore how our EOR service helps you hire confidently across all 50 states.