5 Common Mistakes European Companies Make When Hiring in the US

For European companies hiring in the US, expansion is an exciting step. There’s a massive market to tap into, new talent to hire, and plenty of opportunity to grow.

But the employment environment couldn’t be more different from Europe.

There’s no harmonized framework like the EU directives. On top of fedral law, each US state—and often individual cities—sets its own rules for employment, payroll taxes, and benefits. Many European employers discover this only after hiring, when compliance issues surface, penalties pile up, and expansion plans stall.

Here are the top five mistakes European companies run into when hiring in the US (and how to avoid them).

1. Treating the US like one uniform market for HR compliance

In the EU, labor laws are broadly aligned through directives that set consistent minimum standards. Hiring in France versus Germany feels different, but the underlying rules on things like working time, leave, or termination share a common foundation.

When it comes to hiring in the US, federal law covers only basic protections such as minimum wage and anti-discrimination. Beyond that, each state—and sometimes each city—sets its own rules.

In Hiring in the US: Pathways to Expansion for Growing Teams, Shannon Schiltz, Operating Partner at Andreessen Horowitz, explains:

“When we see companies coming into the US, a lot of times they're focused a lot on what the federal laws are and how to stand up a corporation inside the US or an entity inside the US. The complexity really starts when you start hiring folks,” said Schiltz. “Expanding into the US—and if you're going into multiple states—it would be like a US company expanding into Europe. Except in Europe, each country is different. In the US, all 50 states are different.”

This impacts every part of employment, including:

• Minimum wage and overtime
• Paid sick leave and termination rules
• Non-compete agreements and final pay deadlines

A policy that works perfectly in New York might break the law in California. That’s why “one-size-fits-all” doesn’t work for US compliance.

2. Mishandling payroll and employment taxes

In most European countries, payroll contributions are filed through a single national system. You withhold income tax and social contributions once, and the government handles the rest.

In the US, you’ll manage separate filings at several levels: federal, state, and sometimes local. Each has its own registration process, tax rates, and payment schedules.

Even something as basic as unemployment insurance is calculated differently in every state and can change yearly. And the rules change constantly:

• Social Security wage limits are adjusted every year
• State unemployment tax rates shift based on your payroll history
• Contribution limits and wage bases can even change midyear

Without local payroll expertise, it’s all too easy to miss a filing or underpay a tax.

3. Underestimating the complexity of employee benefits

European employers often assume that benefits like healthcare or retirement savings plans are handled by the state. In the US, they’re not. Instead, they’re part of your employer offer.

Health insurance, dental coverage, and retirement plans are key differentiators in job offers and often a legal requirement under the Affordable Care Act.

Here’s what that means in practice:

• Health insurance: In the US, healthcare isn’t provided by the government. Employers usually offer private insurance, and it’s often the first question candidates ask during interviews. Without a strong benefits package of health, dental, and vision plans, plus voluntary benefits, attracting top talent is challenging.

• Retirement plans: There’s no national pension equivalent to the UK’s auto-enrolment. Most employers offer a 401(k), and not having one can make you look less competitive.

• Paid leave: There’s no federal law mandating paid vacation or parental leave. It’s entirely up to you as the employer, and expectations vary widely by industry.

• Benefits compliance: Miss a requirement like COBRA (continued health coverage) or ACA (Affordable Care Act) reporting, and you could face penalties.

Bottom line: US benefits are both a hiring competitive advantage and a compliance minefield. By working with a PEO to design and administer plans, you can meet market expectations and regulatory requirements.

4. Forgetting about workers’ compensation insurance

Here’s one many international employers overlook: workers’ compensation insurance.

In the EU, workplace injury coverage is typically handled through national insurance systems. In the US, it’s managed privately and mandated by state law. Nearly every state (except Texas) requires workers’ compensation insurance, but coverage levels, reporting timelines, and penalties vary widely. Some states even require proof of coverage before an employee can start work.

Even with proper coverage, employers must report injuries quickly—usually within 7 to 10 days—by filing a First Report of Injury (FROI) with the insurance carrier or state board. Missing these deadlines can lead to fines, stop-work orders, and even liability if an employee gets hurt.

5. Managing US employees without local US expertise across HR, compliance, payroll, and benefits

Trying to run US HR operations from a European headquarters is like trying to drive on the wrong side of the road. You can do it, but you’ll probably crash.

Without local expertise, companies often face:

• Missed tax filings
• Incorrect pay runs
• Overlooked compliance obligations
• Endless HR administrative work

In our webinar, Building a Compliance-First Strategy for US Business Expansion, Phillip Alvarado, Deel’s Director of PEO Solutions Consulting, explains:

"There are state-mandated insurances like New York Paid Family Leave, disability insurance, anti-harassment training... Some local municipalities even require insurance that the PEO may not automatically provide,” said Alvarado. “You need an HR partner with your PEO who can inform you about what you need to do—or what you don’t know."

Setting up in the US means registering with tax and labor authorities and building compliance systems in each state where you hire. It’s complex and time-consuming.

That’s why so many growing companies partner with a PEO (Professional Employer Organization). It’s the fastest, safest way to hire US employees without getting stuck in red tape. A PEO already has the infrastructure, compliance knowledge, and systems in place, so you can focus on growth.

Deel PEO makes US expansion simple and fast

Deel PEO is your expert, full-service partner for HR, compliance, payroll, and benefits. We deliver full-service outsourcing across all 50 states to help you scale confidently and efficiently.

Deel PEO helps protect your business by sharing compliance liability, so you’re not exposed to costly fines or legal issues. Through a co-employment model, we manage payroll, benefits, and HR operations with built-in legal guidance every step of the way.

• Fast compliance support and answers at the federal, state, and local levels

• Market-leading employee benefits, including exclusive access to Aetna international plans for globally mobile employees

• Payroll and tax administration done for you, with the support of a dedicated Deel Payroll Manager

• Global HRIS and payroll platform for one consistent and easy user experience

• Risk mitigation and coverage for employment liability insurance (EPLI), workers’ compensation, and employee termination support

• 24/7 employee and admin support, plus a Deel HR Business Partner as your go-to for all things HR

Most PEOs can’t support international companies with US employees. Deel’s different—we support your workforce globally, all in one platform.

Book a 30-minute platform demo with a Deel expert to learn how we can support your US expansion.