Are You Ready to Hire US Based Employees?

Before hiring your first US based employee, you will need to determine which entity will act as the employer. It may be prudent to set up a separate US entity for this purpose, and you will need to obtain a federal employer identification number (FEIN) for the employing entity. You also may need to register as an employer in any state in which your employees work. These steps will allow you to process payroll, file required tax returns and comply with other state-specific reporting obligations.

UK based employers are accustomed to contracts of employment but those are exceedingly rare in the US where the default rule is that employees are engaged “at will”, meaning either party can end the relationship or change employment terms at their own will without good reason or any notice period. Although there is no formal contract, it is still important to agree to key terms that will apply to a new hire and to communicate those terms clearly in an offer letter, ensuring compliance with applicable laws such as related to timely and lawful payment of wages.

You should resist the urge to apply wholesale your UK policies to your US employees, accepting the necessity of at least some differences between how you manage your US and UK workforce. For example, there is no federal right to paid holidays in the US and UK standard holiday amounts are outside of market standards for most US industries. In contrast, US salaries tend to be significantly higher than those in the UK. Rules around the frequency and calculation of wage payments also differ between the two countries as do legal obligations at termination. As your US workforce grows, you will need to adopt US specific policies and procedures, always ensuring that you maintain control over your company culture and values.