How to hire employees in the US

Hiring an employee in the United States usually means one of two things: you set up a US entity and put the person on your own payroll, or you engage an employer of record (EOR) that becomes the legal employer while the person works for you. The first gives you control and is worth it once you plan to build a team; the second gets one or two people working quickly without standing up a company. Capstan does not offer EOR services, so if that is the route you need, engage a provider directly.

The rest is detail, and the detail is where the US is genuinely awkward, because there are really fifty-one systems: the federal layer and every state on top of it. This guide is a conceptual map, not a rate card. The exact rates, wage bases, thresholds, and rules change and vary by state, so confirm current figures with US counsel or a US payroll provider before you rely on them.

Entity or employer of record

If you form a US entity, you become the employer of record yourself. You register for federal and state tax accounts, register in each state where an employee works, and run payroll through those registrations. That is the right foundation once you intend to hire several people or stay for the long run.

If you are not ready for that, an EOR employs the person under its own US entity, handles their payroll and statutory obligations, and invoices you. You direct the work; they carry the employment. It costs more per head and gives you less control, and it is the sensible bridge for a first hire or a short experiment. Either way, the person is an employee, with the obligations that follow, not a contractor you can treat casually.

Payroll withholding and contributions exist

Every US payroll run withholds tax and contributions and remits them to the right authorities. You do not need to master the maths, but you should recognise the categories, because they drive what your payroll provider needs from you.

Federal income tax withholding. Income tax on wages is withheld each pay period based on the employee’s declared circumstances, then remitted to the federal authority.

State and local income tax withholding. Most states levy their own income tax, a few do not, and some cities and localities add their own. Where the employee lives and works determines what applies, which is why remote hires in new states create new registrations.

Social Security and Medicare (FICA). These fund retirement and health programmes and are split between employer and employee, with the employer matching the employee’s share. A wage base caps part of it.

Unemployment insurance (FUTA and SUTA). Employers fund unemployment insurance at both the federal and state level. State rates depend on the state and on your claims history.

The pattern is the familiar one: some obligations are federal and uniform, many are state-specific, and the numbers move year to year. That is why the calculation belongs with a provider who keeps up with it, and why this guide gives you none of the numbers.

Contracts, at-will, notice, and probation

US employment norms differ from most of the world. There is usually no statutory notice period and no mandated probation in the way other countries define them. Most employment is at-will, so either side can end it at any time, subject to anti-discrimination law and any contract terms. Written offer letters are standard and set out role, pay, and start date, and employee handbooks carry much of what other countries put in law.

At-will is a principle, not an excuse. Discrimination protections, final-pay rules, and notice obligations for larger layoffs still apply, and they vary by state. Confirm how termination should be handled with US counsel before you rely on the at-will label.

Data protection: state by state

The US has no single federal data-protection law covering employee data. Instead, individual states have passed their own privacy laws, and several give employees and applicants specific rights over their personal information. What you must disclose, retain, and secure depends on where your people are. Treat employee data with the same care you would under a national regime, keep it in one controlled place, and confirm your state obligations. Our note on HR data security and compliance covers the practices that travel across regimes.

The contractor line

The most common and most expensive US mistake is treating someone as an independent contractor who, by the way they actually work, is an employee. Federal agencies and states each apply their own tests, and misclassification can bring back taxes, penalties, and benefit claims. A contractor genuinely runs their own show; an employee works under your direction and integration. If you are unsure which you have, read contractor versus employee and get advice before you commit, because the label you choose is not the one that decides.

Where Capstan fits

Capstan does not run US payroll and is not an employer of record. It holds no tax tables, computes no gross-to-net, and files no returns. What it does is be the system of inputs around the calculation: employee records, pay structures, joiners and leavers, leave, attendance, and one-off adjustments, all compiled into a documented export for your US payroll provider. Their computed results come back onto the employee record, so your system of record and their filings stay in agreement. Contractors live in the same workspace as your team, and the contractor module adds their portal, invoices and payout register on top; like every module it needs a paid plan under it.

Public holidays. An administrator can import a bundled set of United States public holidays for a year in one click and then edit it, because a bundled set is a starting point rather than an authority. The calendar also carries the working week it runs on, and holidays are typed as public or restricted, where a restricted holiday is optional and the calendar caps how many an employee may pick. Calendars are assigned to locations, and an employment inherits its calendar through its location.

Jurisdiction rules are data, not code. Nothing in Capstan hardcodes a country. Jurisdiction content ships as versioned country packs a workspace adopts, which is what lets a rate change be a new version of the content rather than a software release. Being exact about what exists today: the only pack authored is for India, and it covers contractor invoice withholding and tax lines rather than employee payroll. For the United States, the tax treatment comes from you and your provider.

The payroll export is the same shape everywhere. It carries day counts, the compensation components in force at period end, and joiner or exit prorations recorded as dates and payable days rather than prorated amounts. There is no US branch in it, because there is no country logic in it at all. Your provider supplies the country; Capstan supplies clean, documented inputs and files the computed results back onto the record.

Where to go next

If your US hire is part of a wider, cross-border team, the guide to hiring global contractors covers the structures involved, and the country notes for the UK, Germany, and Singapore follow the same shape. For the current federal and state numbers this guide has deliberately left out, speak to a US payroll provider or employment counsel. The numbers move; the structure they sit inside is the part worth carrying.