It’s no wonder the land of opportunity appeals to many foreign entrepreneurs hoping to get a slice of American pie and live the American dream. The U.S. holds 13.5% of the global GDP and is only second to China in its share of global revenue. The U.S. has the largest tech market in the world with four of the top ten cities leading global financial technology located in the U.S. (San Francisco #1, New York City #2, Boston #7, and Chicago #9). The U.S. leads the world in innovation as well. HICKEY, a global leader in site selection and location strategy consulting, released their fourth edition of the Global Innovation Hubs Report, highlighting the top global cities driving innovation ranking Boston, San Francisco, Los Angeles, Seattle and New York City as the top five markets. Life science talent abounds as well with three of the leading bio-pharma firms located in the U.S. (Johnson & Johnson, Amgen, and Pfizer). Professional services in the U.S. occupy 37% of the global market share. Much is involved in expanding business operations into the U.S. Fortunately, one area that can be completely outsourced is Human Resources. Here is a quick guide covering HR areas that may be new to a foreign company embarking on U.S. operations, all of which can be outsourced to a reputable HR consulting services firm.
The U.S. market has some of the strongest employee protections in the world. Employment laws set strict requirements with which employers must comply. The U.S. workplace is regulated by both federal and state statutes and regulations, and all are generally equally applicable to both U.S. and foreign employers. The U.S. Department of Labor regulates conditions in the workplace at the federal level, and state-specific issues are handled by each state. Often, federal and state laws are in conflict, meaning one is more favorable to the employee than the other. In most cases, the state or federal law more favorable to the employee takes precedent.
Equal Employment Opportunity
Equal Employment Opportunity (EEO) laws make it illegal for employers to discriminate against individuals because of certain characteristics. There are federal and state laws prohibiting discrimination against a job applicant or an employee because of the person’s race, color, religion, sex (including pregnancy and related conditions, gender identity, and sexual orientation), national origin, age (40 or older), disability or genetic information.
Family and Medical Leave
The federal Family and Medical Leave Act (FMLA) entitles eligible employees of covered employers to take unpaid, job-protected leave for specified family and medical reasons with continuation of group health insurance coverage under the same terms and conditions as if the employee had not taken leave. Eligible employees are entitled to:
12 work weeks of leave in a 12-month period for:
- the birth of a child and to care for the newborn child within one year of birth;
- the placement with the employee of a child for adoption or foster care and to care for the newly placed child within one year of placement;
- to care for the employee’s spouse, child, or parent who has a serious health condition;
- a serious health condition that makes the employee unable to perform the essential functions of his or her job;
- any qualifying exigency arising out of the fact that the employee’s spouse, son, daughter, or parent is a covered military member on “covered active duty;” or
26 work weeks of leave during a single 12-month period to care for a covered servicemember with a serious injury or illness if the eligible employee is the servicemember’s spouse, son, daughter, parent, or next of kin (military caregiver leave).
Family and medical leave is an area in which many states have enacted laws providing more generous coverage for employees including, in some cases, paid leave. 13 states and the District of Columbia have enacted paid family leave laws: California, Connecticut, the District of Columbia, Massachusetts, New Jersey, New York, Rhode Island, Virginia, and Washington have laws in effect; Colorado, Delaware, Maryland, New Hampshire, and Oregon have enacted laws not yet in effect.
Most of these state programs provide parental and family caregiving leave as well as temporary disability insurance to cover paid personal medical leave. Some also use a social insurance policy design that funds these benefits through payroll taxes on employees and/or employers.
Americans with Disabilities
The federal Americans with Disabilities Act (ADA) is a civil rights law that prohibits discrimination against people with disabilities in everyday activities. The ADA prohibits discrimination because of one’s disability just as other civil rights laws prohibit discrimination because of race, color, sex, national origin, age, and religion.
The federal Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in federal, state, and local governments. An area governed by the FLSA, and in which many U.S. employers struggle with compliance, pertains to employee classification as exempt, non-exempt or independent contractor. Employee classification is not always straight-forward, and misclassification can result in tax consequences and stiff penalties and fines.
The FLSA governs the minimum wage paid to any non-exempt employee in the U.S. and has remained unchanged since 2008 at $7.25 per hour. However, many states have a much higher minimum wage such as California where minimum wage is $15.50. If Washington, D.C. were a state, it would have the highest minimum wage at $16.10.
An employee handbook provides employees guidance and information on a company’s policies, procedures, mission, and workplace code of conduct. It serves as a valuable resource for employees and serves many purposes for employers. Companies use employee handbooks to protect the company against lawsuits, set expectations for employees, ensure fair and equal treatment of employees, inform employees of their rights and benefits, and comply with state and federal regulations.
U.S. employers must verify the identity and employment authorization of individuals hired for employment in the U.S. by examining acceptable forms of documentation supplied by the individual and completing an Employment Eligibility Verification Form (Form I-9). Employees assigned from their home country to work in the U.S. may need a U.S. employment visa and should consult with a U.S. immigration attorney.
Health and Safety Standards
Federal and state regulations require employers to provide a work environment free from hazards and to comply with specific safety and health standards for specific industries.
While not required by law, most U.S. employers provide a package of benefits to employees such as health and dental insurance, a retirement plan, paid vacation and holidays, disability, and life insurance.
The U.S. healthcare system relies heavily on private health insurance, the primary source of coverage for most Americans. 60% of Americans obtain health insurance through their employers with employers paying about 75-85% of the premium. Employees pay the remainder of the premium often on a pre-tax basis.
The federal government offers employer incentives to provide retirement benefits to employees, one being a tax deduction for any contribution made to a retirement fund, and the employee’s tax liability is deferred until the benefit is paid. Employers generally offer one of two types of plans, the most common being a defined contribution plan, commonly known as a 401(k) plan. Any employer contributions are allocated among the participating employees’ accounts, and employees make their own contributions. Any investment gains or losses affect the value of the employees’ accounts at retirement but don’t affect the employer’s contributions since employers are not obligated to ensure any specified level of benefit in the plan. The second type of retirement plan used by U.S. employers is a defined benefit plan in which an employer promises a specified pension payment, lump-sum, or combination thereof on retirement that depends on an employee’s earnings history, tenure of service and age, rather than depending directly on individual investment returns. Any investment gains or losses don’t affect participants’ benefits paid but does affect the amount the employer contributes to meet its obligation to the employee.
Operating Payroll and Employment Taxes
Federal and state regulations require employers to withhold and remit income and social security taxes to the appropriate government agencies and to also file regular payroll tax returns. Failure to do so may result in costly penalties. It’s common in the U.S. to outsource payroll processing to an external payroll service provider.
Standard Business Norms
Cultural norms and the way in which business is conducted varies greatly among countries. For example, it’s common for South Koreans to expect their guests to engage in noraebang, or karaoke. When joining Korean colleagues for dinner, guests may find themselves at a karaoke establishment and be expected to sing. It’s acceptable to be unfamiliar with the French language when conducting business in France, but it’s expected to apologize for a lack of fluency before engaging in further dialogue. U.S. businesses are more aggressive with marketing campaigns than other countries. One example is present in sports broadcasting in which every stoppage has its own ad break. In European sports like soccer, commercials are only seen during the half-time break, and spectators enjoy the surrounding 90 minutes of soccer unimpeded. Americans may more quickly strike up business relationships than some Europeans. U.S. business ties are unlikely to get in the way of pragmatic decision-making whereas Europeans usually take years or even decades to develop business relationships, the strength of which may heavily influence business decisions.
Get Smart HR
For foreign businesses, the prospect of expanding to the U.S. and accessing a diverse and expansive market with innumerable opportunities can be both challenging and rewarding. It takes a considerable investment of time and resources with opportunities for missteps and mistakes along the way. By outsourcing HR to a reputable HR services firm like Smart HR, foreign business owners can rest assured all aspects of HR will be handled by top-notch, seasoned HR consultants. If you are contemplating expanding your business operations into the U.S., look no further than Smart HR for all your HR needs. Call today.