So you’re a foreign entity who’s ready to do business in the United States? Congratulations, and welcome! What follows is a preliminary overview of how employment and health insurance work in the U.S., and how Justworks can help your U.S. subsidiary navigate them.
Part One: The Basics
First thing’s first: you need to know some of the basics around employment laws and the health insurance marketplace in the United States. There are many rules and requirements you need to meet.
EMPLOYMENT LAWS TO KNOW
This is not an exhaustive list, but simply an overview to get you started. Laws vary from state to state and different requirements may apply based on your particular business. Consulting with an attorney is always the best way to know you’re doing things right.
That said, here are some key requirements regarding your U.S. operations:
GETTING SET UP
Note: Under the Affordable Care Act’s (ACA) employer shared responsibility provisions, certain employers (called applicable large employers, or ALEs) must either offer minimum essential coverage that is “affordable” and that provides “minimum value” to their full-time employees (and their dependents), or potentially make an employer shared responsibility payment to the IRS. To determine if these provisions apply to your business, visit the IRS website.
- Identify state registration requirements in any state where the business intends to operate, and obtain a federal Employer Identification Number (FEIN or EIN) from the IRS. You need this number to pay federal taxes, hire employees, open a bank account, and apply for business licenses and permits.
- Determine whether you need a state or local tax ID by researching applicable state and local laws regarding income taxes and employment taxes. You may also want to familiarize yourself with the applicable reporting forms.
- Obtain any required insurance. Again, these requirements vary from state to state, but here are some examples of policies you may need:
- Workers’ compensation - Not required in certain states such as Texas, however, it is a requirement to using Justworks’ platform and services
- State statutory disability insurance - Required in California, Hawaii, New Jersey, New York, Rhode Island, and Puerto Rico
- Unemployment insurance - Varies by state, and you may need to register with your state workforce agency
- 4. Consider additional types of insurance that may not be legally required, but might be helpful or applicable to your business. These may include commercial general liability insurance, auto insurance, Employment Practices Liability Insurance (EPLI) coverage, and more. Justworks requires EPLI coverage for all our customers, and when you start with Justworks you will be enrolled in our EPLI policy.
- Comply with state new hire reporting requirements. Here’s a helpful resource.
- Complete and retain an IRS Form W-4 for each employee to designate the appropriate amount of federal tax withholding. Additionally, complete state and local tax forms as required by applicable law.
- Follow the Form I-9 requirements. Employees must complete a Form I-9 and provide documentation verifying their identity and authorization to work in the U.S. Also, be sure to confirm whether your company is required to use E-Verify. E-Verify compares Form I-9 information to government records online, in order to confirm an employee is authorized to work in the US. See this post for a helpful guide on I-9 and E-Verify.
- Properly classify all employees as exempt or non-exempt. Each employee must be classified as exempt or non-exempt from applicable minimum wage and overtime requirements, including Fair Labor Standards Act and applicable state laws.
OTHER COMPLIANCE REQUIREMENTS
- Identify workplace posting and notice requirements. Employers must notify employees of their rights under many federal, state and local employment laws. Many of these laws mandate notice through the display of posters in the workplace and/or notices provided to employees.
- Understand which employment laws apply to your business. Depending on the size, location, and nature of your business, different employment laws may apply, such as:
- Wage and hour requirements
- Anti-discrimination laws
- Hiring and notice requirements
- Background check laws
- Leave and paid sick time laws
- File payroll taxes on quarterly and annual basis (in addition to any additional payroll taxes that may apply) and annual wage statements.
Learn more about how Justworks helps with compliance.
THE U.S. HEALTH INSURANCE MARKETPLACE
Once you’ve completed all the steps necessary to get your U.S. subsidiary up and running and fully compliant, you’ll probably want to offer your employees health insurance. Health insurance in the U.S. can be a bit complicated, so here’s a very quick overview.
In general, most Americans get private health insurance through their employer. The federal government provides health insurance coverage through Medicare and Medicaid for certain groups of people, such as the elderly, disabled, poor, and young populations.
Once again, requirements around employer-sponsored health insurance can vary greatly depending on the state. In general, employers can select providers for health insurance benefits on the open market, comparing what plans and rates will best suit their needs. Large companies and corporations are often able to negotiate better rates with health insurance companies by bringing a large number of employees into the pool, benefiting both parties.
For small- and mid-sized companies, this can be more difficult and rates may be higher. That is why the professional employer organization (PEO) model can be a great option for these businesses.
Part Two: The PEO Model
WHAT IS A PEO?
As a professional employer organization, or PEO, we help small- and medium-sized businesses get their employees access to big-company benefits at affordable rates by grouping them together under the Justworks umbrella. There’s power in numbers when it comes to working with a PEO. Our PEO business model allows you to offer access to health insurance, retirement plans, workers’ compensation, and even gym memberships — benefits and perks usually available only to large corporations.
With a PEO like Justworks, you can also streamline your back office functions like payroll and HR in one place. We are also experts in employment-related compliance, and can help you with your payroll and related tax filings, and in most cases, file it for you.
WHAT IS CO-EMPLOYMENT?
PEOs can take on such responsibilities for you because of a practice called co-employment. Co-employment is a great fit for U.S. subsidiaries of foreign entities because it distributes employer responsibilities, which can be especially helpful when your business operates across time zones and countries.
With a co-employment contract, Justworks will handle payroll administration and related tax filing, and provide HR support and access to benefits. Meanwhile, your company will retain responsibility for day-to-day operations and management of your company’s employees. Through this sharing of responsibilities, you are able to focus more on running your business.
HOW JUSTWORKS CAN HELP YOUR U.S. SUBSIDIARY
As you can tell from the previous section, Justworks is a great solution to help you take care of your U.S. subsidiary’s HR needs. Justworks provides automated payroll, access to competitive benefits and perks, support for your HR questions, and a customer service team available 24/7.
Offering access to health insurance helps you attract and retain the best talent in the U.S. In short, it’s essential for being a competitive employer. By working with Justworks, your team can get access to all kinds of perks and benefits, such as:
- Commuter benefits
- Short-term disability
- Long-term disability
- Life insurance
- Accidental death & dismemberment insurance
- On-demand primary care services
- Gym memberships
- Bike shares
As much as we’d like to, we can’t do it all. There are some items that fall outside of Justworks’ scope that you’ll need to find help with elsewhere, such as:
Justworks does not provide legal or tax advice. If you have any legal or tax questions, you should consult with your professional legal or tax advisor.
Part Three: Get Started Checklist
Now that you have a clearer picture, we hope you’re ready to get started with Justworks. Here is a checklist of things you’ll need to begin the enrollment process:
- A physical address in the U.S. We are not able to use P.O. Boxes for office addresses. If your employees all work from home, please use the home address of the most senior employee for the office address.
- A minimum of two employees or working owners, one of whom must be a W-2 employee.
- If you want to access to benefits coverage through Justworks (which you’re not required to obtain), you must have a minimum of two employees enrolled in the plan who are not from the same household.
- A Federal Employer Identification Number (FEIN or EIN). This unique nine-digit number is used by the Internal Revenue Service (IRS) to identify a business operating in the United States.
- Business formation documents (e.g., Articles of Incorporation/Registration), to verify the existence of your business and business name. This document should be sent to you from the state in which you are incorporated, and you should have a digital copy of this.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.