Expanding your team into the US? 5 considerations you need to make when hiring across the pond
The following article was kindly provided to BAB by Rosie Phillips, Business Development Manager, Precision Global Consulting
We share a language, similar culture, laws, political systems and the infamous ‘special relationship’: it’s no wonder that the US is one of the top spots for UK companies looking to branch into new markets. But despite the obvious similarities, there are some key differences to be aware of when you’re considering expansion to the U.S.
Your people are your greatest asset, and so whether you’re looking to bring over some key players from your current location, hire local talent, or a mixture of both – you’ll need to abide by US employment laws, compliance, customs and industry standards. Here are five things you should be thinking about.
- Every state is different.
The US is a big place – it’s more than twice the size of the EU as a whole. As a result, it can be extremely fragmented and doing business nationwide can be as complicated as dealing with 50 different countries.
Whilst the main US legal structure is based on federal laws, each state also has the power to establish its own system of criminal and civil laws under the US constitution. In practice, this means 50 different legal systems. And, to make things even more complex, certain cities and counties within states also have differing regulations and taxes.
Employment-wise, some of the key legal variations to look out for across states are: minimum wages, paid sick leave, overtime, minimum pay periods, travel pay, termination, amongst others. Your employer costs, which include taxes and insurances, will also vary significantly across the US. This inevitably means that costs are lower in some states than others, with San Francisco sitting at the higher end and places like Delaware and Virginia at the lower. You will also need to be registered in every state you want to employ workers in.
Take-away: Consider carefully where you want to set up, never assume the laws are the same and make sure you adapt your business model and cost structure when expanding into new states.
- Compliance is key.
The US is renowned for its suing culture – Wal-Mart alone averages 17 lawsuits every day by ex-employees. It’s crucial that you are on top of the relevant laws and compliance in order to protect not only your workers, but also your business. Falling short here can results in hefty fines, criminal charges and even prison sentences. A few of the major points you are responsible for as an employer are:
- Worker’s compensation (WC): This is an insurance that you have to pay for each worker you employ, covering injuries that happen while on the job. Whether the it’s a result of the job or not, you are covered for all types of injury that occur while the employee is at work (and in some cases on the way to and from work). This will also cover an event in which an employee pursues the employer to cover the costs of an injury. WC is calculated as a percentage of salary, and varies depending on the role, location, worksite environment, previous history at the site and your insurance carrier. If you have a low loss history, high staff numbers and low-risk, you may be able to find a carrier who will write you a nationwide policy – otherwise you’ll need to go state-by-state, which can be an arduous and expensive process.
- Tax withholdings: As with the legal system, taxes in the US are notoriously complex and work on a federal, state and at time municipal level. Not only this, but certain taxes vary from company to company, such as State Unemployment Tax which varies based on the history of your company.
- Business insurances: Amongst others, General and Professional Liability (GL/PL) are crucial for any business to cover their employees and any claims or losses arising from their actions. GL generally covers personal injury or property damage, whereas PL (also known as errors and omissions insurance) covers negligence with regard to the professional services you provide.
- Termination: Employees are often employed ‘at-will’, which means that both parties can terminate the relationship at any time, with no notice or reason required. Longer-term senior workers are more likely to have an overriding employment agreement with a reciprocal notice period, normally around 2 weeks.
Take-away: Ensure you have the right legal advice or consider using a partner to manage your back-office and compliance. Stay up-to date with legal and tax changes in every state you are operating and don’t get complacent, because “when there is a will, there is a lawsuit” (Addison Minzer).
- Medical benefits are really important.
Unlike the UK’s NHS, our US counterparts have no national healthcare system. The horror story hospital bills are commonplace across the internet – an uncomplicated birth alone can set you back over $50,000. As a result, medical insurance has to be the most important benefit when working in the US.
The Affordable Healthcare Act (ACA), known as Obamacare, was introduced in 2009 and makes it compulsory for all employers with over 50 employees to offer their workforce an employer-sponsored, affordable healthcare plan. This also restricts discrimination within plans, where previously individuals were denied insurance for pre-existing medical conditions and women were generally charged more than men. Not only is it a federal requirement, but medical benefits are extremely important when individuals are choosing which company to work for, so you should ensure that you are offering attractive benefits to your employees.
So, what should you offer your workforce? The market is clustered and there are a variety of avenues to go down. Consider the main different options: Preferred Provider Organization (PPO); Point of Service (POS); Health Maintenance Organization (HMO); Health Reimbursement Arrangement (HRA); or a Health Savings Account (HSA). Each has different benefits and drawbacks.
Some of the key factors you should watch out for when deciding which plan type and provider to go for are: in-network vs. out-of-network coverage, deductibles, co-pays and co-insurance.
Take away: Consider the makeup of your workforce and what is most important to them, ensure you can offer a variety of coverage levels and options (e.g. the ability to add other family members plans) and do your market research.
- You only need to pay for sick leave in certain states.
Whilst the Family Leave Medical Act (FLMA) guarantees 12 weeks of unpaid leave, there is no federal requirement to offer Paid Sick Leave (PSL) in the US. This even stretches to parental leave: whilst individuals in the UK are offered 39 weeks paid and 13 weeks unpaid maternity leave, there is no entitlement to offer workers paid maternity or paternal leave in the US. The Obama administration attempted to introduce PSL but it was opposed in Washington, with Republicans arguing that it would hurt small businesses and result in job losses.
As a result, some states have passed their own laws requiring employers to offer their employees PSL. The exact legislations vary state-by-state with regard to the number of days’ entitlement, when it can be accessed, how long it takes to accrue and whether it can be carried over. For example, in New York, PSL is accrued at 1 hour per 30 hours worked and can be used after 120 days of employment with a maximum annual accrual of 40 hours. More and more states and cities are adopting PSL – so watch out for changing requirements over the next couple of years.
Take-away: Check the PSL requirements in states you are operating and consider offering PSL to your workforce as both a benefit and in anticipation of further states adopting their own legislation.
- There’s no requirement to offer paid holiday.
The US is one of only 13 countries in the world that doesn’t offer paid time off by law – there is no minimum requirement for paid vacation or paid public holidays beyond the PSL requirements in certain states. However, paid vacation is an attractive benefit and should be offered to your workforce in line with industry standards – but these are significantly lower than here in the UK.
According to the US Bureau of Labor Statistics, 77% of private employers offer paid vacation to their workforce, with an average of 10 holiday days for full-time employees after one year. On average, these employers also offer an average of 8 paid public holiday days.
However, the culture and atmosphere to vacation in the US is strikingly different from the UK. Recent research showed that only 48% of Americans used all of their vacation days in 2017, with a total of 705 million unused holiday days annually. The negative attitude towards taking paid time off is slowly but surely changing, with an increased recognition of the benefits of taking time off for both companies and individuals.
Take-away: Matching benefits for your UK and US internal employees may be a bit trickier than imagined, but ensure you offer competitive benefits at least match industry standards.
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