Hiring a non-US employee in the USA [CHECKLIST]

Define the mission: it is essential to clearly define the scope of the mission and its impact on the job description, particularly if the establishment is very small, even inexistent in the USA. E.g. Will the employee fill multiple positions? Will an excellent salesperson within the existing establishment maintain their performance in the absence of an establishment in the USA? Does the market require the employee to make significant cultural adjustments?

Anticipating the employee’s performance: the employee must fulfill at least one of the 2 conditions below to provide real performance in the USA:

• Knowledge of the company: this is indispensable to facilitate exchanges and all processes between the non-US company, clients, and employees, particularly the sales force. It will be an even greater asset if the non-US employee is led to manage US employees.
• Knowledge of the market: too often approached in an overly relaxed way by non-US companies and their employees. This requires real on-site expertise (sectorial and cultural) and may make it necessary to turn to local personnel.

If these conditions are not fulfilled by the non-US employee, it is important to foresee a training plan so that they will match the specificities of the company, the establishment of a local US establishment to lead them, and/or the recruitment of US employees or agents to ensure support functions.

Verifying the employee’s level of English: too often, employees demonstrate the sin of excessive confidence. Be careful: US business partners often have very little patience with international employees. If the employee is responsible for relational functions, their speech must be fluent and they must not have a highly pronounced accent.

Validating the employee’s emotional stability: does the employee have a family that will also have to adapt? Do they plan to return to their home country in the near future? Are they planning to receive significant support from the company in the USA? Do they already have international experience? Are they open to cultural / business differences?

Taking precautions with regards to the treatment of the employee: if the non-US employee is new in the USA, they will have to adapt 1/ on a personal level (culture shock), and 2/ with regards to business practices (sometimes arduous learning curve). Although the offer of a salary and an attractive package may be required to motivate the employee, you must be prudent with regards to the amounts offered, because performance is not guaranteed.

Contacting a lawyer: it is necessary to get informed ahead of time to evaluate 1/ feasibility, 2/ the cost of the visa, 3/ the procedure and deadlines to put together the application, and 4/ the effective deadlines for receiving the visa.

Understanding the types of visas [see Visas in the USA: How do You Choose?]:

• E1 and E2: these are the most common visas for expatriates intending to take over a senior / management position.
• L1: for founders and managers who have worked at the company outside the USA for more than 12 months.
• H1B: for “professionals.” The H1B is subject to annual quotas and is only granted once per year, in October.
• J1: for interns, with 2 options (“trainee” or “intern”).
• O1: meant for exceptional profiles.

Anticipating the procedures: in order to request a visa for employees, most of the time, an employer must first request certification at the company level with the help of a lawyer.

Anticipating the time periods for receiving the visa: These vary according to the type of visa. For example, a J1 can be obtained within 1 month (simple preparation and quick validation), whereas receiving an H1B can be very complex (application to prepare with a lawyer over several months, the request must be made between January and March, random drawing by the administration in April, and receipt in October if the request is accepted).

Anticipating the evolution of employees:

• Renewing visas: some visas are renewable, with deadlines that vary according to the visa (e.g. every year for the L1, every 2 years for the E2, and every 3 years for the H1B). The renewal processes must be completed with the help of a lawyer.
• Procedures and deadlines: considering the professional evolution of employees, the application to be prepared may be just as complex as the first time around. It is important to plan ahead to avoid having to repatriate the employee.
• Mobility: only the H1B and the O1 are transferrable from one company to another. The other visas, which are directly connected to the enterprise, ensure a certain stability for the employer.

Determining the type of employment agreement: based on the employee’s situation, the employer will prepare an offer letter or an employment agreement [see Employment Agreements in the USA].

Preparing the salary negotiations:

• Net salary: most of the time, expatriates concerned with their purchasing power demand a net salary that matches the net salary they received in their home countries. However, the cost of living is very different (furthermore, it varies by state), and the tax deducted at source will obviously differ according to the evolution of the employee’s situations (family, property and financial investments around the world, donations, studies, etc.). The US tax system is different, and the strategy will involve negotiating a gross salary based on the standards elaborated for the same position in the same geographic area.
• Gross salary and tax deducted at source (W4): the employee must fill out a form called a “W4” to estimate the tax deducted at source [see W4: Witholding Taxes and Notions of Personal Taxes]. On this form, the employee must indicate the number of allowances (e.g. the number of people they are responsible for). The higher the number of allowances is, the less the employee will have deducted from their salary: since the tax administration does not check the W4, but only the final tax declaration, nothing stops the employee from indicating “0” for the allowances during hiring, negotiating an upward gross salary, and receiving reimbursement for the real allowances (> 0) during their personal tax declaration. As such, be careful with the strategies you use.
• Benefits: to simplify the offer letter, the fringe benefits (vehicle, rent, etc.) do not have to be formalized. Given that everything is taxable, the simplest thing is to increase the gross salary to cover the corresponding expenses.

Selecting healthcare insurance: employees will most likely wish to benefit from the same coverage as in their home country. The employer has 2 options:

• Taking out American insurance: to identify the insurance company and adequate coverage, it is necessary to understand the insurance system in the USA [see Health Insurance in the USA]
• Having recourse to insurance companies offered to expatriates in your home country: be aware of pitfalls, however, because some companies specialized in expatriation may not be in line with the Obamacare laws, which poses problems during the tax declaration (the employee will then have to pay significant penalties).

Determining the opportunity for a 401K (retirement plan): the chance to subscribe to an American retirement plan will depend on the period for which the collaboration is planned:

• If the employee is only staying in the USA for a few years (< 10 years): most often, expatriates continue to pay into their retirement plan in their home country. In fact, if the employee signs up for a 401K and decides to remove the investment before they retire, they will pay penalties. In general, if this retirement takes place in the first 10 years, the sum of the penalties will amount more or less to the profits accumulated over the period (employer contribution + investments).
• If the employee stays in the USA for more than 10 years, a 401K is recommended. When the employees leave the USA, the investment can be kept and will become attractive enough to compensate for the penalties linked with later closure.
• Selecting a 401K: In the USA, the standard rule is to subscribe to a retirement savings plan through capitalization. The most often used plan is called “401(k).” [see The 401(k) Retirement Plan: Essential Concepts] This plan is generally made up of deposits from the employees participating in the plan (x % of their salary is saved each month) and also of participation on the employer’s part, although this is not obligatory. There are 3 primary types of 401(k): traditional, safe harbor, and profit sharing. The traditional and safe harbor plans are often the most appropriate during the first years of an establishment’s existence in the USA: the employer contribution simply depends on that of the employee and it is easier to respect the rules concerning non-discrimination.

Preparing the return conditions: this involves implementing an additional cause that will amend the employment agreement signed in the home country. This document will guarantee the employee, among other things:

• at least a position and a salary equivalent to their position before working for the US subsidiary,
• that the company will implement the necessary terms and conditions so that the employee can benefit from their rights concerning social security and retirement in their home country,
• that the employer will take over various fees (flight to and from the USA for the employee and their family, moving costs, etc.).

Be careful NOT to indicate a return date, because this could impact the request for a US visa (the employee will have to be declared a temporary worker) and limit the flexibility of the American employment agreement (prolongation or rupture).

A lawyer specialized in your home country’s labor law may prove to be quite helpful.

Respecting equality of treatment: legally, the employer must ensure equitable treatment between non-US and US employees. This includes retirement and healthcare insurance, but also vacation days and potential fringe advantages.

Ensuring parity for retirement: it is possible to offer a 401K to your non-US employee or to turn to retirement plans offered in the non-US employee’s home country. However, you must be careful to ensure parity between employees: the easiest way and also the most advantageous for the American company may be to make the parent company subscribe to the retirement plan offered in the non-US employee’s home country (for this employee) AND to offer a free subscription 401K plan to all employees (US + expatriates).

Registering with a payroll provider: this involves registering in the state (or states) in which the non-US employee will carry out their activity. The employer must ask the Department of Labor in the concerned state(s) for their unemployment number (name given to reference unemployment benefits).

Sending the “employee package” to the payroll provider: to be specific, the payroll provider will need:

• The offer letter addressed to the non-US employee and signed by the two parties
• The I9 form, which can be downloaded on the Internet and filled out by the employer (this is a matter of certifying that the employee is able to work in the USA and has a visa)
• The non-US employee’s social security number (available when the visa is delivered) [see Social Security Number: How do You Get an SSN?]
• The company’s banking information (with a sufficient sum to allow the payroll provider to cover the non-US employee’s salary payment)
• A form of identity for the non-US employee