HR for a US small business run from Europe: at-will employment, the first hire, the handbook and keeping good people

European founders tend to arrive with one of two ideas about American employment law. Either it is the Wild West, where anyone can be fired for anything, or it is a minefield of lawsuits. Both contain some truth, and neither helps you run a team. In Texas, employment is at will, paperwork for a new hire fits on a few pages, and many federal rules only start once you reach a certain headcount. At the same time, discrimination and wage rules are enforced seriously from the first employee.

At-will employment, and its limits

"Texas is an employment-at-will state," as the federal Court of Appeals for the Fifth Circuit put it in a 2006 decision. Without a contract that says otherwise, either side can end the employment at any time, without notice and without a stated reason. There is no statutory notice period, no works council and no severance requirement for an individual dismissal.

The limits come from three directions:

• Statutes. An employer may not fire someone for a reason the law forbids, such as race, sex, religion, national origin, age or disability under the federal anti-discrimination laws, once those laws apply to the company.
• The public policy exception. The Texas Supreme Court recognised in Sabine Pilot v. Hauck (1985) that an employee may recover damages if the sole cause of the dismissal was the refusal to perform an illegal act.
• Your own documents. An offer letter promising employment "for two years" or a handbook that lists the only grounds for dismissal can undo at-will status. State in the offer letter and the handbook that employment is at will.

At will does not mean without consequences. A dismissal that looks arbitrary invites a claim that the real reason was an unlawful one. We advise clients to document performance issues and to give honest, consistent reasons. Our page on protection against employee lawsuits explains how small employers keep that risk low.

The headcount thresholds that switch federal rules on

Many federal employment statutes only apply once a company reaches a certain size, and each one counts differently. These are the main markers:

State law often reaches smaller employers than federal law, so check the state where your people actually work. A European parent should also ask early whether employees of related companies may count toward these figures.

Before day one: the paperwork for a new hire

1. Offer letter. Position, pay, start date, exempt or non-exempt status, benefits and the at-will statement.
2. Form I-9. Every employer verifies identity and work authorisation. The employee completes Section 1 at the time of hire; the employer completes Section 2, examining the documents, within three business days of the hire.
3. Form W-4. The employee's federal withholding choices.
4. New hire report. Federal law requires each employer to report a new employee to the state directory of new hires, with name, address, Social Security number, start date and the employer's EIN, within 20 days of the hire or earlier if the state sets a shorter period.
5. Workers' compensation decision. Texas is unusual here: the Texas Department of Insurance states that private employers can choose to carry workers' compensation insurance but are not required to in most cases. Employers without coverage, called non-subscribers, must file a report with the state and report work-related injuries causing more than one day of lost time, as well as illnesses and deaths.
6. Payroll registration. Federal and state payroll tax accounts must be in place before the first pay run.

For a company run from Europe, the payroll side is where things go wrong most often. Our page on payroll for foreign-owned US companies explains how we set it up.

Paying people: exempt, non-exempt and overtime

The most important classification in American HR is whether an employee is exempt from overtime. Executive, administrative and professional employees can be exempt only if they pass a duties test and are paid on a salary basis of at least $684 per week under the Department of Labor's current regulation, which the regulation translates to $2,964 a month. Everybody else is non-exempt and earns overtime at one and a half times the regular rate for every hour beyond 40 in a workweek. Europeans often assume that a salaried employee never gets overtime. Under the FLSA, a salary alone does not make anyone exempt.

Since the One Big Beautiful Bill Act, overtime also has a tax angle for your staff. For tax years 2025 through 2028, employees may deduct qualified overtime compensation, meaning the part of FLSA-required overtime pay above the regular rate, up to $12,500 a year ($25,000 on a joint return). The deduction phases out above $150,000 of modified adjusted gross income ($300,000 for joint filers) and requires a valid Social Security number. Correct classification and clean time records therefore matter to your employees as much as to you. Our page on US payroll taxes covers the employer's side of the withholding.

The employee handbook

No federal statute requires a handbook. We still recommend one as soon as you have a handful of employees, because it is where you write down the rules that protect you. A sound small-business handbook contains:

• the at-will statement, and a sentence that the handbook is not a contract;
• equal employment opportunity and anti-harassment policies, with a clear way to report a complaint to someone other than the direct manager;
• working time, timekeeping, overtime approval and meal breaks;
• paid time off, holidays and sick leave, as you choose to offer them;
• expenses, company property, confidentiality and data protection;
• conduct, discipline and how a dismissal is handled.

Keep it short enough that people read it. Twenty clear pages beat eighty pages of group policy. Have every employee sign a one-page acknowledgment that they received it and understand that employment is at will, keep that page in the personnel file, and update the handbook once a year, because state rules on leave and pay change often. When you change a policy, tell people in writing before it takes effect.

One trap catches European parents who translate their group policies. Section 7 of the National Labor Relations Act protects employees' right to engage in concerted activities for their mutual aid or protection, a right that matters even in a company without a union. Broad rules that restrict what staff may say to each other about pay and working conditions can collide with it. Have the handbook reviewed for the US before it goes out.

Non-competes deserve a word too. The FTC's rule banning most non-compete clauses was removed from the Code of Federal Regulations in February 2026, after federal court decisions. Whether a non-compete holds is again a question of state law, so have it drafted for the state concerned.

Motivation: what American employees expect

Without statutory benefits, the package you offer is the package your employees get, and American candidates compare offers carefully. The benchmarks from the Bureau of Labor Statistics for March 2026: 80 percent of private industry workers had access to paid vacation, 81 percent to paid sick leave and 71 percent to employer-provided medical care. A small company that offers less needs a strong reason for people to join.

Beyond the package, these are the things we see working in small US teams:

• Clear goals and fast feedback. Americans expect to know where they stand, and a yearly review is too slow. A short monthly conversation works better.
• Visible recognition. Praise in public, criticise in private. A thank-you in the team meeting is worth more than Europeans think.
• A path upward. Titles, raises and responsibility should be able to grow without waiting for someone in Europe to retire.
• Bonuses tied to results, paid promptly and explained in writing, so that everyone knows what earns them.
• Decisions made locally. Nothing demotivates a good American manager faster than every decision waiting for head office.

How not to build a team

Most HR problems in European-owned US companies we see trace back to a handful of mistakes:

1. Hiring a friend of a friend as the first manager without a real search. The first US hire sets the culture for everyone after.
2. Treating contractors as employees. A person who works fixed hours under your direction can be an employee in law whatever the contract calls them, with payroll taxes and overtime to match.
3. Classifying everyone as exempt to avoid overtime, then paying back wages later.
4. Running HR from Europe with European templates, European holiday calendars and European time zones.
5. No paper trail until a dismissal becomes urgent.
6. Ignoring culture. Americans work hard and are loyal to good bosses, and they leave quickly when they feel unseen. Read our guide to customer service the American way: the same warmth and ownership you want staff to show customers has to be shown to them first.

If you plan to send your own people from Europe to run the team, the visa and tax side comes first; our page on sending employees to the US covers it, and our guide to hiring employees in the US covers the local search.