FoxHire, a U.S.-based Employer of Record (EOR), today released its first Multi-State Hiring Compliance Burden Index, a national survey of HR, payroll, staffing, and business professionals who employ or place workers across multiple states. The findings reveal that state-by-state employment complexity is not just slowing hiring. It is actively narrowing where companies are willing to operate.
Among the study’s most striking results: 50% of employers have declined to hire a qualified candidate because of compliance concerns tied to that candidate’s state. Nearly half (48%) have delayed a hiring decision or expansion altogether because the regulatory picture in a given state was not clear enough to move forward.
A national labor market running into local limits
More than half (53.5%) of employers surveyed expanded into at least two new states in the past 12 months. Yet the operational infrastructure required to hire compliantly has not kept pace. Over a third of respondents (36%) say they need at least one full month before they feel confident they are compliant in a new state. During that gap, hiring stalls, start dates get pushed back, and candidates go elsewhere.
The states employers find most difficult
The study asked respondents across five professional groups to rank the states that create the most compliance friction. California and New York appeared at or near the top of every list, but the reasons differ by role:
- Recruiters ranked New York first (40%), citing pay transparency requirements and classification rules that create friction before a job offer ever goes out.
- Benefits administrators also ranked New York first (36%), pointing to layered paid leave and health coverage mandates that require continuous, state-specific administration.
- Legal, risk, and compliance professionals ranked California first (35%), noting the state’s detailed employment statutes and aggressive enforcement environment.
The consistency across groups is one of the study’s key findings. These states do not just create problems for one department. They generate compliance strain across the entire organization, from recruiting through legal review.
Penalties are not hypothetical
One in four employers (25%) has paid a penalty, interest, or fine related to multi-state compliance in the past 24 months. The most common source of exposure is payroll: 32% of respondents say payroll taxes and registrations generate the most compliance work, and 30% say payroll mistakes are their single biggest fear when entering a new state.
Despite this, 42% of employers rely primarily on payroll software to manage their multi-state obligations, and only 17% have an ongoing external retainer for routine compliance support.
“Hiring has gone national, but employment law largely has not,” said Colin LaBeau, President of FoxHire. “Organizations are expanding across state lines faster than their compliance systems can keep up. This research reflects what we see every day: companies want to hire, but the regulatory patchwork is forcing difficult decisions about where they can do it confidently.”
