Payroll Considerations for Hiring Out-Of-Country Remote Workers

By  //  July 12, 2022

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Hiring remote workers has become commonplace and follows a simple process when hiring domestically. However, if you’re choosing to employ out-of-country talent, you will need to consider a range of legal and financial hurdles, which make the process more complex.

The main issue facing this type of employment is following the host country’s regulations, especially regarding pay. Fortunately, there are plenty of strategies for achieving your remote hiring goals, and we’ll discuss them below. 

Paying Contractors

Businesses looking to hire freelancers aren’t technically employing them, which means the rules shift slightly. In the US, if you hire an international employer and they’re working abroad, you aren’t obligated to withhold taxable income. However, you need to ensure that the W-8BEN form has been completed before their first payment. If they fail to fill out this form, you’re legally obligated to withhold up to 30% towards taxation. 

When the time comes to pay the contractor, there are several ways to do this, and you will need to consider currency transfer rates and costs to the contractor. If you’re open to using different methods for payment, liaise with the freelancers and ask for their preferred payment method. Alternatively, you should use an international payment platform like Ria Money Transfer, which offers fantastic rates and is packed into a user-friendly interface.

Paying Employees

Create an Entity

You will need to pay foreign workers, and simply adding them to your existing payroll won’t benefit them for tax purposes in their own country. There are a few ways to remain compliant and pay international employees. The most challenging method of payroll operation is to create an entity in the worker’s foreign country, which ticks all compliance boxes and allows for wider company expansion. However, this is time-consuming and will cost a fortune, making the following a better option. 

Employer of Record

If you need a simple payroll solution, you can use an Employer of Record (EOR), which guarantees full compliance. Essentially, your company controls the working life of the international employee, but the EOR takes care of the payroll and administration. By using an EOR, your company can hire freely and not have to worry about breaching any local laws.

Business Partners

Depending on your business, you may have existing business contracts, vendors, and suppliers in the international employee’s country. If you have a positive rapport with them, you can ask them to add the employee to their payroll. You would remain responsible for managing the employee, but the business partner would complete any administration and make tax contributions, which makes your life much easier. 

Remote working is commonplace in 2022, which means more quality talent is being sourced internationally. However, this comes with many legal challenges including payroll. The type of worker you hire – employee or contractor – will have a direct impact on how you operate. If you don’t mind filling out a couple of forms and choosing an international payment platform, hiring contractors is a much easier approach.