Hiring Remote Employees in Other Countries: A Guide For US Employers

Since the Covid-19 pandemic has driven the transition to remote work, it has become common for employers to hire workers not only from around the US but other countries as well. This gives companies access to a larger talent pool beyond their physical location and can help to cut costs.

But hiring remote employees in other countries is more complex than hiring within the US, as employers must comply with local employment laws and tax requirements. If you’re looking into expanding your team internationally, this article outlines the factors you’ll need to consider.

Is Hiring Remote Employees in Other Countries Possible From the US?

First, to answer the question, yes, you can hire remote employees from other countries if your business is based in the US.

If a talented candidate lives outside the country, it will be expensive to pay for their relocation and visa costs for them to move to the US – that is if they are prepared to move. Hiring them to work for you remotely solves this problem, saving your business money and contributing to your employers’ job satisfaction.

You’ll need to take into account the legal and logistical implications of hiring foreigners abroad. There are benefits for US companies, such as saving time and money on Social Security tax, Medicare contributions, filing W-2/1099 IRS forms, as well as work visa costs.¹ You won’t need to include them in your US payroll for tax reporting purposes, as the IRS provides a W-8BEN tax exemption form for foreigners living outside the US and earning income from US companies.²

As non-US residents working abroad, your overseas employees will not be subject to US employment regulations. Instead, they’ll be protected by local employment laws.

How to Hire Remote Employees in Other Countries

There are two main ways you can go about hiring full-time employees in other countries: setting up a local branch or subsidiary where they are located or using an employer of record (EOR) service.

Use an Employer of Record Service

An employer of record (EOR) is a third-party service provider that handles the hiring of employees in another country on your behalf. The EOR manages the payroll management and legal compliance, while your company manages employees’ work and performance.

Using an EOR takes the hassle out of hiring candidates located in another country and ensures compliance with local laws. The EOR acts as a local liaison between your human resources team and remote employees, and their knowledge can help you to navigate any differences between employment rights and benefits in their location compared with the US.

Outsourcing the hiring and administration to an experienced third party can be more cost-effective than opening a local branch, although it will depend on your company’s specific needs. If you intend to build a significant presence in the market where remote employees are located, it may make more sense to establish a local business entity and maintain control of the hiring process.

Form a Local Entity

The traditional route of setting up a local business entity can be expensive, and requires an understanding of local laws. But it may be worth it if you plan to develop a commercial presence in a certain country beyond hiring one or two remote workers. Depending on the country’s business regulations, you may need to have a local representative, as well as accounting and legal knowledge.

One of the benefits is that you retain control over the hiring and payroll process. It can also be an advantage if you intend to have physical, production, sales or distribution in the country.

Keep in mind that US companies would have to create local branches for any country where they hire employees. There are different requirements for independent contractors.

How to Pay Remote Employees in Other Countries

Once you make the decision to hire remote workers, you need a way to pay them. There are several different methods for transferring payments to employees in other countries.

Wise Business

Wise Business is designed for small businesses sending and receiving international payments.

Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. Its straightforward service takes the hassle out of making payments to other countries in foreign currencies, with features such as batch payments. Its transparent fee structure ensures your remote employees are paid without costing you in hidden fees – wherever they work in the world.

Recipients are paid in their local currency, saving them money on transaction charges. They also don’t need a Wise account to receive payments - but if they have one then It's free to send the same currency from one Wise Account to another!

These features not only save your business money, but can help to build your relationship with remote workers by getting them paid on time and in their preferred currency.

Open a Wise Business account online

Payment Providers

Alternatively, you could use other online payment providers such as Payoneer or PayPal Business, which may be preferred by employees in certain locations.

Payoneer offers flexible solutions for paying salaries, hourly wages, or contracts and invoices. In some countries, Payoneer can automatically collect the necessary tax forms from employees. However, its exchange rate markups and additional fees may make it a more costly option.

PayPal Business offers the convenience of sending money directly to an employee’s existing account, but PayPal charges fees to both senders and recipients.

Bank Transfer

Not all US business checking accounts support international payments, so you’ll need to check with your bank to see whether it’s possible to pay your overseas employees directly. If the account does allow international payments, you’ll need to watch out for foreign currency fees and exchange rate markups.

Benefits of Hiring Remote Employees Abroad

There are several advantages to hiring employees to work from other countries:

• Expanded talent pool: Companies that hire outside the US have access to a global pool of talented candidates, who may be better equipped to fulfil certain roles than local candidates. This will include workers who may be unwilling or unable to move to the US to work.

• Cultural diversity: Employees in other countries can bring fresh skills, values, and perspectives to your business, fostering innovation and problem-solving. Cultural influences that your local staff may not have exposure to can help enrich your company culture and broaden its appeal to potential employees as well as customers and clients.

• Cost savings: US companies can save money on salaries or wages as well as payroll taxes by hiring workers located in certain countries. In addition, companies in some industries may be eligible to receive government subsidies for hiring workers abroad.

• Local market knowledge: If you’re looking to expand your business into specific local markets, hiring remote employees can provide valuable insights into local customs, consumer preferences, and trends. This can help to tailor products or services to gain a competitive edge.

• Increased flexibility: Remote work offers greater flexibility for both employers and employees, enabling companies to build a dynamic workforce that can adapt to changing business needs and an evolving competitive environment.

• Extended operating hours: With remote employees located in different time zones, you can extend your company’s operational hours and provide support to customers or clients around the world at any time of day, enhancing customer satisfaction and competitiveness.

• Scalability: Hiring remote workers through an employer of record enables you to quickly scale your workforce up or down in response to fluctuating demand or business needs without the resources associated with traditional hiring.

• Crisis preparedness: Having distributed teams in different countries creates built-in resilience against disruptions in certain locations such as natural disasters, pandemics, or geopolitical events, as employees in other locations can continue working. This ensures business continuity and minimizes downtime.

Factors to Consider When Hiring Remote Employees

Before you start the hiring process there are several things you need to consider to help the process go smoothly.

• Employee status: You need to be clear on whether your remote workers will be employees or independent contractors. This is important, as there are differences in the way contractors are paid, taxed and managed. While self-employed workers are responsible for their own taxes and contributions, the downside is that you have less control than with full-time employees. What’s more, if the authorities determine that employees have been misclassified as contractors, your company may be liable for back taxes and penalties.

• Legal compliance: If you decide to hire employees directly you need to ensure you comply with local employment laws and tax regulations, and should consider seeking legal advice to help you navigate international laws. If you use an employer of record, you should check that they are up to date on these requirements to avoid potential legal issues and liabilities.

• Cultural differences: Hiring employees in different countries brings fresh perspectives, but you also need to be mindful of differences in communication styles and nuances between cultures to foster a supportive and inclusive work environment.

• Variations in time zones: With teams distributed in different locations around the world, you’ll need to be flexible with scheduling and communication to accommodate differences in time zones and avoid having employees working unreasonable hours.

• Employee motivation: Remote work requires employees to be highly self-disciplined, motivated, and prepared to take accountability. During the hiring process, look for candidates who demonstrate a track record of working independently, meeting deadlines, and taking initiative.

• Security awareness: Having employees working remotely introduces additional security risks, such as data breaches and cyberattacks. Ensure that potential hires understand the importance of cybersecurity best practices, such as password management, data encryption, and secure file sharing, to protect your company’s sensitive information.

Discover Wise Business: The Easy Way to Pay Employees Abroad

Wise Business is a smart way to save money and take the hassle out of international transactions. If you have employees abroad, you can benefit from:

• No monthly fees
• International payments at the mid-market exchange rate
• The ability to hold over 40 currencies and manage multiple currencies all in one place
• Rate alerts for conversion rates
• Easy batch payments
• QuickBooks and other accounting software connections to track payments

You can find out more about Wise or register an account online in just a few clicks, and start saving time and money for your business.

Create your Wise Business account

Sources:

All sources checked February 2024.