How to Hire an International Employee: Key Steps and Advice

As companies have continued to operate remotely or on a hybrid model, they’ve continued to expand their team beyond borders. But hiring internationally isn’t just about filling a job vacancy – it’s about bringing fresh perspectives and new skills to your business.

So, whether you’re looking to hire overseas workers or refine your existing process, this article will help you figure out exactly how to hire someone from another country.

We'll also discuss how Wise Business could be a great account for you when paying your employees abroad.

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Step 1: Understand what an international employee is

When you hire internationally, the definition of an international employee matters. That’s because there’s a clear distinction between different types of workers that can impact how you manage taxes, their work schedule, and the policies for hiring them.

An international employee is a worker who is employed by a company based in one country but lives and works in another. This doesn’t include someone hired for short-term arrangements or occasional freelancing – it involves a long-term, full-fledged employment relationship, just like an employee in your own country. These workers become a part of your company in full, abiding by all employment policies.

The difference between an employee and a contractor

Let’s take a look at the distinction between an international employee and an international contractor:

International Employee

• Employment relationship–They have an ongoing employment relationship with the company, which generally includes an expectation of continued work.
• Work hours – These types of workers are typically more committed to your company and often work full-time hours.
• Company policies – Employees are subject to employment laws and policies of both their home country and the host country of the company they work for.
• Benefits – They are eligible for employment benefits such as health insurance, sick leave, retirement plans, and paid vacation.
• Taxes – When it comes to tax handling, the company is responsible for withholding taxes and staying compliant with local laws.
• Supervision – Their work is usually directed and supervised by company management, where they have to adhere to specific processes and standards.
• Long-term investment – They are considered a long-term asset to the company with potential for career progression.

International Contractor

• Project-based work – International contractors aren’t tied to your company – they have the freedom to work with multiple clients at any given time.
• Flexible scheduling – Typically set their own work schedule and operate on a more autonomous basis as long as they meet project deadlines.
• No benefits – Not eligible for company-provided benefits like health insurance or paid time off.
• Tax responsibility – Responsible for their own taxes and insurance.
• Invoicing – Often invoice for their services according to the contract terms, which can be a fixed project price, hourly, daily, weekly, or monthly.
• Legal and regulatory compliance – Responsible for adhering to their own legal and business obligations, as they don’t typically have employment rights under the client’s business.

Learn More: Best Contractor Payment Software: Features and Pricing

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Step 2: Understand the benefits of hiring an international employee

When you choose to hire internationally, the advantages aren’t simply limited to accessing a wider talent pool or potentially cutting down on costs. There are many benefits that can impact the trajectory of your business, making it more competitive, culturally rich, and ready for growth in such a global economy. Here are a few of them:

• Around-the-clock productivity – Having employees in different time zones means that your business can operate beyond the traditional 9-to-5 workday, offering around-the-clock productivity or customer service.
• Diverse cultural perspectives – International employees can give your workplace diverse cultural insights and local market knowledge, which can offer opportunities for expansions and overall business development.
• Cross-cultural communication skills – Their ability to navigate cultural communication styles can foster a multinational business environment.
• Reduced costs – Depending on the worker’s location, hiring internationally can sometimes be cost-effective in comparison to hiring locally.
• Competitive edge – A diverse workforce can give your business a competitive advantage by understanding and serving an international customer base better, which can lead to improved customer satisfaction.
• Commitment to diversity – Demonstrating a commitment to a diverse and inclusive workforce can enhance your company’s reputation and appeal to a broader range of clients and potential employees. A majority of workers say policies associated with DEI (diversity, equity, and inclusion) at work have had a positive impact.¹

Look into taxes and extra costs for your international employee

Bringing an international employee on board comes with its own set of financial considerations. Even though you might have found top talent abroad, your business might have to be prepared to cover the expenses that come with that hire.

The main aspect you’ll have to navigate is tax regulations in the employee’s home country and compliance in your own. You might need to hire legal and tax professionals who specialize in international employment to make sure you fulfill all requirements. Different countries also have different rules regarding benefits and social security, as well as legal work status and visas.

Lastly, paying salaries in foreign currencies means having to deal with the risk of currency fluctuations, which can make the cost of employment unpredictable at times. However, there are ways to make the payment process a lot smoother, which we’ll explore in step five.

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Step 3: Decide whether you are hiring an employee based in the US or abroad

International employees aren’t necessarily going to be working from abroad. There’s a chance that the employee you have your eye on is an international worker based in the US. Where the employee will be working will shape the hiring process and the considerations relating to factors like compliance and visa sponsorship.

If hiring internationally, find out the labor laws in the employee’s country

If you decide to hire an employee based outside the US, you’ll need to have a solid understanding of the labor laws in their respective country. Each country has unique regulations regarding employment – for example, the UK will have vastly different employment laws than Mexico.

1. Mexico

In Mexico, their labor laws only work to protect formal employees. These laws are heavily regulated and tend to give employees the upper hand, which makes it even more important for companies to comply. Additionally, Mexican employees are also legally entitled to many different rights and benefits, such as severance payments, weekly rest days, and the mandatory Aguinaldo Christmas Bonus (typically paid in installments).²

2. UK

The United Kingdom has a range of employer costs and taxes you’ll need to be aware of, such as a minimum 3% Pension Fund and 15.05% National Insurance Rate. There are also national minimum wages that depend on the age of the worker – £10.18 for those aged 21 to 22 and £10.42 for those aged 23 and over, for example.³

3. Canada

Canadian labor laws vary by province, but there are also general federal standards that all employers should follow. In Canada, overtime is required when an employee works over 8 hours per day or more than 40 hours per week. There are also different employer costs and taxes in Quebec and outside of Quebec, which vary significantly. For instance, Quebec requires 6.40% to go to the Canada Pension Plan, while other provinces only require 5.95%.⁴

4. Philippines

The labor laws in the Philippines have strong employee protection policies in place, such as complicated termination processes and mandatory thirteenth and fourteenth-month salaries (additional month salaries paid at the end of the year). There are also mandatory employer costs and taxes like social security contributions and 1.375% for health insurance.⁵

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If hiring domestically, get the required visa and necessary certification for the employee

If you’re hiring an international employee to work domestically within the United States, you’ll need to secure the right visa and certifications so that they are authorized to work legally. There are five different visas for noncitizens employed in the US, from EB-1 to EB-5. EB-2 and EB-3 both require an additional labor certification.⁶

If hiring internationally, determine if your business has to report to the IRS or withhold tax on payments made to the international employee

If you choose to hire overseas workers, establish whether your business is obligated to report earnings to the IRS or withhold taxes on payments. Although your employee will still have to abide by the local tax laws in their country, the IRS requires US companies to comply with some tax reporting and withholding obligations for some foreign workers. Typically, a foreign worker is subject to US tax of 30%.⁷

If hiring internationally, have international employees complete IRS Form W-8BEN

All international employees need to complete IRS Form W-8BEN. The form will certify the employee’s status as a non-resident and establish their eligibility for tax benefits and exemptions or reductions in withholding tax. When they accurately fill this form out, your employees will stay compliant and reduce the risk of unnecessary penalties.

Step 4: Lower the risks and issues while hiring international employees

We’ve talked about the host of benefits of hiring international employees, but it certainly doesn’t come with its risks. Be sure to stay proactive in pinpointing and mitigating these risks so you can successfully integrate international talent into your company.

• Legal non-compliance– One of the biggest risks is failing to comply with labor laws, tax codes, and other requirements of the employee’s country, which can lead to fines, penalties, or legal issues. Do thorough research, but also consider consulting with legal professionals to ensure full compliance.
• Cultural misunderstandings – Different cultural norms, workplace expectations, and varied communication styles can lead to misunderstandings and affect productivity. Implement cultural sensitivity training for your teams and use technology to help bridge any language differences.
• Intellectual property (IP) security – Protecting sensitive data and IP across international borders can be challenging – solid contracts that include non-disclosure clauses can enforce a better sense of security for your company.
• Quality and performance monitoring – Since a global workforce will work in varying time zones with different holidays and workweek standards, it can be complex to manage everyone. Using performance indicators and conducting regular virtual check-ins can help effectively manage and support your international hires.

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Step 5: Start paying international employees

Once you’ve successfully hired your international employees, the next step is to set up a smooth and efficient payment system. International payment providers like Wise Business can simplify the process with features that make global transactions manageable and cost-effective.

Wise boasts many of them, including batch payment tools and mid-market conversion rates across currencies – two things that are indispensable for international payroll.

By using Wise Business, you can make payments in 80+ countries and even get your own local bank details for 9 different currencies to send money like a local. With the multi-currency account, you can seamlessly convert money from USD and bypass hefty transfer and conversion fees associated with traditional banks.

And with 50% of payments being instant or arriving in an hour, you can rest easy knowing payments will be delivered on time, every time.

Empower your digital hustle with Wise Business

Hiring international employees doesn’t have to be difficult thanks to Wise Business. Opening a Wise Business account helps start paying your international team at a low cost, without any hidden fees.

You can keep your personal and business finances separate, track your cash flow, and handle cross-currency transactions with minimal costs - allowing you to reach customers all around the world.

Some features Wise Business users love
Receive Payments like a Local: Businesses can pay a one-time fee for accounts details in global currencies, such as USD, EUR, GBP, CAD, so they can receive money without any additional fees
Account Software Integration: QuickBooks, FreshBooks, Xero, Sage, and Wave
Batch Payment Tools: Pay up to 1,000 invoice in one instance
An International Account: Hold 40+ currencies at once
Transparency: Wise Business is trying to get rid of all your business account fees

Looking to send and receive business payments at low cost?

Pay your employee
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Learn More:

Best Ways to Hire Employees in India

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Sources:

1 - Pew Research - Diversity and Inclusion
2 - HireBorderless Mexico - Border Laws
3 - HireBorderless - United Kingdom
4 - HireBorderless - Canada
5 - HireBorderless - The Philippines
6 - USCIS - Permanent Workers
7 - IRS - NRA Withholding
8 - Wise Trustpilot