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Global Payroll 24 min

Guide to hiring international employees

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As the world grows more accustomed to remote work, the barriers between businesses and global talent are lower than ever. That’s great news for employers: there has never been a better time to build an international team than today.

And why not take that plunge? The benefits of global workforces are incredible. Remote companies — and international companies in particular — tend to be more productive, more inclusive, and more sustainable than their local, office-bound counterparts. Creating a culturally diverse workforce brings untold value with new energy, ideas, and insights. Unlocking the power of international hiring means access to a much wider talent pool, while your current employees can relocate without having to leave the business. Everyone wins.

But hiring international employees can be risky if you’re not familiar with local payroll, taxes, benefits, and compliance in every country where you source talent. This guide was developed to answer all your international hiring questions to help you feel comfortable and confident as you begin onboarding international employees.

The benefits of hiring internationally

How would you like to tap into a new talent pool? Hiring internationally offers the chance to find skilled professionals in new locations you previously could not access. You can invigorate your team by hiring global employees who have hard-to-find or highly specialized skills that are in short supply. Even your most senior employees can benefit from skills transfer in these situations. 

Expanding into new markets

If you’re looking to expand into global markets, hiring internationally can provide legitimacy to your brand, whether you’re in startup mode or you’re a firmly established company. Employees who are familiar with a local market can guide you through the pitfalls of opening an office by providing:

  • Language skills
  • Knowledge of local business customs and etiquette
  • Established professional networks
  • Local business knowledge and contacts to pave the way for introductions
  • Insight into employee expectations for pay and benefits
  • Professional and social support for your staff who relocate to open a new office

In other words, hiring international employees gives your company a soft landing when entering new markets and allows you to build trust quickly in new places. 

Worldwide coverage

One benefit to hiring internationally is the ability to work across different time zones. Overall productivity increases when your team is distributed around the globe and work is performed continually in a 24-hour period. There is even a positive trickle-down effect on mental health, as your employees don’t need to work long or unusual hours to meet variable needs.

Going global also allows your company to lean into the power of asynchronous working. When you free productivity from hourly constraints, you will be shocked at just how much more productive your team members (and, as a result, your company) can be.

Increased diversity, equity and inclusion (DEI)

It cannot be overstated how much genuine value a business derives from having a diverse group of skills, opinions, and experiences. Repeated research shows that diversity increases profits for businesses. When you hire an international workforce, your whole team gets a boost from DEI, including:

  • Improved employee performance
  • Increased productivity
  • More creativity and innovation
  • Reduced turnover of employees and contractors

Don’t be afraid to take the leap with your first international hire. If you are not sure whether you’re ready to hire full-time help, you can always get started with international contractors. As long as you stay compliant in your international hiring practices, it’s all upside for the business and for your team. Hiring internationally could be the secret sauce to gaining competitive advantage and solidifying your DEI.

Unique challenges for employers hiring internationally 

The benefits of international hiring are undeniable, but if you don’t have a lot of experience, there are a few things to consider before you get started. Setting up local infrastructure requires expertise in tax law, contract law, and HR compliance. Defining a company process for international expansion is one thing, but implementing that process is a different experience in each location.

There are four basic strategies for hiring international employees. Many companies use a combination of the four:

  1. Set up a legal entity for your business in the country where you want to hire employees.
  2. Contract a professional employer organization (PEO) to co-employ remote workers where you already own an entity.
  3. Work with an employer of record (EOR) to employ workers on your behalf in countries where you do not own an entity.
  4. Hire international contractors to work on specific projects or for specific time periods.

See also: Learn the difference between an EOR and a PEO

Keeping up with local employment legislation

Setting up a global infrastructure for hiring can be an expensive, time-consuming exercise. You can set up a local HR team on every continent — and staff each country with HR and legal specialists — or you can find a partner who offers an easier way to grow your global team compliantly. If you do work with a partner, make sure they have wide global coverage

Other areas to consider include:

  • Local labor law
  • Hiring laws and local customs
  • Payroll and accounting regulations
  • Contract management
  • Intellectual property protection

See also: How to hire remote employees

Paying international employees

Once you’ve found the right people to hire, paying them can pose another set of problems. Each country where your employees work has regulations about how to pay workers. This can include everything from frequency of pay to withholding tax. It’s important to know the compliance regulations so you don’t expose your company or your employees to unnecessary fines, fees, or penalties. 

Other considerations deal with the mechanics of paying international employees. Questions to consider include:

  • What currency will you pay them in?
  • Do you have currency accounts for every country where your workers live?
  • How will you transfer money? Will you use a bank or a fintech service provider?
  • How will you pay employees if they are not in a stable country, are displaced, or have become a refugee?
  • What payment arrangement does your new employee prefer? Do they want to be paid in their local currency or in yours? Is it legal to pay in a currency other than the local one?
  • How will you manage foreign exchange fluctuations?

See also: How to pay international employees

Paying international contractors

If you plan to onboard international contractors in addition to employees, there are a few other factors to consider. You will need to take additional steps to ensure you’re not encountering unnecessary risk. One of the most common pitfalls is misclassifying employees as contractors – the consequences of which can be severe from both a financial and a reputational standpoint. 

See also: How to pay international contractors

Managing global compensation

Before you extend an offer to an international employee, it’s important to determine your global compensation policy. There are a number of approaches you can take, but you need to be consistent and transparent so every employee is treated fairly and feels valued. 

Your strategy for paying international employees should take into consideration:

  • How many international employees you expect to hire
  • How many countries your employees will reside in
  • Whether your current employees will move to another country to reside

Considerations for compensation packages include:

  • Stability of local currency
  • Cost of living in each country
  • Local inflation rates
  • Standard of living for employees in your company
  • Government entitlements in each country, including social programs like health-care coverage
  • Customary fringe benefits for each location, which differ from country to country
  • Relocation costs, depending on whether you initiate the move or the employee makes a request to relocate
  • Ongoing expenses for expats who may be maintaining residences in two countries
  • Tax equalization for employees who have tax obligations in more than one country

If that sounds like a lot, don’t worry. You can use Remote’s global compensation strategy, which is fully transparent, as a blueprint to establish your own international plan.

Common global compensation strategies 

If you have employees working in more than one country, you’ll want to determine your global compensation strategy early to avoid difficult situations down the road. Here are ways both large and small companies are paying their international employees. 

Case-by-case

Develop a customized compensation plan for each employee.

  • Pros: If you expect to never have more than a limited number of employees, this could be a good option.
  • Cons: The onus is on you to ensure each package is in line with other employee compensation. If your company grows more quickly than expected, this approach can become cumbersome. Once you set an expectation for customized packages, it’s hard to wean employees off the strategy, especially if they like to negotiate. 

Pay everyone the same rates

Set pay grades based on seniority level and title. Everyone, everywhere in the world, earns the same amount of money, which usually hinges on the currency used by the company headquarters. 

  • Pros: There is no dispute about whether people are being paid fairly. Everyone knows they’re making the same amount as their peers. If you avoid using the region with the highest cost of living as your base, the company can save money on global compensation.
  • Cons: Cost of living varies greatly from country to country. Attempting to standardize compensation by paying the same rates to everyone can lead to problems. You may not be able to attract employees who live in high cost of living (HCOL) areas unless you pay top rates for everyone, which can be extremely expensive and not sustainable.

Adjust pay based on cost of living

Set compensation for each region to give employees an equitable standard of living. This works best when all salaries are completely transparent and accessible to all employees. 

  • Pros: Employees understand their compensation is designed to ensure everyone with the same jobs and similar experience has the same lifestyle opportunities and buying power. The company can offer competitive packages in different areas, allowing the business to compete for talent anywhere.
  • Cons: People with highly desirable skill sets may leave to make more money working in a different region or for a different employer. If an employee moves to another country, reducing wages can make employees feel devalued. 

Managing global compensation has a lot of moving parts. Pay inequality can lead to low morale, so it’s critical your global compensation policies are easy to explain and maintain.  Complications arise when employees live in areas where the local currency isn’t stable; that are suffering from high inflation; or with a high cost of living. Thinking through all the variables before you make your first offer saves you time in the future and helps build trust with your global workforce. 

See also: How to calculate compensation for remote employees

Misclassification risk

How you classify employees when they begin working with you is critical to staying compliant with hiring practices in each country. You cannot simply pay people as contractors, even for a little while, if they are performing the duties of employees. Many countries have strict labor laws to protect worker rights and ensure employees are being fairly compensated and receiving necessary benefits. 

Companies violating labor rights deny local governments the revenue they need to provide essential services, so governments tend to take these cases seriously. Governments expect employers to pay employment tax, social security levies, or premiums for national healthcare programs. When you misclassify your employees as independent contractors, either willfully or accidentally, local governments react with fines and penalties which usually include interest. The last thing you want is to get caught in the crosshairs of a government official who realizes you’re not compliant in your hiring practices. 

Permanent establishment risk

Permanent establishment risk is a tax terminology that indicates a company has a presence in a country sufficient enough that the country in question charges the company corporate taxes. In certain cases, this can lead to double taxation, both in the country where the company is headquartered and in the country where international employees work.

One thing to keep in mind is you don’t need an office to be considered permanently established. If you’re conducting business, especially if you’re making sales or generating revenue in the country, you need to be aware of permanent establishment risk. Working with an employer of record (EOR) or professional employer organization (PEO) does not affect your permanent establishment risk either way.

The popularity of work-from-home arrangements has made governments more aware and more vigilant about enforcing permanent establishment. Before you hire internationally, it’s important to speak with a trusted partner who has local expertise to understand your permanent establishment risk.

See also: What companies with remote workers should know about permanent establishment risk

Controlling your intellectual property

A critical part of international hiring is ensuring your intellectual property (IP) is protected. If you’re hiring remote workers, you’ll want to keep your innovations and inventions firmly in your control.

IP laws are different in different countries. In some areas, IP rights could be assigned to local workers unless you have specific language in your employment agreements. Common types of IP which may be at risk include:

  • Copyrights
  • Patents
  • Trademarks
  • Trade secrets

Every company should be proactive in protecting their competitive advantage. While every industry includes some level of IP protection, companies in a few areas must be especially careful:

  • Technology
  • Finance
  • Energy
  • Manufacturing
  • Startups  

If global expansion is part of your business strategy — or if you want to take advantage of an untapped global talent pool — hiring an international remote team is your best option. Building any workforce comes with challenges, but when you hire internationally, you have an entire world of talent at your fingertips.

The options for hiring internationally 

You can add international employees to your team in several ways. Your strategy for employing international hires will depend on your short-term requirements and the long-term goals of your business. 

Hire independent contractors

Working with independent contractors is a great way to begin building your international team. This is a nice move for startups looking to scale their businesses, especially if they need specific skills not available in their local area. The good news is it’s entirely possible to hire and pay contractors abroad with speed, simplicity, and no hidden fees. You can onboard, pay, and manage contractors anywhere in the world using an international contractor management platform.

Avoid this trap: Misclassifying employees as independent contractors is an all-too-common problem, and it can creep up on you before you realize it. In some countries, classification changes based on length of association or the total number of hours contracted over time. Companies who hire international independent contractors must understand the classification rules of the country where their international workers reside. As with so many things, misclassification violations occur differently in each country. 

Open a local entity or foreign subsidiary

Opening your own international office(s) might factor into your global expansion strategy. This means you open a legal business – also called a local entity – according to governmental and business compliance laws of each country. 

Pros

  • A local presence shows you’re committed to becoming part of the local business community.
  • Having your own office is a good way to build trust.
  • Employing local people gives your company a head start in establishing a new office.
  • Brand awareness for your company increases.
  • Your current staff have an opportunity to relocate and gain international experience. 

Cons

  • A huge investment is required in capital, in time, and from your staff to properly enter a new market as a local entity. The points below are not exhaustive, but they are a good checklist of things needed for a dedicated office in a foreign country.

Establishing a foreign subsidiary

  • Business registration
  • Domain name registration
  • Accountant fees
  • Legal fees
  • Professional registrations and fees
  • Licenses and permits
  • Consultant fees

Financial

  • Business insurance: public liability, income protection, vehicles, stock, workers’ compensation, unemployment, disability, etc.
  • Working capital
  • Banking packages, such as overdraft facilities, lines of credit, company credit cards
  • Business loans

Hiring

  • Salaries
  • Benefits
  • Taxation
  • Employment contracts
  • Stock options
  • Retirement/pension obligations
  • Relocation packages
  • Tax equalization
  • Visas
  • Work permits
  • Repatriation

It’s a lot to organize, especially if you don’t have people experienced in a particular market to help guide you. If you choose to work with an employer of record, you can hire employees immediately through the EOR, then transfer those employees to your own entity once you finish opening it.

Work with an employer of record

An EOR is a global employment services provider that helps you employ people legally in other countries. Working with an EOR is the fastest and most cost-effective option to hire employees in countries where you do not already have a presence. When you work with an EOR, you can hire and onboard employees in other countries immediately without needing to open an entity. 

See also: What does an EOR do?

Working with an EOR is the best option to begin hiring international employees. With an EOR, you can begin onboarding employees immediately without needing to hire your own HR, legal, and compliance experts — your EOR handles all those duties. In addition, because the EOR hires employees on your behalf, your company is insulated from many of the compliance risks that come with hiring abroad.

See also: Learn more about Remote’s EOR services

Find a global payroll solution

If you already own an entity in a country but would like some help managing payroll, benefits, and compliance, a global payroll solution may be the best option. Global payroll services require you to own an entity, but if you have already spent the money and time to open your entity, global payroll tends to be less expensive than full EOR services.

A global payroll solution typically acts as an extension of your own HR or legal department. With global payroll services, you can outsource payroll processes, benefits administration, and certain aspects of compliance. However, you will still be ultimately responsible for things like correct classification of your workers. 

The easiest way to scale global hiring and stay compliant 

Having a partner to help you navigate hiring internationally in multiple countries insulates you from many of the risks of compliance missteps. Partnering with an expert also provides continuity of experience for you and your employees. But before you choose a partner, there are a couple of things you should know.

Why you should use an owned-entity employer of record

Global employment solutions come in two flavors, and it’s important to understand the difference before you make your decision. You’ll want to establish whether the service provider is an owned-entity or partner-dependent employer of record. Here’s a quick definition of each type of EOR:

Owned-entity: An owned-entity employment partner provides all the services you need to hire internationally, using their own resources. They’re usually more cost effective and provide better IP protections. The big advantage is the direct relationship with your owned-entity EOR — you can rely on the quality and service offerings to be the same in every country where you do business. Because owned-entity EORs have local knowledge and local team members, you’ll also have a partner who understands local laws and provides better customer service.

Partner-dependent: A partner-dependent employment solution does not serve you directly. They have partners that act as intermediaries between you and the EOR. You will experience varying service levels between countries, as well as elevated and unpredictable costs, because partner-dependent EORs must add extra fees on top of their partners’ services to make a profit.

The dangers of relying on a partner-dependent employer of record

The clue is in the word “dependent” – a sign your EOR isn’t operating with the degree of autonomy you want. If you have ever transferred money internationally and encountered a web of additional banks and banking fees in the transaction, you have experienced the problem of partner-dependent financial services. Likewise, a partner-dependent EOR cannot guarantee their partners won’t change their fees or pricing and will likely have trouble providing transparency over the fees charged to your business.

A partner-dependent EOR is only as good as each partner for each individual service. The quality and consistency will be different from country to country and possibly from region to region within a country. If your global employment solutions provider relies on partners, it can be hard to get immediate answers to your questions. There’s little a partner-dependent EOR can do about that, especially if they have to wait hours or day for answers themselves.

In short: it’s always better to work with an owned-entity EOR partner, like Remote, to guarantee consistent service and fair, transparent pricing.

How using contractors for longer periods can lead to misclassification

Working with contractors can be a great way to get started with international hiring, but you may eventually need to convert your international contractors to employees to stay compliant. Even if you hire a person as a contractor, various factors can change the legal classification without further action on your part. Those factors can include:

  • How long they’ve worked on your projects
  • Whether they work exclusively for you
  • How much control you have over the way they do their work, including setting priorities 
  • Whether you provide office space, equipment, and software

In some countries, contractors automatically switch to employees after a certain period of time. You will probably not be notified when this happens, and your workers may not be aware of the rules themselves — even if they want to remain contractors. To compound matters, labor laws change all the time, so what was legal last year might get you in trouble now. 

Misclassification of employees is a serious and costly infraction. You will almost certainly face hefty penalties and fines if you are caught. In extreme cases, you can even lose your license to operate in the country. Having an EOR to help you navigate the risk of misclassification in each country is the smart thing to do when you use international workers. 

Before you venture into the international employment market, find a partner who can help you provide a good employee experience and ensure you’re meeting all your labor law obligations. An owned-entity EOR partner like Remote is your best option for hiring globally and staying compliant with local and international labor laws.

What are the visa regulations of hiring internationally? 

Once you open the door to international hiring, be prepared for your current employees to explore opportunities for international work. One of the best ways to train international staff and ensure your culture is established in a new location is to post experienced staff in the new location. Knowing how to handle international employee relocation will help you answer any questions that might arise.

There are two parts to acquiring the legal right to work internationally:

  1. Is your candidate eligible to reside in the country?
  2. Is your candidate eligible for a work visa in the country? 

Let’s explore these questions in more detail.

Residency requirements for relocation

You must ensure each employee qualifies and is approved for the appropriate visa and work permits before an assignment commences. In many countries, employees must meet minimum thresholds of residency for immigration (e.g., agree to reside in the country for a minimum number of days each year). Other requirements can include:

  • Getting a physical from a designated medical professional
  • Submitting to a drug test
  • Passing a police background check
  • Submitting to a financial evaluation
  • Being fingerprinted
  • Taking a language test
  • Providing character references 

If your candidate does not meet residency standards, applying for a work visa is a waste of time and money. It is not possible for employees to work in countries where they do not even have permission to reside.

Getting a work visa when relocating

There are usually several hurdles to getting a work visa in a new country. Your candidate might need specific experience, education, or skills to qualify for a visa. For example, some countries require knowledge workers to have a university degree regardless of their experience. It’s possible to have a work permit issued, but the employee still needs sponsorship from a company before a visa is granted.

In some countries, a work visa will only be issued if there are no qualified local candidates. You may have to prove you’ve done a thorough job search in the local market before you can relocate someone from another country. 

There may be different types of work visas in a country depending on immediate needs for specific skills versus a normal migration requirement. It’s not uncommon to see temporary work visas, permanent work visas, and special work visas. All are valid for employment, but each flavor will come with different requirements depending on the issuing country.

Overcoming relocation hurdles

While relocations may seem complicated, an EOR can guide you through the process of acquiring the appropriate visas and work permits. However, any offer of international employment should be conditional on meeting the immigration and visa requirements of the country where your candidate will reside and work. Even if you, your candidate, and your EOR are all in agreement, you cannot move forward without the approval of the government in question.

Remote offers a helpful relocation program to ensure you and your employees have a seamless and compliant relocation experience.

How Remote makes it easy to hire internationally 

Hiring your first international team members can be a daunting task — but don’t fear! Remote can help you hire, onboard, pay, and offer benefits to your global team with ease. We operate in dozens of countries all around the world – and that number is growing all the time.

With Remote, you can onboard global employees and contractors with just a few clicks, managing your whole international team in one great platform. We navigate the complexities of global hiring on your behalf, so you can spend less time worrying about international hiring laws and more time focusing on growing your business.

Remote allows businesses of all sizes to hire in new countries without the financial or time investment of opening new entities or foreign subsidiaries. Because Remote is an owned-entity EOR, you always have a single point of contact for all your international hiring needs — from payroll to benefits to taxes and more. Remote even allows you to offer stock options to your employees, directly through the Remote platform!

Global expansion is within your reach

The thought of moving to an international business model may leave your board giddy with excitement and you with a healthy dose of anxiety. The practicalities of hiring internationally can be daunting, especially if you have traditionally kept your hires local. As the world moves to a remote way of working, though, traditional barriers to hiring internationally are gone. In their place is an opportunity to gain competitive advantage by building a world-class team. 

Fortunately, whether you are a seasoned international hiring veteran or just getting started, you don’t have to do it alone. Working with Remote, you can take advantage of a global talent pool with no stress, no surprises, and consistently low flat-rate pricing. Just think of what you could accomplish with all the talent in the world just an offer letter away!

With Remote’s global employment services platform, you can: 

  • Hire people with confidence in dozens of countries.
  • Manage global payroll for employees and contractors in one place.
  • Maintain compliance in your global hiring practices.
  • Have a single point of contact for your international employment needs.
  • Eliminate the need to invest in international offices.
  • Save money on entity or foreign subsidiary costs.
  • Eliminate the risk of misclassifying employees.
  • Protect your intellectual property.
  • Reduce legal and consulting fees associated with international hiring.
  • Grow and scale your business with speed and efficiency.
  • Build a culture of diversity, engagement, and inclusion.

And the best part is, you don’t even have to wait. Sign up now to begin onboarding employees and contractors around the world in minutes!

The fastest, easiest, safest way to hire internationally 

Whether you are a startup or an established enterprise, Remote is the most cost-effective way to build your international team, stay compliant with labor and taxation laws, and enjoy the benefits of international hiring.

If you are ready to get started — or if you’d like to ask some questions! — Remote is here and ready to help.

  • Sign up now to begin onboarding international employees and contractors right away.
  • Contact us to speak with a global employment expert about your company’s unique needs.