How to Hire and Pay International Remote Employees

Hiring Remote EmployeesIf your company has recently started to work remotely, it’s certainly not alone! The onset of the COVID-19 pandemic has finally made organizations realize the benefits of remote work and many that were previously office based, have shifted to become remote first for good. As a result, in 2021, 16% of companies in the world are now remote.

As you start to establish a remote workforce for your company, chances are you’ll come across applicants based in other countries. In this case, you won’t need to worry to take care of work permits as internationally based employees won’t need to move to work with you, but, how can you legally hire them if you don’t have presence where they are located? Is it possible to do it? The simple answer is yes.

This article will highlight the main areas of focus to guide you on the international hiring process of remote employees:

Factors to Consider When Hiring International Remote Employees

When hiring an employee from a foreign country, it’s essential to stay up to date on the country’s legal, cultural, and communication procedures. The country you choose depends on the particular skills you need, logistics, and budget. Here are other considerations to make:

1. Compensation for Remote Employees

One of the first aspects to establish when hiring abroad is the criteria you’ll use to pay “fair” salaries to employees spread around the world, independently to their locations.

There are 3 main different approaches for remote based teams compensation, all with pros and cons:

  • Universal salary:
    It follows one extremely simple concept – if your work is location independent, your salary should be, too: equal work should receive equal pay.

    • Equal pay, equal work independently of location
    • Allows employees to move location without fearing pay changes
    • Opens the door for a more diverse workforce
    • Minimizes awkward conversations with employees who move to cheaper locations
    • However, it’s likely that you will end up under-paying and over-paying in some cases
  • Cost of living salary: 
    A cost of living salary is where employees are paid based on their location. By adjusting for the cost of living, you get the same amount of “purchasing” power in the local labour market as you do anywhere else.

    • Gives employees the same purchasing power regardless of location
    • You can potentially hire from a more diverse workforce
    • Cheaper salaries for some areas balance more expensive ones in others
    • However, it can leave employees feeling less valued and it’s time-intensive to calculate
  • Headquarters salary:
    A headquarters salary, or national average salary, is where you set your company’s salary by your local area or the national average cost of living.

    • The salary is set based on the headquarters location, so equal pay, equal work
    • Simpler and good if most of your employees work from within the same country or locations with the same or similar cost of living
    • However, you might struggle to attract talent from areas with a higher cost of living than yours

To learn more about these different alternatives, advantages and disadvantages, as well as experiences of companies with them, take a look at this guide.

 2. Time Zones

Having remote employees from different countries sometimes means working in different time zones. Even if async communication is key when working remotely, depending on the type of position, it’s important to consider and establish if the role needs to have a certain “overlay” in number of work hours with some other team members and clients/customers timezones, and specify this when hiring for the role.

To help you with this, take also a look at our guides about “Strategies to Manage a Team Across Time Zones” and “A Guide to Asynchronous Communication: What it is, How it Works and Why it’s Key for Remote Work Success“.

3. Language Barrier

Despite having the technical skills required, it’s important to remember that the candidates will have to communicate with the team and management, and therefore, make sure that there’s an understanding and agreement about the language to use, and that the new employees have excellent written and verbal communication skills in it to effectively perform their work.

To make sure that the candidates fulfill these expectations, it’s fundamental to interview the applicants and ask them to do a few tasks where they will be able to show not only their verbal, but also their written communication skills.

4. Duration of Employment

Since the recruitment process takes time, most candidates expect a minimum of 6 to 12 months commitment from the employer, foreign or otherwise, and it’s critical to establish it when hiring for any role.

Methods to Hire and Pay Remote Workers Abroad

Finding the right candidate can be easier when hiring remotely with a global poll of them, as well as remote focused job boards with alerts that are even free, like the Remoters one, but you have to consider hiring and paying them. Due to tax differences, most companies are unable to include foreign remote workers in the regular payroll.

Additionally, companies have to follow labor and employment laws. This often requires registering the company in a foreign country. The best fit for your company depends on the number of employees you need and the duration of employment. There are several ways to overcome this challenge:

1. Hiring as Contractors or Freelancers

Hiring foreign professionals on a contract basis makes it easier to work with professionals anywhere in the world, especially for shorter periods of times too if needed; however, it has some disadvantages, as these won’t really be company employees, since they need to be registered as independent professionals in their country in order to be able to provide their services as “freelancers” or contractors, so, there’s always a risk of conflict of interest and minimal control by the company. The remote worker may also fail to get dedicated to you, and could feel detached from the company.

Because of this it’s fundamental to establish an agreement that specifies the scope of the engagement, working hours, confidentiality, exclusivity, payment frequency and method, etc.

Bibi Raven, link builder and founder of bibibuzz, says:

I’ve been WFH from day 1, and all hires are freelancers from elsewhere 🙂 I used to hire through onlinejobs.ph (which I love!) but my newest hires are recommendations from team members. As they’re all gamers, socializing is easy. Tracking kpi’s is essential. Invest in both!

It’s also important to note that depending on the country, hiring employees as contractors could also lead to tax-related challenges. For instance, some countries could classify independent contractors as employees by the local authority if they only provide services to a single company client,  and your company may have to pay back taxes, penalties, and contributions, which is why it’s recommended that you research first if this would be the case depending on the location of the professional.

Grant Simmons, SEO Specialist and VP at Homes.com, says:

“Contract worker(s) out of Lithuania, W-8BEN-E tax form, paid via Transferwise (wise) in USD. Found via niche website /vertical portfolio& have been fantastic. Skilled work produced on time, in budget, excellent communication, & with great “can do, it’s done” attitude.”

2. Using a Local Business Partner in the Country

If a company already has trusted business partners, suppliers, or vendors in the employee’s country, it’s possible to add that employee to their payroll. They will bear the responsibility of tax payments and other welfare or social contributions.

It’s not a permanent solution, but it makes it possible to hire on short notice.

3. Setting Up a Local Entity in the Country of Operation

Many multinational countries often establish other branches in the countries they operate in. This makes it possible to hire employees directly. If you only need a few employees, this option may be expensive. However, if your company needs many employees for a long duration, it will be worth your while.

You’ll need to register your company as per the local requirements, and it can be an easy and cheap process or hard and expensive, depending on the country laws and bureaucracy.

4. Using a GEO Employer of Record

A Global Employment Organization (GEO) refers to an international service that hires employees abroad without having a branch in a foreign country.

Such a service is helpful when running local payrolls, abiding by labor laws, and offering employment in a foreign country. The GEO has existing employers of record (EOR) well-versed in all procedures and payroll processes.

The EOR becomes the local employer on behalf of your company and is responsible for paying taxes and employment benefits. You get experienced local experts on your team without worrying about compliance.

Platforms to Use When Hiring, Paying and Managing Global Remote Teams

Handling remote teams can be challenging, especially when it comes to HR, legal compliance, and payroll management. Luckily, there are some platforms you can use to simplify the process.

1. Deel

Deel is a payroll and compliance platform designed to help international companies hire and manage remote teams. It makes it possible to swiftly hire and pay full-time employees or contractors across the globe.

Using Deel, you’re able to pay taxes and benefits, handle the payroll, and draw up legal contracts for a specific country across 160 countries. Your employees can choose how to withdraw payments and have 100+ currencies to choose from.

Pros

  • Contracts that comply with local laws – Deel partners with more than 200 local legal partners to facilitate localized contracts.
  • Automated payroll- You can opt for bulk payments to the whole team.
  •  Worldwide payments.

Cons

  • Available templates for tax forms and contracts designed for different countries are relatively few.

See more about Deel here.

2. Remote

Remote is a global platform that facilitates HR services. It makes it possible to perform payroll processing, managing benefits, handling tax and compliance, onboarding new employees, among other administrative tasks.

With Remote, you can easily hire foreign contractors or employees within a few minutes.

It comes with Remote Employer of Record and access to a free Global Contractor Management Platform with localized contracts and various payment methods.

Pros

  • Management of Benefits- With Remote, you’re able to offer your employees medical and life insurance, 401(k)s, paid holidays, and pension.
  • Easy onboarding- Remote has a self-service option where new employees can easily add themselves to the platform.
  • It has career and skills tracking options.
  • Ensures tax and local legal compliance.
  • Remote is complimentary for contractors.
  • Payment and payroll management is automatic.

Cons

  • Services for full employment are only available in specific countries right now.

See more about Remote here. 

3. Panther

Panther is a global platform that offers automatic payroll management for remote teams. The software provides tools that facilitate hiring new employees and customizing legal documents such as non-competes and NDAs. Your employees will be able to choose from more than 70 payout methods.

Pros

  • Tax Management
  • Tracking employee attendance and leave days
  • Managing benefits, and compensation
  • Multi-country availability across over 150+ countries

Cons

  • The platform has limited resources for support.

See more about Panther here.

4. Boundless

Boundless is a global employment platform that empowers businesses to take their team international. It’s a software that allows an organization to employ anyone globally in a manner that’s best for the people and business.

The platform covers all local employment responsibilities, running payroll, filing taxes, and providing statutory benefits to the employees. As a result, boundless is already active in many of the world’s most tightly regulated markets.

As a result, it offers security to both the organization and employees as well. One of the biggest concerns of hiring a remote team is complying with the international employment requirements.

With boundless, you can put all those worries to rest. The international workers will get access to full employment rights, statutory benefits and will automatically comply with international tax.

You aren’t just limited to one country either; organizations can effectively run a multi-country payroll by incorporating boundless. In addition, the software helps ensure that the organization can quickly meet the local tax requirements for every employee’s home country.

Hiring remote employees and sending money overseas is starting to become trickier to navigate. Governments are starting to enforce compliance laws for employee misclassification, and boundless can help you avoid all of those issues.

However, perhaps the most significant advantage of employing boundless is that it allows organizations to scale rapidly. By incorporating boundless, organizations can look towards taking full advantage of the ability to hire from a global talent pool.

Pros

  • It makes running a global employee base much easier
  • Ensures that the organization meets tax compliances in different countries

Cons

  • It doesn’t offer support for a lot of countries

See more about Boundless here.

Remote Team

Remote team is an invoicing platform that’s the ideal choice for remote teams, freelancers, and independent consultants. Employing the software can help ensure that the organization saves time and money.

By leaving the payroll management to the remote team platform, business owners can ensure that they can place their focus on the most important business decisions.

With remote team, the organization can pay invoices directly from their dashboard with access to multiple money transfer options. In addition, it’s easy to create, manage, and send multiple invoices with remote team all in one place.

Another brilliant feature of the software is using the customizable template builder. Every organization can customize their invoice according to the design they prefer.

On top of managing the payroll, remote team can help organizations calculate the employees’ hours, their time-off, and the holidays in their payroll. One of the biggest issues when managing a remote team is having to track hours.

A lot of organizations make use of time-tracking apps to make their lives easier. Luckily, remote team allows integration with multiple different time-tracking apps. So you can manage their hours and pay their invoices all in one place.

Remote team’s platform also ensures that the organization doesn’t have to worry about tax compliance. The platform will handle everything from any potential tax laws and regulations. These laws and regulations are also constantly changing, and it can be difficult for organizations to keep track.

Pros

  • Integration for multiple different applications
  • Customizable template builder

Cons

  • Average customer service

See more about Remote Team here.

Wrapping up!

Hiring remote employees from other countries is becoming more and more common, and although there might be challenges to employ a global workforce there are alternatives to allow you to do it while complying with legal and tax requirements. With the help of this guide, you now know how to easily go about it.

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