Hiring international employees would help you to get the best talent. However, paying international employees might get tricky. Here’s how you can pay your international employees!
The remote working structure had become a widely recognized working arrangement around the globe. During the Covid-19 pandemic, most companies had to turn to remote working structures. It was quickly realized that remote working is beneficial to both companies and employees. Employees who work remotely report feeling less burnout and companies get the chance to hire the best talent globally. Thanks to remote and synchronized working arrangements, companies can employ from anywhere around the world and find the best fit between company culture, the company needs, and employee skills. Borders started to become meaningless. However, one question arises: How are you supposed to pay international employees?
In this article we will first explore your payment options, then we will talk about some factors that you need to keep an eye out for when managing employees internationally.
What are your options to Pay International Employees?
You have three main options when it comes to paying employees abroad:
1 – Set up a legal local entity abroad:
Setting up a local legal entity comes with risks and a big commitment. You would be required to handle a considerable amount of administrative work. This option is viable if you plan on hiring more than 25 people from that country. Requirements for establishing a legal presence vary depending on the country. If you are planning on establishing a legal local presence in another country, your best option would be to seek the guidance of a local expert. However, here are some basics of what you would need to do:
- Open a bank account for your company.
- Be aware of local regulations and make sure your conduct conforms to the local laws.
- Learn how to set up a new payroll.
- Hire local employees.
- Use an Employer of Record (EOR):
According to CXC Global’s article, “An employer of record (EOR) is a company that hires an employee on behalf of another organization. They handle traditional employment tasks such as payroll, tax, and the drafting of contracts. For tax purposes, an EOR is your employees’ legal employer.” EORs are one of the easiest ways to make sure you comply with the local laws and regulations when you are entering a new and foreign market. EOR system allows you to hire employees abroad without having to establish a local presence in that country, therefore it greatly diminishes your risk.
2 – Use freelancers and independent contractors:
This last option gives you a lot of freedom and flexibility. Depending on your agreement with your contractor, you can pay them hourly rates, or you can choose to pay project based. In most cases, you wouldn’t be responsible for paying taxes for them or providing them insurance. Independent contractors are expected to pay their taxes and insurance. However, you need to be careful about how you classify them. Even though you hire them as independent contractors, depending on your long-term relationship with them, you might be required to classify them as full-time employees. In most countries, misclassification comes with serious consequences.
Check out our guide on how to pay your independent contractors through Remotify. Remotify is a platform in which you can create invoices. Remotify also allows you to pay your freelancers in over 30 different currencies, with a commission rate of a mere 4.5%.
3 – Some tips on hiring international employees
Lastly, we would like to discuss some factors that you should consider when hiring international employees.
- You might face some foreign taxes as well, depending on which form of employment you decide to go with.
- Employment laws will differ from country to country. The benefits and working conditions that you are required to provide for your international employees might be different from what you offer to your employees.
- You need to decide on which currency you are going to use to pay your international employees. Bear in mind that exchange rates might fluctuate. Therefore your safest option might be to pay international employees in their currency.
- You should do your research on the average salaries of the country that you plan on hiring from. That way, you can make sure that you offer your employees a fair rate.