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Why is it so hard for employers to pay their international employees?

Thriving in the new world of work means looking beyond your borders, literally and figuratively. Hiring outside of your usual, more localized pool of talent has many benefits—especially in the diversification of company culture and idea generation—but this wide-open field is laden with potential pitfalls.

Luckily, with a little patience, due diligence, and investment in getting expert help in international employment (ahem), there’s a way through.

Here are some of the most common mistakes companies make when hiring global talent. Take heed, folks: these watchouts could save you time, money, and safeguard you from an awful lot of headaches.

Misclassifying of Employment Status

So you’ve hired the perfect person for the role. The shiny square peg for your vital square hole. But in your rush to get down to work, you incorrectly classify this new hire as an independent contractor instead of an employee. This can lead to severe legal and tax implications, and hefty financial penalties. Different countries have different criteria when it comes to the determination of employment status, so you’ll need to do your research to make sure everything’s above board.

And if your strategy relies on a hope that you won’t get audited, well… If there’s one rule to live by it’s this: Don’t fuck with the tax man.

Misunderstanding local labor laws

A failure to come to grips with the often-labyrinth labor laws local to your new hire can leave you vulnerable in all sorts of areas: minimum comp, rules around overtime and working hours, alongside other employment standards vary from territory to territory. Social security and pension contributions can be mandatory in certain countries, too. Many others have regulations in place specific to remote working with international companies, something which can also add legal and tax ramifications.

Companies will need to make sure they follow the letter of the law for the sake of both employer and employee. Those rules, however arcane they may seem, are there for a reason.

Not accounting for currency fluctuation

We’re sure we’re not the only ones who’ve been on vacation, stopped by a market or store, seen a price listed in a foreign currency, and had no idea if this is a good deal or a bad one. The same is true for business—and the stakes are a lot higher than getting a good price for a rug in a sun-baked bazaar.

With exchange rates fluctuating day-on-day, a lack of accounting for these variations can lead to dissatisfaction from your new employees whose paycheck might feel a little lighter than they expected…

Lacking clarity of documentation

Ah, yes. Paperwork. Our old friend. It’s good to see you.

While it’s not the sexiest area of employment, you can never underestimate the power of clear documentation. A failure to communicate effectively with international employees is an issue that will only get worse as it goes on. That’s why precise documentation with outlined compensation, tax obligations, and payment schedules is imperative.

Getting your contracts sorted early makes things a lot easier sailing for your new talent.

Using non-compliant payment methods

Unfortunately, when working with foreign employees, the actual payments themselves are often far from seamless.

Differing payment methods—such as wire transfers, SWIFT, and automated clearing house (ACH) transfers—each come with their own set of requirements and drawbacks. Unwittingly using an incorrect or unsupported payment method will often result in payment failure—never a good thing.

A failure to research the appropriate method of payment won’t just result in a delay in funds, it can also see the money (and your account) scrutinized or rejected if they fail to comply with local laws, anti-money laundering (AML) regulations, or other requirements.

Issues with corresponding banks

Payments can often need to go through multiple channels—often several corresponding banks—before it reaches the wallet of your international employee. One break in this chain can cause plenty of hassle.

Errors in routing instructions can lead to delays or failures in processing and some sending and receiving banks, acting as intermediaries along this payment process, may not have the relationships required to make things run as smoothly as you might hope.

And then there’s the day-to-day stuff…

Everything from issues with network issues in your chosen payment method’s infrastructure to timezone and business hour differences can affect the schedule of payments.

Incorrect or invalid details entered onto necessary forms, as well as limits to the amount of money you legally send from one country to another (rules which again change from place to place) could see payments rejected.

Other, semi-hidden ‘incidentals’ like banking and transaction fees—which can vary between different countries and financial institutions—can also impact your company’s bottom line, especially along a tight budget.

Hazards abound, and we’ve barely even scratched the surface of the geopolitical specifics. There was a time when all of these issues scared away employers from the global market, closing its ranks to the wealth of outside talent that could help take their business to the next level.

Luckily, here at Multiplier, we’ve got you covered. We’re the experts when it comes to making the hiring of international talent as straightforward as possible. Our platform handles payroll, tax compliance, employee benefits and compensation, as well as a host of other advantages.

Want to know more? Book a demo today.

Ria Thomas
Ria Thomas

Product Marketing Manager

Ria is a Product Marketing Manager at Multiplier

Employ the best person for job, regardless of location

Employ the best person for job, regardless of location

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