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Employer Friendly Guide To Pay International Employees

Wednesday, August 11, 2021

Are you finding it difficult to pay international employees? 

With rapid advancements in technologies that enable remote work, companies are now bolder and daring in venturing out to hire talent from the global pool. 

To take advantage of tapping into the global pool of talent, you’ll need to know how to pay them. Employees come in various types- freelancers, contractors, and full-time employees. Check out our other posts on paying employees. In this post, we shall cover the nitty-gritty of paying full-time talent. 

May the global workforce be with you.

Why Should You Hire International Employees?

Are you interested to know the various advantages of hiring international employees?

Global hiring is an up-and-coming trend. There are several strategies encompassing things like - AI, social media, data-driven processes, behavioral interviews, etc. The ways to fish from the global pool are endless. 

Before diving deep into the maze of payment-related issues, let us portray the benefits of hiring international employees.

  1. Flexibility: The increasing happiness quotient resulting from work from home is thanks to the flexibility rising from remote work. One of the benefits of hiring international employees is the flexibility they bring with them. Working across borders means working across different time zones. 
  1. New Markets and Work Culture: International employees stem from talent markets that were untapped earlier. They bring with them a diverse set of skills pertaining to work culture and technological skills. 

Looking to employ talent from another country? Multiplier can help. Our EOR solution helps you enter new markets and set up distributed teams.

  1. Increased Productivity at Low Costs: Hiring international employees means fully remote roles. This means you can off-set costs pertaining to infrastructure. Moreover, cross-border hiring from developing nations can help you acquire experienced talent for a fraction of what you will be spending.

Read more about the benefits of hiring globally here.

How Should I Calculate International Employee Taxes?

The major cost incurred while hiring employees from other countries is the taxes involved. When you have a foreign employee in your payroll, you are susceptible to tax from two countries. 

It is for this exact reason that you should be vigilant about calculating taxes and withholding them from your employee’s paycheck. 

Here are the obligations that you have to fulfill when paying an employee in another country:

  1. Calculating employee tax
  2. Withholding social security and contributions such as a pension, insurance, etc, based on employee and employer shares
  3. Offering mental and health coverage
  4. Calcualtingpension and coverage
  5. Calculating severance payments

When it comes to paying employees working overseas by putting them in a US payroll, the employee must submit ID card, social security number or W-4 form, which if they do not, becomes a tax compliance issue. 

Things To Consider While Paying International Employees

While paying an overseas employee from your home country, there are certain circumstances you should look into. 

Currency

When paying employees cross border, there can happen currency fluctuations. Say, when transferring money from the USA to a country in the EU, there can be changes in the amount of money you disburse from your home country., 

This can lead to lesser amounts of money reaching your international employee. 

Moreover, keeping in mind currency conversions can also help you create appropriate budgets for your payroll management. You wouldn’t want to end up with rainfall in your payroll budget when recruiting talent at a far lesser cost. 

Taxes and other obligations

As mentioned earlier, taxes are another thorny road you have tread. 

Paying foreign employees means checking for tax laws in two different countries. 

Sometimes, this may not be the case thanks to international treaties. Employers need to evaluate the existence of such treaties before they fire up an employment contract with an international employee. 

Researching on these fronts can help you save a few credits and use them later on.

Employee Classification

Employee classification is another fine line you have to watch over. Employees have to be carefully classified as contractors or full-time employees based on their work hours, tenure, nature of work, duration of the project, benefits, withholding taxes, etc. 

Just because dealing with an overseas contractor is easier than paying an overseas employee, you shouldn’t play rough with the rules.

Salary Research

One of the main reasons behind hiring an overseas employee is the acquisition of low-cost talent. 

Developing countries offer experienced hard-working professionals for salaries 300% less than professionals in the USA and the likes. 

Conducting comprehensive research on salary trends puts you in the driver’s seat while negotiating salaries with your international candidate. 

How To Pay International Employees?

Bank transfers? Should I wire them? Would I need a swift code? Let us walk you through a few tips that can help you pay overseas employees without losing much from your rainfall. 

Here are 4 straightforward, no-nonsense ways to pay your international employee.

1. Pay the employee on your home country payroll

It is important to understand the nature of the employee’s jobs when disbursing their salaries. For example, when your employee is assigned short-term work overseas, you might still be able to pay them on the local payroll. 

Check with your local government laws to understand the most transparent and flexible way to pay your employees.

However, if you are hiring an employee who is a resident in some other country, then you must classify them as a local employee. In such cases, you should pay them in their local currency and have a payroll in their own country. You have to conduct a few background checks in order to verify their tax id and social security purposes. 

In cases of expats, you must pay them according to two tax systems and deal with respective compliance issues and also verify their duration of residence - if they have continued their residence and become tax-paying residents.

2. Ask a local partner or third party company to place them on their payroll

Another way that reduces all the nightmares of paying overseas workers is partnering with the likes of Multiplier. 

Getting the aid of a local payroll vendor to process salaries is risk-free. When you add an employee on a third-party payroll, the latter becomes legally responsible for the employee, freeing you from local compliance and labor laws. They become responsible for administering salaries, withholding taxes and social security, offer benefits, etc.

However, this does not mean you can surf away from the research you do to hire a payroll partner. Remember, your payroll vendor can still impact your employee experience by causing mishaps or exceeding expectations when managing the latter’s remunerations. Make deliberate moves while choosing your payroll partner.

Nevertheless,  once you seal a good deal with companies that ensure 100% payroll accuracy like Multiplier, paying overseas employees shouldn’t scare you in your nightmares anymore.

3. Pay them as independent contractors

You could also classify your overseas worker as an independent contractor to offset the worries in managing tax and compliance. 

So let us clear the air around who an Independent contractor is. When you employ a worker with a specialized set of skills for short-term projects under a written contract or verbal agreement, you can classify them as an independent contractor. A stark delineation between contractors and employees is that the former manages their own tax and benefits. 

And this is what you can turn into an advantage. Since contractors must deal with taxes on their own, it reduces the toll on your responsibilities. 

Moreover, this move can work well for certain types of positions or projects. Specialist roles such as consultants, lawyers, salespeople can very well be hired and paid as independent contractors.

Engage an Employer of Record (EOR) | Get the Multiplier Advantage

With the rapid advancements in remote technology catalyzed by cloud computing, cybersecurity, video conferencing platforms, etc, SaaS-based EOR or an Employers on Record will be all the rage. The solutions are also within the law while paying overseas workers.

Many overseas companies benefit from EOR solutions ( in the case of Multiplier, 50+).  

According to the law, the entity that pays the worker takes legal responsibility and accountability for the employee. EORs are companies that can take employees under their payroll and manage administrative activities efficiently, thus, effectively making employees their legal responsibility.

Delegating your employee’s payroll to your EOR partner enables you to impart functions such as processing payroll, dealing with government bodies, ensuring tax compliance, or filing paperwork to the EOR 

Also, a SaaS-based EOR like Multiplier would already possess the infrastructure to pay international employees. They would: 

  1. Posses locally registered entities
  2. Local bank accounts 
  3. Automate generating employment contracts

More emphatic EORs like Multiplier - which understand the nuances of HR such as employee experience, engagement, and retention - also help in imparting benefits such as insurance for contractors and full-time international employees.  

Simply put, an EOR quickly and easily eliminates the barriers to entry in global markets. They can also open doors to foreign markets and in the case of Multiplier, we help you enter new markets in 24-48 hours. We help you protect your company while paying international employees. By promptly handling administrative tasks, you can focus on your expansion efforts.

Interested to know more? Book a call with Multiplier.

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