Payroll

How to pay international employees: A detailed guide

9
min

Discover the top 10 countries to hire international remote workers with our comprehensive eBook. Learn about the best locations to source global talent, taking into account key factors.

As the world becomes more familiar with remote work and asynchronous communication, global hiring has become one of the top trends. Today, businesses of all sizes can easily build the best teams globally. However, hiring internationally can be challenging if you’re unaware of the local tax scenario, compliances, and international payout systems.

Paying international employees is a big challenge in particular because you’re unsure of:

  • what currency you will pay them in,
  • what system will you be using to transfer the money,
  • currency accounts needed for every country you want to hire in,
  • managing foreign currency fluctuation rates,
  • tax implications and local labor laws.

Read on to clarify all your doubts and learn more about how to pay foreign employees.

Things to consider when paying overseas employees

Payroll differences across countries

Each country has its payroll requirements that you must understand while considering paying wages to overseas employees. For example, many countries require paid sick days off for short-term illness or paid public holidays, which must be considered. 

Many countries have pension requirements, too. For example, US employees who work overseas must have pensions such as IRAs and 401 (K) that have contribution limits and might be affected by the expat’s presence in another country. 

{{international-employement="/components"}}

Compliances 

There are various compliance requirements that you need to know and adhere to while paying international employees. Failing to do so can call for heavy penalties.  For example, if you are a US company hiring overseas, you can have a higher or lower taxation regime on your earnings. Plus, you may face double taxation, one in their country and one in yours. 

Understanding the taxes can help you determine the payroll of your overseas employees. Apart from tax regulations, every country has a different take on employee contract status that you need to adhere to.

Overseas presence

There is no one way to hire international employees. For instance, you might consider creating an overseas presence by establishing an entity and registering with the local government. However, this comes with an upfront cost and might not be suitable for all businesses. 

If you want to test the waters before setting up a business, consider exploring other options, like putting the employee in the home country payroll. However, this can become a compliance issue if the employee becomes a resident in the new country. 

If you’re hiring in the UK or Thailand, you can still hire an international employee without having a permanent establishment locally. The local employee pays taxes and social security filings like a self-employed person.

Some countries like France and Estonia also offer payroll law compliance for employers. This law allows special payroll-only registrations for foreign employers so that they can conduct a legal local payroll without in-country tax and social security. 

Another option is to work with an EOR, like Gloroots, that helps you hire internationally and manage the global workforce payments on your behalf. 

Want to learn more about hiring internationally? 

Read here  How to hire independent contractors

Local tax structure 

When expanding business globally, you must understand the local tax structure to stay compliant with the local labor law guidelines. Plus, this will also help you to determine the payroll for overseas employees. However, it's easier said than done. 

To understand the local tax structure and achieve compliance, you must either set up a local entity or hire through an EOR. 

Working with an EOR is a better choice as it simplifies administration and handles payroll for foreign employees. The EOR serves as the legal employer in the foreign country, so it can run payroll, conduct tax duties, and comply with the local tax structure. 

Gloroots handles all your payroll needs with care. The platform offers automated single-click payroll, handles multi-currency payments, and supports crypto pay-ins and payouts

Currency and exchange rates

Consider currency and exchange rates when paying foreign independent contractors or employees. International employees may use a different currency other than the US dollar, which may affect the final amount they receive. Transfer and currency exchange fees can be steep depending on the country’s economic trend. Plus, there are constant fluctuations in exchange rates, which can further impact the final amount. 

{{hiring-power="/components"}}

Different options to pay international employees

Before you narrow down to one, know your options. These are some of the popular options followed by businesses to pay international employees. 

Setting up a local entity

If you’re a rapidly growing company considering a permanent presence in a new country, then it makes sense to set up a local entity. While it helps the business to enter a new territory, it also makes paying foreign employees easier. It also gives you more control. 

Partner with a local business

Many businesses tie up with local entities within the industry to scale faster and foray into a new territory. Often, it's a part of the strategic goal of the company. Working with a local business helps a foreign company to use the local company employee recruitment and payroll system without having a subsidiary. 

Online payment providers

Online payment is a popular choice among businesses and international employees for sending and receiving payments in multiple currencies. Some online payment providers are PayPal, Payoneer, Wise, etc.

However, it’s important to check the exchange rate and transaction fees before opting for these online providers. For example, PayPal has a very high transaction fee, and employees might not be willing to pay for it. 

Partner with an EOR

Working with an EOR is another option to pay international employees. The EOR serves as the employer and provides employees with all the facilities, including an easy payroll system, and manages taxes for the foreign company. 

Why choosing an EOR is the best solution?

Paying international employees is a complex process, and partnering with an EOR is the best way to insulate your business from compliance risks. It helps you navigate the entire hiring and payroll process with expert guidance. 

By partnering with an EOR like Gloroots, you can get multiple benefits from a single platform. Here are a few benefits:

  • Onboard international employees and independent contractors faster with automated contract generation and a single dashboard to track onboarding statuses.
  • Multi-currency payments, custom employee benefits, and crypto pay-ins and payouts.
  • Monthly reports detailing FX rates, resource usage, employer liability, EOR fee breakdown, etc.
  • 24/7 customer support

100% compliance with local tax and employment regulations, hiring norms, etc.

Check out how Gloroots helped Sketchnote pay all its international contractors in one go.

Want to know how you can benefit from Gloroots?

Schedule a call today!

Content
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Ready to take your hiring global? Let’s talk. Our experts have got you covered. 

Speak to us