There are 3.29 billion workers worldwide, and many of these employees work internationally. So whether you open an office overseas or work with contractors outside of your home country, you’ll need to know how to pay international employees. This article is more about how to provide payment for services rendered by a foreign person, not which country would be best to hire employees. That will be an article for a later date.
Hiring globally can help your business in many ways:
- Lower overhead
- Attract more talent
- Hire based on specialized skill sets
For startups, hiring internationally can be crucial for success.
Today, we’re going to explain the main hurdle of paying these employees so that they can become an integral part of your team.
How to Pay International Employees
If you open up an office, bank account and operations in a country, your HR team can work with local payment processors. However, if you’re not able to go this far and still want to hire international employees, you still have many options available.
A few of the ways we suggest paying your international employees:
Create a Subsidiary
If you plan on doing extensive business in a country and hiring employees there, it may be worthwhile to create a subsidiary. A subsidiary is a branch of your business, created in another location, such as a foreign country.
For large companies, it may be worthwhile to go this route because you’re able to:
- Maintain a physical presence in the country
- Enter the country’s market more easily
Your subsidiary can have its own human resources team and handle payroll in the country to make payment easier. Depending on the country, it may also be beneficial to open a subsidiary from a tax advantage standpoint.
However, it’s often impractical for small businesses to open up subsidiaries for this purpose because they’re expensive and can be frought with local, legal responsibilties.
Professional Employer Organization (PEO)
A PEO may be a good option for your business. PEOs maintain operations in your desired country to ensure that you can carry out your business activities as efficiently as possible.
These professional organizations are responsible for many things, such as:
- Hiring employees
- Employee onboarding
- Payroll management
When working with a PEO, you also benefit from the PEO’s expertise in operating in the desired country and their ability to keep your business operations compliant. For example, the PEO will ensure that your operations remain compliant with local regulations and laws such as potential retirement benefits and employee tax requirements.
Third-Party Employers
A third-party employer is another business entity that operates in the desired country. For example, the business may operate in Canada and would act as your partner or affiliate. The business would be responsible for paying the third-party employer, who in turn pays the employees.
The third-party will want some form of compensation for their role, and you pay the third party directly.
E-payment Options
E-payment options are available, and these options have become increasingly popular in recent years. In this scenario, you would pay international employees using one of the many e-payment platforms that operate in the employee’s country, such as:
- PayPal
- Stripe
- Quicken
Of course, cryptocurrency may be an option, although it’s less popular than e-payments because the adoption of crypto varies greatly from one country to the next.
Pay as a Contractor
Does the employee act more like a contractor than an employee? Do they make their own schedule or use their own methods to get the job done? If so, you may want to pay them as a contractor rather than an employee.
You can pay many people as a contractor, including:
- Marketers
- Lawyers
- Salespeople
Essentially, if the person is paid hourly or on commission, they’re often a good choice for paying as a contractor.
Pay on Home Payroll
Often, businesses will send employees to another country to work internationally for a short period of time. In some cases, you may be able to keep the employee on the home payroll instead of paying them internationally.
However, a lot of research and due diligence is required to understand the host country’s:
- Regulations
- Requirements
In some scenarios, especially for very short periods of time, you may be able to keep the employee on the home payroll.
Final Thoughts On How To Pay International Employees
Paying international employees is a growing trend that companies worldwide are leveraging to fill their ranks. The benefits of hiring internationally include picking employees from a much larger talent pool and finding the best talent for the job.
However, you need to also know how you’ll pay these employees.
Often, you’ll find that hiring the employee as a contractor is in your best interest, but you may also find that a PEO is a better option. Weigh the payment options available, discuss options with an accountant and consider the many options for paying international employees discussed throughout this article. To speak with a consultant about setting up advanced international payment systems, reach out to us today.