As 2023 approaches, more and more HR and recruitment managers will have top talent at their fingertips. Instead of looking at a database filled with regionally-based candidates, you can hire international remote workers in just a few steps. In addition to knowing country labor laws, tax compliance, payroll payments, and so on, we’ll walk you through what you need to know when it comes to hiring employees overseas.
First, let’s go through some of your options when employing international workers.
Option 1: Open a local entity
One of the most common methods of foreign worker recruitment is to set up an entity in another country. This’ll give you the leeway to establish a local branch in the country, hire talent, and legally run payroll in accordance with the country’s labor laws and taxes.
If you work for a company with a large budget looking to employ large numbers of international workers, this could be a great option—but there’s a caveat; establishing a local entity is expensive and time-consuming.
You’ll need a thorough understanding of the country’s labor, corporate, and payroll regulations. You’ll also need to complete and be aware of several bureaucratic processes, such as registering the local business with tax authorities and social security offices. Ireland, for instance, plans to increase it’s corporate tax to 15% for large companies starting in 2023.
If you’re interested in hiring just a couple of employees—as opposed to aiming for long term stability in that market—you have other choices.
Option 2: Employment or green card sponsorship in the US
When hiring a foreign employee, many companies start with a sponsorship. In this case, you’d work with the US government and follow regulations that allow the employee to work and live in the US as a non-immigrant. Cuban, Nigerian, and Canadian citizens are just a few nationalities that can receive a sponsorship or green card.
Many foreign workers begin with an H-1B visa and work towards getting a green card for permanent residence. This entire process from start to finish could take workers anywhere from one to five years to get a green card.
This option will also include a lot of heavy lifting for your business in terms of paperwork and protocols. We’ll get into this in a few minutes, but as the US government prefers businesses hire Americans, it’s a long process with several steps.
Option 3: Hire with an EOR in a foreign country
An EOR (or Employer of Record), is a way to quickly hire employees abroad without needing to open a local office in that country. Here’s how this model works:
A representative from the Employer of Record will hire your employee in the new location and handle all payroll, tax, contract, benefits, and employment issues. For example a US company using an EOR service in India won’t need to worry about any regulatory changes in health insurance, because the EOR outsourcing service would make all the necessary updates and ensure compliance.
While the EOR makes sure you remain compliant with local laws and employs the employee on paper, you would manage the employee as you would with any local team member.
Your company would control the employee’s day-to-day responsibilities, while the EOR manages their payroll and taxes. Not only does this ensure you’re following all local laws, but it also helps you hire talent faster, and save money, as an EOR is less expensive than opening a foreign subsidiary.
Option 4: Hire an independent contractor
Just as with an EOR, hiring an independent contractor can help you save resources. An independent contractor is self-employed, hired to provide specific services. Unlike with a regular employee, independent contractors aren’t entitled to:
- Health insurance
- Compensation insurance
- Insurance coverage
- Paid time off
With independent contractors, you’ll gain access to a wider pool of talent, but you also won’t have control over how the work gets done, and their specific working schedule and availability. You may also face worker misclassification, where laws vary from country to country. In Japan for instance, businesses cannot control or even guide independent contractors, or the government may classify the relationship as employee-employer.
Option 5: Empower the process with a global payroll solution
Not only will a global payroll solution help you manage the entire hiring process from A-Z, but a powerful platform will also have in-house experts to help you stay compliant at all times. This is a great option for companies that have an entity in the designated country.
Overall, a global payroll solution is less expensive than an EOR (if you already have an entity in the country), which will allow you to put those valuable resources towards other areas that can benefit the company.
A global payroll solution functions like a branch of your internal HR or legal department. They’ll take on any payroll processes, administrative tasks, benefits, and compliance. This option is also ideal for when you’re hiring several international candidates and want to give them a streamlined experience.
Now that you’ve read about four options for employing international workers, you’ll want to know the specific process for hiring a foreign employee to mitigate any challenges that can set you back.
4 steps for US companies hiring a foreign employee
When it comes to hiring employees abroad, the US government created specific guidelines, ranging from working with the US Labor Department to understanding and complying with tax regulations. Let’s go through the steps.
1. Apply for certification from the US labor department
The Department of Labor aims to protect the rights and work opportunities of U.S. citizens, so you’ll need to prove your case for hiring a foreigner. For that, you’ll need to:
- Show evidence of your need to hire a foreign worker
- Prove the open position meets the foreign labor certification program requirements
- Complete the ETA form
- Show that you can pay the candidate at least minimum wage
- Mail in the completed form and attachments to the US Labor Department
2. Interview the candidates
After the Department of Labor approves your certification for a foreign worker, you’ll need to start the hiring process. When interviewing candidates, remember that resumes from abroad can look different.
In some Latin American countries, you’ll need a photo, while it’s atypical for US residents to include one on their resume. In addition, it’s illegal for US employers to ask candidates about their age, but EU citizens may include their birthdate on their resume.
3. Apply for a work visa in the US
The visa process can take more time than you’d think. After finding your perfect candidate, you’ll need to file a petition with the U.S. Citizenship and Immigration Services (USCIS), which can take up to a year.
Even if you have all of your paperwork organized and ready to go, your candidate may run into immigration issues, which could delay the process or even worse, halt it completely. In that case, you’d need to start the hiring process from the beginning.
4. Comply with tax regulations
Each country has their own tax regulations and the US is no different. All foreign workers need to apply for a social security number with the Social Security Administration. While working in the US, all foreign workers also need to pay payroll taxes, the same as any US citizen.
Finally, any foreign-based employee working outside the U.S. will need to fill out Form W-8 BEN and Form W-2. If there’s a disparity between government records and the employee’s information, the government may send a no-match letter. In that case, follow the letter’s instructions on how to proceed.
The above steps for hiring a foreign employee is just the beginning. There are several other considerations to take into account when it comes to foreign worker recruitment. From defining roles to legal requirements, here are a few recommendations for where to start.
Tips for hiring employees globally
Though there’s no one right way to handle bringing on international employees, there are a few ways to make the process as smooth as possible.
- Define roles and statuses – Hiring an independent contractor is not the same as hiring an employee. Defining which kind of employee you’re hiring will help you set expectations for your company and the employee, as well as stay compliant with country labor laws, tax policies, and more.
- Check legal requirements – Each country has their own legal process. For example, Singapore has separate permits depending on the employee’s skills. You’ll need to know the difference between remote and overseas expansion hiring and how to comply in each scenario.
- Use employment contracts – After you choose your candidate, you’ll need to create an employment contract based on the local employment law. International employment contracts are a legal requirement, so make sure you draft one and that it protects you, the employee, and outlines your internal policies or rules.
- Create an onboarding plan – A positive onboarding experience will not only help you retain talent, but it will enhance their experience with your company, setting them up for success. Compile information such as their role and responsibility, introduction to their team members, insight into the company culture, a checklist of tasks to complete during the first month, and more.
- Consider a global payroll platform – A global payroll platform can make the difference between staying compliant in every country you work in and facing serious fines for misclassifying your employees.
As an HR professional, you likely have plenty of experience hiring international remote workers no matter where they’re from. But when it comes to the payroll process, it can get a little complicated.
How to pay international employees
After deciding on how to hire your employee (by local entity, EOR, independent contractor, and so on), you’ll need to consider which currency you pay them in, what their working hours will be, when you’ll pay them, and any other elements where you’ll need to comply with labor laws.
When it comes to actually submitting payment for international employees, you have three options:
- Keep the employee on their home country’s payroll – If your employee will temporarily work overseas, you may not need to switch payrolls. Follow the legal requirements of your country and the country where the employee will work when making this decision.
- Use a local payroll company in the designated country – Bringing on a payroll provider can help you avoid misclassification or breaking any tax or compliance laws. A local payroll provider can also provide the best experience for your company and the employee that will suit everyone’s needs.
- Outsource your global payroll process – A local payroll company can benefit any small businesses looking to expand into a new country. But global companies in multiple locations may want to have all of their payroll cycles in one place (using one provider) so all documentation and information stays organized and remains compliant with employee classification.
While we suggest keeping the above options in mind, there’s only surefire way to compliantly pay your employees from all over the world.
How to expand globally and stay compliant
In your business, you likely have experienced professionals from several verticals and industries. But when it comes to a thorough understanding of compliance from any country or nation, not every business has a strategic workforce management expert on board.
Luckily, a global payroll platform will know all labor laws from A-Z so you can focus on what matters most, growing your business. With a renowned platform like Papaya, you’ll work with experts who can eliminate any legal risk or exposure. Health & safety authorities will protect your workers and help you provide any necessary benefits such as first aid training or mental health initiatives.
Most importantly, Papaya offers the full package, with experts for benefits, payroll, and labor laws, so no matter where you’re hiring from, you always know you’re covered.
Hire international employees safely and effortlessly with Papaya
The new year brings more than confetti and champagne. For many companies, it’s another chance to expand the business. But hiring international employees means knowing which strategy will work best for you, which documentation you’ll need, a checklist of hiring-musts, how to pay your employees, and most importantly, how to stay compliant. Safely grow your business—and save yourself from navigating red tape—with Papaya’s global payroll platform. Schedule a demo today.
Can U.S. companies hire foreign employees?
Yes, US companies can hire foreign employees. Companies can choose from several options when globally expanding their workforce: opening a local entity, sponsoring a candidate in the US, using an EOR, or hiring an independent contractor. For each country’s regulations regarding hiring foreign workers, check out our countrypedia.
How do I pay an international employee?
There are a few ways to pay international employees. Depending on your home country and the employee’s country of residence, you can keep them on their local payroll, use a local payroll company, or outsource your payroll process. If you have multiple international employees, you might consider using one global payroll platform to ensure you’re meeting all compliance regulations.
How much does it cost to hire a foreign worker?
According to Business News Daily, the average cost of hiring a new worker is $4,000. Though this number may look different for you depending on the:
- Whether you’re completing the entire hiring process yourself or outsourcing to experts
- The candidate’s level of expertise and the role you’re filling (entry or high level)
- How many workers you’re recruiting
- Their country of origin
- Any resources you need for recruiting, interviewing, onboarding and training
What are the benefits of hiring international employees?
Hiring international employees has several advantages. Not only do you get to choose candidates from a wider talent pool, but they’ll provide different skill sets and perspectives to your company, enhancing your company culture. Other benefits could include gaining access to international markets and developing credibility there and saving money on hiring without sacrificing talent.
What are the consequences of hiring a foreign worker illegally?
Any business that isn’t compliant with local foreign labor laws could face multiple consequences, from fines to employee deportation. In Australia, any employee working illegally will have their visa revoked and get deported. This is why it’s essential to make sure you know and follow all workforce regulations.
What are the visa regulations of hiring internationally?
If the employee is working in the US for an extended period of time, they will need a business visa. Companies wanting to hire international workers outside of the US, will need to sponsor the candidate. Foreign workers who work for a US company outside of their own country, however, do not need a visa or a work permit if they’re not working in the US.
How can you obtain visas for your employees?
Any US-based company must obtain a labor certification approval from the Department of Labor. Then, your company will need to file an Immigrant Petition for Alien Worker, Form I-140, with the U.S. Citizenship and Immigration Services (USCIS). For a complete guide to obtaining a visa for employees, check out this guide to employment-based immigrant visas.