How to Pay Overseas Remote Workers?
Hiring remote workers overseas is an attractive option for a many reasons. No longer are we restricted to our local talent pool, hence to stay competitive employers should take full advantage of this.
How should you pay your new remote team member? It is not always as simple as it might first appear and will vary depending on where the worker is located and length of the employment contract.
If your company doesn’t have a branch located or a registered legal entity in the country where your new staff member is located, then most likely the easiest solution is to just pay them from your home country’s office.
However, there are a few things to consider:-
Contractor vs Employee
Contracting is becoming increasingly common and more widespread, even in locations around the world where it was once considered a ‘dirty word’. We are fans of contracting and believe for many companies in the 21st century this makes the most sense overall. For starters, it is a simple solution for international payroll. Technically the staff member is self-employed and as such it best suits B2B arrangement and ideal for shorter-term projects/assignments. However, in some jurisdictions, there is a risk that if the contractor is seen to be working long term or is managed in a certain way they might be re-classed as an employee instead, and as such are entitled to employee benefits and protection based on local labor laws.
If you hire a full-time employee, be it locals or expats then a thorough understanding of the host country’s labor laws is essential for operating within the regulations, and to avoid any major issues arising later on.
Paying employee via home office payroll
For short assignments, it is not an issue to pay them directly from the home office. However, a form or registration may be required in the host country without the need for any legal entity to be set-up. If the employee is staying long term (expat), then a working visa will be required. Without any legal entity established, one method is to arrange a third party payroll solutions provider or managed service vendor to place the staff member on their books, taking care of all the administration and visas for a fee. This would be the easiest solution whilst you decide whether it makes sense to establish operations in the host country.
The expat worker will be required to pay tax in the host country. This should be taken care of and advised on by the service provider. It is important to check for any tax treaties between the two nations, as you may need to withhold tax back in the home country.
When hiring local employees, they will certainly need to be paid on a local payroll since they won’t be registered for tax in your home country anyway. Once again you will need to use a third-party provider to process this. Global Employment Outsourcing providers go beyond just payroll and offer a complete solution to avoid any non-compliance issues. For more details on these services go check out https://velocityglobal.com/blog/geo-services-need-know/ or similar.
Currency fluctuations are undoubtedly a problem when paying an overseas staff member from your home country. The easiest solution would be to agree on a fixed home currency amount, but this may not suit the employee who might instead prefer a stable host country salary so they can better manage their expenses. However, this firmly puts the exchange rate risk on the employer. Fortunately, there are many options available, so check out any GEO provider and research this further. If you end up with multiple overseas employees then the need to hedge this exchange rate risk, using a reputable foreign currency transfer provider should be high on your list of priorities.