Paying international employees is not as simple as hiring in-country. The challenge? Every country has its own set of employment laws; compliance in your own country will not guarantee compliance across borders.
These laws address the length of the workweek, pay frequency, vacation policies, and more. Currency and exchange rates are also a factor in paying international talent. While the U.S. dollar is widely accepted in many countries, the fees that follow the exchange rate can be costly— causing your company to spend more than expected.
Here are some options your company can take to pay international employees in a convenient, compliant, cost-effective way.
One way to pay your overseas employees is by creating a subsidiary based in your employees’ countries of origin.
A subsidiary is a company operating overseas that is part of a larger parent or holding company with headquarters in another country. Foreign subsidiaries are separate legal entities and must observe local laws. They’re also responsible for their own assets and tax compliance.
Creating a subsidiary can be an effective solution for large companies with multiple foreign operations and employees who intend to do business in a foreign country long-term. However, this may not be a viable option for a smaller business as the overhead costs to create a subsidiary can be substantial.
Your company can start its own subsidiary from scratch or merge with an existing company in the country you intend to do business in. Some countries encourage foreign investment and make the legal process to set up a subsidiary simple—many even provide incentives such as tax breaks. Other countries discourage this model, making the process more challenging.
Finding a partner to do business within the foreign country of your choice is another way to create an international payroll for your remote employees.
In a partnership, individuals formally join together to run a domestic or international enterprise. Under the terms of their partnership agreement, each individual is responsible for the enterprise’s obligations while sharing its assets, profits, and liabilities.
In some countries, a limited partnership, or limited liability partnership (LLP), is easily available. An LLP may allow foreign partners and limit each participant’s liability for one another’s debts. Other countries place severe restrictions on partnerships if one of the participating partners is a foreigner.
A professional employer organization, or PEO, is also known as a co-employer. PEOs manage HR responsibilities for the employees of their client companies.
Hiring a PEO can help businesses comply with legal entities while giving their employees—both international and stateside—easy access to benefits like 401k, health insurance, and wellness. PEOs already have the necessary legal structure to handle employment, payroll, and immigration matters, making them a cheaper option than a subsidiary and ideal for small- and mid-sized businesses.
A PEO can be a good option for companies that want to test the market in a foreign country and don’t yet have the resources to set up a subsidiary.
An employer of record, or EOR, is a company that can employ workers on your organization’s behalf via a service agreement. Because an EOR is the legal employer of your workers on paper, it can hire workers in foreign countries for you.
An EOR also takes on the risks and responsibilities of an employer along with tasks such as payroll. While an EOR does offer the same HR services as a PEO, they take it one step further by assuming liability so your organization doesn’t have to.
For example, an EOR can register your business in each country you are located in and ensure compliance with all local labor laws. Your employees are also covered under EOR insurance regarding workers’ compensation and healthcare. Taking on those responsibilities makes the EOR liable for any compliance issues—not your organization.
Paying international employees is no simple matter. So, how do you decide which is best for your company?
That often depends on your business strategy. How long do you foresee your company’s presence in a foreign country? What resources do you have available? Do you want to seize growth opportunities immediately, or do you have time available to wait on legal processes to establish your company’s presence in the country?
Worca is also here to help you decide the best fit for your business. Request a call to learn more about how our innovative global HR platform can help you pay your international employees and build a cross-border team.
You can hire from everywhere and succeed anywhere with Worca’s Core HR Service Bundle localized by country. Your end-to-end employer of record (EOR) solutions easily and compliantly hire international talent is call or email away.