Hiring remote workers in your own country is fairly simple. The only real differences may be between state or regional taxes and regulations. But if you want to hire remote workers in foreign countries as employees or contractors, then it becomes more complex.
This article is proudly produced and presented by the folks at Shield GEO – International Employment made simple.
The main issue for remote employers is that they have to comply with host country employment and labor laws, and that almost always means having a registered entity in the foreign location. There are a few ways to handle this, and the best choice will depend on how many workers you want to employ and for how long.
This can be a costly option for just employing a few workers, but if you have other business interests in the country, or plan on hiring many workers for the long term it might be worth it. There are registration requirements which may include having a local representative, as well as hiring legal and accounting expertise.
One of the advantages is that you will have control over the entire employment process without outsourcing to a third party. Larger businesses may want that autonomy and have no problem with the set-up costs and time.
However, if you are just hiring a single remote employee, setting up a branch or entity for only that purpose may not be the most efficient option.
If you have any existing suppliers, vendors or business contacts, they might be willing to put the worker on their payroll and take care of all the tax withholding and social contributions. They would be doing this simply for employment administration, and the employee would remain under your control and management.
More than likely this is an interim solution but does allow you to hire the employee quickly and gives relative assurance that you will be in compliance. It does require a level of trust with the local company as they will be handling compensation, payroll and taxes on your behalf.
Some companies will use a GEO to hire their foreign workers, run payroll and make sure all labor laws are followed. This is accomplished by an employer of record (EOR) that is already set up in the foreign country, who are familiar with all the statutes and payroll processes to follow.
The EOR legally administers all employment tasks, and the company just remits the monthly compensation for payroll and withholding. The benefit of the GEO system is that it offers local expertise and experience, and you won’t have too many compliance concerns. They are also able to interface between the employee and your HR department to handle any differences in benefits or employment rights that may be unfamiliar. There is a fee for the GEO service, but it is far less than setting up an entity and frees up HR time to manage the worker rather than focus on employment tasks.
It may seem simplest to just put the worker on your home payroll, but the problem is that then they are not having taxes or contributions withheld in either country. This might work with an expat who just wants to work remotely abroad, but it’s not as feasible for remote foreign workers.
Some countries don’t permit remote payrolls for residents, and if they do, there may be registration requirements and payment of both employee and employer social contributions, so you might as well find a local employment solution.
Companies hiring remote workers may be inclined to hire the worker as a contractor rather than an employee. This does have its advantages, as the company only has to set up a contract, confirm work progress and send payment, and the worker takes care of their own taxes and contributions as they are self-employed. Some workers prefer this or are already set up this way, but many are not prepared to be independent.
The downsides to hiring contractors is that there is typically less control by the company and the worker may not feel as loyal or connected to the business. Moreover, the worker could be re-classified by authorities as an employee if they don’t meet self-employment criteria. This would mean payment by the company of back taxes, contributions and in some cases penalties for misclassification.
There are many global employment solutions for hiring remote employees, and that includes deciding how to allocate payroll, tax and entitlements between the home and host country. Accessing global talent is a modern, technological opportunity, but traditional laws and business cultures still need to be followed in the countries of employment.
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