Hiring Overseas Labor for Your Business

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by Advice Chaser
by Advice Chaser

Now that many workplaces are remote, there are no limits on your labor pool. If needed, you can seek out the most talented people from all over the country. But what if the best person for the job is in another country? Can you legally hire workers from overseas?

The answer is yes, but there will be some additional complications involved. You have a variety of options, each of which comes with its own costs.

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Your Options for Overseas Labor

An overseas worker you hire is not subject to US law or US taxes. However, you will need to learn about the law and tax code of the country they live in. You must deduct the taxes they owe in their country and pay them in their own currency. Depending on your situation, you can hire labor in another country in three different ways:

  1. You can establish a legal entity in the other country. If you regularly hire significant numbers of employees in a certain country, it may be worth your while to create a permanent foreign entity there. This allows you to open a branch and run payroll within the country for the workers you hire. However, this method comes with considerable expense, and you will need to hire an expert familiar with local regulations.
  2. You can work with an employer of record (EoR) which is a business that hires your employees for you. Many EoRs work globally and can manage employees anywhere. You get the talent you need, and your employees have someone locally managing their payroll and taxes. This comes with a cost also, but if you’re hiring only a few people, you’ll save a significant amount compared to establishing an entity of your own. Since the EoR’s job is overseas labor, you can rely on them for the expertise you need.
  3. Hire contractors or freelancers. Under US law, you don’t have to pay benefits or taxes to contractors. However, you can’t simply choose to make some of your employees contractors instead. A contractor will do work for you by the piece and usually works for other people as well. If you control where, when, and how they do their work but call them a contractor, you may be on the hook for misclassification. Have your contractors fill out the tax form W-8BEN and sign a contract detailing the work they will do. They will be responsible for paying their own income tax.

Which of these options works for you depends largely on the scale of your operation and the kind of work needs you have.

Advantages of Remote Labor Overseas

If the people you want to hire live in a foreign country, it’s exponentially easier to hire them remotely than to have them immigrate to the US. By working remotely, they can continue living close to friends and family in their familiar culture instead of having to uproot their lives to come to you. And you won’t have to sponsor an employment visa, with all the red tape and delay that causes.

In some cases, you will save money by hiring foreign workers. If the cost of living is low there, they may not need the same salary. However, if they have the skills and language fluency to work in the US, they might still hold out for a salary comparable to what US workers get. After all, they can do exactly the same work as your domestic workforce can, and if you don’t pay them what they’re worth, another company may.

Time zones can work for or against you. On the one hand, workers on the other side of the world won’t be able to easily join you for remote meetings during your work day. But on the other, if the work is time-sensitive, like customer support, you may need availability when it’s the middle of the night in the US. Not many people want to stay up all night answering the phone—but it’s daytime in India!

Disadvantages

Hiring people in another country comes with complications you don’t have with American remote workers. First, there are the legal and tax issues, which you’ll have to deal with by establishing a foreign entity or working with an employer of record.

Next, there’s the difficulty in finding and assessing talent in another country. You can’t have them in for an interview. So you’ll need to take extra care in ensuring the potential employee has the skills you need. You may want to ask for a portfolio of past work, offer a paid test project, or have a number of video calls. Since standards may be different in their country, you’ll need to clearly communicate all your expectations.

Given the time zone differences and potential language difficulties, you likely won’t manage the person very closely. Are they a self-starter, happy to work independently? You want employees who can manage their own time and workload, communicating with you as needed.

Last, you’ll need to work out a method to pay them. Wire transfers are one option, and there are a number of payment apps that work internationally. Contractors and freelancers often have a preferred method they want you to use. There is almost always a fee involved, plus the conversion into their home currency.

Which Solution Is Right for Your Business?

There’s no one right answer for every business. Very small businesses will usually prefer local employees, because you don’t need any special knowledge to manage and pay them. As you grow, however, you may find overseas remote workers can fill needs you can’t solve with domestic labor. Just remember to seek professional advice to make sure you’re managing your employees within the boundaries of law and tax regulations.One important ally for all your business decisions is a business financial advisor. To find the right advisor for a business of any size, contact us today.

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