How do I employ someone outside the US?

Firstly, why should you?

US-based companies are casting wider nets for a number of reasons, and not just to get around local skill shortages. Chief among them is access to a worldwide talent pool, full of skilled workers who are eager to work with American brands. Highly qualified teleworkers in countries with lower costs of living are particularly attractive to US firms, thanks to favourable exchange rates.

The firms win, too, by saving the 7.65% in taxes that they would have to pay for social security and Medicare for American employees. And by bringing more foreign nationals into their organizations, these companies benefit from truly global perspectives, diversity of thought, and enhanced access to foreign markets.

Who counts as an employee?

Just like their local counterparts, remote employees have one or more of the following characteristics:

• They work full-time for one company, with no other clients
• The employer provides training and guidance on how the work gets done
• They’re entitled to benefits, leave, and insurance

Teleworkers who don’t match these criteria are most likely independent contractors. But those who do must be treated as employees, albeit with an important difference: they’re subject to labour law and tax regulations in their own countries, not the United States. 

For example, “at-will” employment gives US employers the ability to dismiss workers without notice or warning, provided the reason for dismissal is not unlawful. But most countries take an entirely different approach to severance and termination.

Usually, they require notice periods and warnings prior to termination. This is an important factor for US-based companies to consider when hiring teleworkers outside the US.  

Playing by the rules

There is no legal prohibition on hiring remote workers outside the US, so companies are free to explore the market. As long as remote employees remain in their home countries, there’s no need for a work visa or permit. Their US-based employers simply have to submit a form W-8 BEN on their behalf, in order to exempt them from tax withholding within the US.

That only changes if and when they decide to relocate to the United States. To do that, they’ll need an HB1 visa, and their position with the IRS will change.

The catch: foreign labour compliance

That’s the good news. But it’s not the end of the story. When American companies hire foreign teleworkers in their own countries, the regulation of that relationship falls under local labour law.

That means, of course, that foreign companies must be ready to comply with an unfamiliar set of laws and regulations. We’ll discuss this in more detail a little further down, but you can get a quick primer with our Playroll Country Playbooks.   

Attracting talent

More and more companies are coming to understand that hiring foreign workers is more about attracting talent than acquiring it. Long before you start to worry about compliance in the countries where your employees live, you’ll need to formulate an offer that they’ll find attractive.

To do that, businesses need to understand the economic outlook and conditions in different countries. For example, supplemental health insurance will be more of a draw card for workers in countries where this is not already a mandatory requirement for all employers. 

Look in the right places

One of the most popular ways to recruit remote workers is through LinkedIn. Over 800 million people use the platform worldwide, and the vast majority of them are outside the US. LinkedIn also empowers recruiters with a range of tools to tailor job listings and vet candidates.

Internal employee referral is another powerful recruitment method. Especially for companies who already employ foreign remote workers, an internal incentive scheme can fill talent pipelines with quality candidates. Best of all, they’re already familiar with the company and its culture, because of their interactions with existing employees. 

Streamlining the interview process

Before you start interviewing candidates, it’s a good idea to spend some time translating and benchmarking their qualifications. This is necessary even without a language barrier because you need to be sure that the applicant actually has the skills you’re looking for.

Online test tasks can also be given to candidates who get further along the application process. Some companies offer to pay candidates who get to this stage, a courtesy that reflects well on the company. 

Throughout the application and interview process, remember that a majority of teleworkers are not actively looking for a job. To keep them engaged, avoid overly tedious or complex processes. Companies should also prioritize understanding candidates’ personality traits, and their preferences when it comes to working remotely.

The onus is on recruiters to identify incompatibilities early on. 

Managing a global team with an Employer of Record

In order to attract and then retain talent, businesses must have a way to pay their employees efficiently. Late or error-ridden payroll is likely to upend a company’s global expansion ambitions. Even more importantly, international payroll needs to comply with local labour laws and tax regimes.

That’s where the complexity we touched on earlier comes into play. 

In most countries, it’s illegal for a foreign company to employ locals without having first set up a legal entity on home soil. That’s a challenge for companies that don’t have deep pockets, or who are trying to employ a small number of foreign nationals in a given country. 

Thankfully, there’s a solution that takes the sting out of hiring abroad. Playroll’s technology-enabled global platform enables companies to expand their teams globally and retain the talent that comprises them. Through a network of subsidiaries around the world, Playroll’s clients get to take the cream of the crop, hiring in over 170 countries, without registering any legal entities. 

Request a demo to learn more about zero-entity expansion beyond the US with Playroll.