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How do you Pay Remote Employees in Different Countries?

You’re the founder of a small tech company, with remote employees based all over the world. You’ve decided to employ all your employees through a sole proprietorship arrangement. But is asking all your employees to start a company really the best solution?

Your Options When Paying Remote Employees in Different Countries

Paying Your Remote Employee through a Local Partner

You could work with a local partner or affiliate in your employee’s country of residence. A local partner might be willing to place your employee on their payroll.  Your employee would then be a legal employee of the local partner, and part of their payroll, withholding and benefits system.  You will continue to direct and supervise your employees work.

Why you should work with a local partner

  • In country expertise
  • Local partners will help ensure that statutory benefits such as social security and workers’ compensation are offered in full compliance with the country’s laws

Why you shouldn’t work with a local partner

  • Language and cultural barriers when liaising with a local partner who’s in a different country
  • Can be costly
  • You would have to use a different local partner each time you employ in a new country, so be prepared to engage with multiple people from different countries overlooking your different employees

Paying Your Remote Employee on Home Country Payroll

Your remote employee can be paid via your company’s payroll under certain circumstances. Most countries do not allow remote payrolls from a foreign company, but there may be specific laws that permit it as long as the company registers the employee.  

In that case, payment can be made to your employee while complying with host country withholding requirements.

Outsourcing Payroll for Your Remote Employee

You could work with an outsourced payroll provider to pay your remote employee. There are two ways you could outsource your remote employee’s payroll.

One option is to use a local payroll provider that primarily computes withholding, compensation and then issues the check. There are limitations to how much a local payroll provider can do for your local employee. It is a limited administrative foreign employment solution that does not guarantee compliance with taxation, immigration or labor laws in the country.

A more comprehensive option for you is to use a GEO service, that offers full payroll and employment compliance in your employee’s country. The GEO service differs from payroll providers, since the GEO has a legal entity in place that functions as the local employer of record for the remote worker.

It is also an easier option than employing your worker through a local third party, as GEO services such as Shield GEO, typically have partners in most countries and can help you hire all your remote employees in different countries. You will only have to coordinate with one account manager who will help you sort out your employment needs for all your international employees.

A GEO service is also compliant with local laws and allows you hire your international employee easily without much hassle. You wouldn’t have to burden yourself trying to understand complex foreign jurisdiction and can sleep easy knowing that your remote employees are being well taken care of.

Can You Pay Your Remote Employee as an Independent Contractor?

The simple answer is no, if they are an employee. The use of contractors is on the rise, and it does seem to present an easy remedy to the international payroll issue because your employees are self-employed, and it becomes more of a B2B arrangement. 

But there is a big risk of misclassification, where the country your employee is based in may actually view them as your employee based on how you structure and manage their work.

In contrast, formal employees (locals and expats alike) are entitled to a full range of benefits and labor protections in the host country, and those can’t just be ignored.  At some point, you will need to find a way to comply and meet local regulations, or be prepared to face financial and legal consequences.

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