Recent data tells a compelling story: U.S. job openings have plunged to 7.6 million, marking their lowest point in 14 months. Yet, ironically, technical roles remain stubbornly hard to fill.
Engineering managers still spend months searching for senior developers. Product teams struggle to find experienced PMs. Data science positions go unfilled, while AI specialists command ever-higher salaries.
Here's the reality: your next great hire probably isn't in your backyard. They might not even be in your state or country. The good news? You can hire them anyway.
However, employing global talent comes with its own considerations and compliance requirements that every U.S. company should understand before taking the plunge.
Key takeaways:
- To remain compliant, U.S. companies hiring international employees must understand labor laws, tax obligations, and work visa requirements.
- Establishing a local legal entity, hiring independent contractors, or partnering with an Employer of Record (EOR) are three viable pathways for global hiring.
- An EOR like RemoFirst simplifies hiring by managing compliance, payroll, and benefits across 180+ countries.
Does an International Employee Need a Visa to Work for a U.S. Company?
Here's the short answer: probably not. If your Brazilian developer codes from São Paulo or your French designer creates masterpieces in Paris, they can work for your U.S. company without a visa. The visa conversation only matters in two specific scenarios:
For Business Travel
The B-1 Business Visitor Visa covers short-term visits to the U.S. for meetings, training, or consulting. Many visitors can alternatively use the Visa Waiver Program (ESTA) for stays under 90 days, though it has more restrictions.
For Relocation
Moving someone to the U.S.? You'll need one of these:
- H-1B visa for specialized roles requiring a bachelor's degree
- L-1 visa for transferring managers or specialists within your company
- O-1 visa for individuals with exceptional abilities
What Does it Cost to Hire a Foreign Employee?
There's no single answer to this question, as the final cost depends on several factors, starting with the employee’s location.
At a high level, international hiring expenses fall into two main categories: compensation and mandatory benefits. However, if relocation is involved, you must account for extra costs like visa processing, travel, and resettlement support.
Compensation, Benefits, and Mandatory Contributions
When calculating the cost of hiring foreign workers, looking beyond just salary is crucial. Each country has its own regulations governing social security, taxes, and employee benefits.
For example, in Brazil, employers contribute around 20% of an employee's salary to social security, plus additional costs like mandatory profit sharing and transportation allowances. In Japan, companies must cover commuting subsidies and health insurance, while in Germany, employers must make significant pension contributions and provide six weeks of paid sick leave.
Social security costs vary widely, from 13% of salary in the UK to 45% in France. On top of that, many countries mandate extra benefits — such as a 13th or 14th-month salary bonus.
Relocation Considerations
Moving talent to the U.S.? Be sure to budget for:
- Visa processing (USD 5,000-10,000, including legal fees)
- Relocation assistance (USD 20,000-50,000 for international moves)
- Temporary housing (USD 3,000-5,000 per month)
- Immigration support (USD 2,000-5,000 annually)
Relocating talent to the U.S. requires careful budgeting for visa processing, relocation assistance, temporary housing, and ongoing immigration support to ensure a smooth transition and compliance with regulations.
Does an International Employee Need to Pay U.S. Taxes?
For most remote workers, the answer is no. International employees pay taxes in their home country and local jurisdictions instead.
However, watch out for these exceptions:
- U.S. citizens working abroad must file U.S. returns
- Digital nomads need country-specific tax strategies
- Split-time workers may have obligations in multiple jurisdictions
- Independent contractors with U.S. income sources face special rules
Are U.S. Companies Responsible for Withholding U.S. Taxes or Reporting Wages of International Workers?
U.S. companies generally don't need to withhold U.S. taxes for work performed entirely abroad by non-U.S. residents. However, they must manage a complex web of local tax laws and other obligations in the employee's country of residence.
Key employer responsibilities include:
- Local payroll tax withholding and reporting
- Social Security and healthcare contributions
- Unemployment insurance payments
- Monthly or quarterly tax filings
- Annual returns and declarations
- Compliance with data protection regulations
How Can I Legally Hire International Employees?
U.S. employers have three options when hiring international talent, each suited to different business needs and growth stages. Your choice will depend on factors including planned hiring volume, how quickly you need to hire, and budget constraints.
For example, a growing tech startup might start with contractors for flexibility, while a company planning a significant expansion in Singapore could benefit from establishing an entity there.
However, many businesses find that an Employer of Record (EOR) offers the perfect middle ground, providing the flexibility to easily hire international employees without the costs of establishing an entity.
Let's examine each approach in detail:
Hire an International Independent Contractor
Want to test international waters without diving into full employment? Hiring international contractors is often the perfect solution. Contractors typically bring specific skills, can be quickly onboarded, and require minimum supervision.
Working with contractors eliminates the need to open an entity; you don't need to pay benefits, withhold taxes, etc. Hiring international contractors also allows your company to easily flex staffing up or down based on business needs.
However, there is one risk to be aware of before building a team of global contractors, and that's the risk of misclassification. If it's later determined that you misclassified a worker as a contractor who is later determined to be an employee, you could face hefty consequences.
For example, the UK's HMRC collected GBP 36 million in back taxes from one organization in 2023 through IR35 investigations.
Beyond immediate financial hits, companies can also face mandatory employee conversions, retroactive benefits payments, and severe reputation damage due to misclassification.
Contractor relationships can work brilliantly for project-based work with independent professionals. But they're not a shortcut around employment regulations.
Establish a Legal Entity
Opening a local entity provides maximum control over your international operations but is time-consuming and requires a significant financial investment upfront.
The process typically involves:
- Selecting an appropriate entity type
- Registering with local authorities
- Opening local bank accounts
- Establishing payroll and benefits systems
- Creating compliant HR policies
Depending on the country, setting up a legal entity can cost between USD 20,000 to 150,000. Add in registration expenses, minimum capital requirements (up to USD 50,000 in some countries), and ongoing compliance fees, and the costs add up fast.
Local Labor Laws & Employee Benefits
In addition to investing time and money in establishing an entity, companies must familiarize themselves with local employment laws.
For example, in the U.S., there are no mandatory laws dictating policy on sick pay, paid time off, maternity leave, termination, severance pay, etc., at the national level. However, that is rarely the case in other countries.
For example, in Germany, employees are entitled to:
- 20+ days paid vacation
- Six weeks of paid sick leave
- Extensive parental leave
- Strict working hour limits
- Works council representation in larger teams
Navigating these requirements can be complicated without expert guidance.
The Complexities of Global Payroll
Managing a global payroll adds an extra layer of difficulty. Each country has unique payroll regulations, tax calendars, and reporting requirements that companies must adhere to.
Businesses expanding into other countries may also need to manage multiple pay periods. While bi-weekly pay is typical in North America, monthly payments are standard in Europe, so you must ensure your payment system can process different employee pay cycles.
Currency exchange rates and banking relationships also impact costs, and managing payroll across multiple countries can add thousands in banking and processing fees each month.
Companies often need to rely on specialized payroll providers or local experts to navigate these complex requirements efficiently.
Partner with an Employer of Record
Opening an entity is a good fit for companies that want to invest in growing their business in one specific country and plan on hiring a significant number of employees.
However, if you want to hire international employees in multiple countries or only a few international employees, you're probably better off choosing an Employer of Record (EOR).
An EOR allows companies to hire full-time employees and independent contractors in countries where they don't have a legal entity while ensuring full compliance with local laws and regulations.
How EOR Services Work
When you work with an EOR, they become the legal employer of your international team members, taking on all the administrative and legal responsibilities of employment.
Your company maintains complete control over day-to-day work activities, projects, and management decisions while the EOR handles:
- Legal compliance and employment contracts
- Payroll processing and tax withholding
- Benefits administration
- Background checks
- Work permit and visa assistance
- Shipping equipment
The EOR structure creates a clear separation of responsibilities: your company manages the work, while the EOR manages the employment relationship and compliance requirements.
Benefits of Using an EOR
Working with an EOR offers numerous advantages for international hiring:
- Rapid market entry without entity setup
- Reduced compliance risks and liability
- Access to local HR expertise and knowledge
- Simplified employee onboarding
- Consolidated billing and reporting
- Scalable global presence
Cost Considerations
Most EOR services charge a flat monthly fee per employee, which varies depending on several factors, including where the employee is based. The cost can also vary depending on if the EOR operates its own entities or works with partners.
Other factors that can impact cost include the industry type, the total number of employees and/or contractors you hire, the kind of employee benefits you offer, and if you need any additional or custom services.
When you do the math, EORs are more cost-effective than establishing and maintaining local entities, especially when hiring in multiple countries or testing new markets.
Hire International Employees Hassle-free with RemoFirst
Whether you're a startup ready to hire your first international employee or an established company looking to expand your global footprint, RemoFirst can help.
We understand the complexities because we live and breathe global employment every day. Our comprehensive EOR services span 180+ countries, enabling companies of all sizes to hire and manage international employees confidently.
We handle everything from generating compliant employment contracts to processing payroll in 135+ currencies while our dedicated HR experts ensure you're always compliant with local regulations.
In addition, RemoFirst can also help you compliantly manage and pay contractors in more than 150 countries.
Schedule a demo with RemoFirst today and discover how we can help you build your global team.
