A recent game-changer in the business realm is how much easier it's become for companies to hire talented professionals from anywhere in the world. In fact, in 2024 over 30% of U.S. company leaders said they planned to grow their workforce globally.
International hiring benefits both employers and employees. Companies can more easily diversify their workforce, and employees have more choices when it comes to potential employers.
But how do you pay your remote workers if they're scattered all over the globe?
Paying international teams comes with unique risks, including compliance with local employment and tax regulations. Understanding and overcoming these challenges is essential for managing payroll effectively across a global workforce.
Key Takeaways:
- There are significant benefits to hiring workers around the globe, including cost savings, a diverse workforce, and 24/7 coverage.
- Companies hiring globally need to be mindful of the logistical and compliance issues of paying international workers.
- There are several ways to pay global employees, but many businesses find the best option is partnering with an Employer of Record (EOR).
Challenges of Paying a Global Workforce
There are significant benefits to building a global workforce, but there are also logistical issues to consider when paying international employees, particularly for companies expanding internationally for the first time.
Currency Fluctuations
One of the primary concerns when paying a global workforce is ensuring that employees are paid according to the salary terms in their contracts. Currency fluctuations can make that difficult.
Employee compensation can be impacted as exchange rates go up or down due to factors like inflation, interest rates, and economic performance.
Companies must be able to adjust payments according to the current exchange rate, which can be difficult to calculate manually — especially if the employee's local currency is volatile and changes frequently.
These fluctuations may lead to underpayment or overpayment, complicating payroll management and affecting employee satisfaction.
Taxation & Compliance
Each country has its own set of employment laws that companies must adhere to, such as taxes, benefits, paid leave, minimum wage, overtime, public holidays, and other mandatory provisions.
Keeping track of these evolving local labor laws and regulations can be complex for any company, particularly those operating in multiple countries, as each jurisdiction has unique requirements and timelines.
Failing to meet these legal obligations, including local tax laws, can lead to costly errors, including penalties, fines, and damage to the company's reputation.
Employee Misclassification
When adding international employees to their team, companies have two choices: hiring them as employees or independent contractors.
Your business needs will likely determine which one is a better fit. Do you need someone to be in it for the long haul? Then, you'll probably want to hire a full-time employee. Or does this person need to work on a specific project or only for a set period of time? In that case, consider hiring a contractor.
Hiring international contractors can provide flexibility and help reduce the costs and obligations associated with full-time employees, such as offering employee benefits and paying for health insurance.
However, while this approach may seem more cost-effective, it's essential to carefully consider the classification of workers based on their roles and local regulations.
Misclassifying employees as contractors when they should be considered full-time employees can lead to serious consequences, including fines and penalties, back taxes, and legal risks.
Each country has specific guidelines that define whether a worker is an independent contractor or an employee, and failing to follow these rules can result in costly legal battles and reputational damage.
How to Pay International Remote Employees
Managing an international payroll can be challenging. If your company decides to outsource the logistics of paying your global remote workforce, you have several options.
Hire Local Payroll Companies
One way to ensure compliance with local employment laws is by hiring a local payroll provider in each country where you employ staff.
However, this approach can quickly become overwhelming, as managing multiple vendors across various regions introduces significant complexity.
It can also be costly, as each local payroll service charges fees, and coordinating between multiple providers can lead to inefficiencies and potential miscommunication.
Additionally, the administrative burden of overseeing numerous contracts and ensuring consistency across payroll processes can be a logistical hurdle for your team.
Establish Legal Entities
Another option is establishing a legal entity in each country where you operate. While this approach ensures compliance and provides a deeper insight into the local business landscape, the costs can be substantial, potentially reaching hundreds of thousands of dollars.
Setting up a local entity involves various expenses, including office space, insurance, legal and professional fees, and local director salaries. These costs accumulate quickly, and when you multiply them by the number of countries where you have employees, the financial burden can become overwhelming.
Partner with an Employer of Record
One of the most straightforward solutions for companies to pay international employees is partnering with an Employer of Record (EOR). An EOR handles all the legal and administrative tasks associated with international employment, from payroll processing to workforce management.
By working with an EOR, companies can avoid the hassle of setting up local entities or navigating complex labor laws, saving time and resources and reducing risk.
EORs also support contractors' onboarding, payment, and management, ensuring proper invoicing and classification while taking care of the administrative burden.
Ready to hire global employees without the cost and complexity of managing payments and compliance? Book a demo with RemoFirst and discover how we can simplify your global employment processes.
Pay Workers as Independent Contractors
Another option is to hire remote independent contractors instead of full-time employees. This opens up additional tools in order to ensure payments are processed and received in the currency of the country your remote contractor resides in.
Some of these options include PayPal, Wise, Tipalti, or Payoneer. Each tool has pros and cons as well as associated fees. However, RemoFirst also has contractor management and global payment features, so you can also choose this option as well.
Some of our contractor features include:
- Automate payment processing across 150+ countries and a wide range of currencies
- One click invoice creation
- Aggregated overview of timesheets for all your hourly contractors
- No minimums
The Benefits of International Hiring
By tapping into global talent, businesses can boost efficiency and strengthen their competitive edge. Hiring workers internationally offers a wide range of other benefits, too, ones that extend far beyond simply expanding the talent pool.
Diversity
Hiring internationally means adding professionals with valuable skills and fresh perspectives to your business, which helps foster innovation and generate creative solutions.
A diverse employee base also helps your company to better understand and connect with audiences in different countries and then tailor products, services, and marketing strategies to more effectively meet the needs of a global customer base.
Cost Savings
By leveraging the cost-of-living differences across countries, you can hire top talent at competitive rates compared to your local market. This approach helps you optimize your budget while maintaining quality and innovation within your organization.
In addition, hiring from regions with lower living costs can free up resources to invest in other areas of your business, such as research and development, marketing, or expanding your product offerings.
24/7 Operations
Hiring across time zones enables your remote team to provide around-the-clock support and address customer needs at any time of day — particularly valuable for companies requiring 24/7 operations.
Employees based in multiple time zones also help maintain continuous workflows by assigning tasks to team members in different zones, effectively reducing downtime, enhancing productivity, and accelerating project timelines.
Access to Specialized Skills
Expanding your hiring efforts globally allows access to niche skills and expertise that might not be available locally. This can be a competitive advantage, especially in industries requiring specialized knowledge, such as technology, healthcare, or finance.
Additionally, hiring international staff can help bridge skill gaps in your organization, ensuring you have the expertise needed to stay ahead of industry trends and remain competitive in a rapidly evolving market.
Improved Employee Retention
For companies with a global presence, offering employees the flexibility to work remotely from anywhere can boost satisfaction and engagement. This contributes to higher retention rates, employee loyalty, and a more motivated workforce.
Companies can cultivate a more inclusive and diverse workplace culture by supporting work-life balance and accommodating diverse lifestyles. For instance, remote roles that offer flexibility are more appealing to women, as they provide better opportunities to balance work and home life.
