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Written by:
Zoe Boyd

Can A US Company Hire A Foreign Employee?

The US is full of skilled workers, but some industries are suffering from shallow talent pools. Businesses are naturally looking overseas to access foreign talent, but how can a US company hire a foreign employee without falling foul of foreign regulations and taxes? There are a number of different options, so read on to find out more.

 

Can a US company hire a foreign employee in another country?

Yes, it’s perfectly legal and is often a great option. However, a US company hiring foreign workers abroad will have to bear several extra considerations in mind. Labor laws, taxes and employer contributions will all differ from country to country, and failing to understand this can cause problems down the line.

For the purposes of this guide, we’ll be talking about overseas employees who are working abroad, rather than foreign-born workers residing in the US. There are a range of options for employers looking to hire a remote overseas worker, and doing so is often a great choice for a business. 

By expanding your hiring overseas, you will be able to access brand new talent pools, letting you bypass any local skills shortages in your industry. Depending on the cost of living and average salary in your employee’s home country, you might also find hiring abroad to be better value for money.

 

Common challenges of hiring workers abroad

If you want to hire international employees, you will need to keep a few things in mind:

1. Overseas Labour Laws

Any US company hiring foreign workers abroad will need to look up the labor laws in the nation from which they’re hiring. Regulations around overtime, benefits, holidays, statutory sick pay, maternity leave and more will all differ from country to country, and failure to take these into account can lead to legal trouble.

2. Misclassification

This refers to hiring someone as a contractor but treating them as a full-time employee, essentially avoiding paying taxes and other benefits. This can often be done accidentally if you are not familiar with a foreign country’s definition of a contractor. For example, in some countries providing a contractor with equipment or a uniform could be used to prove they’re actually an employee.

3. Permanent Establishment

While hiring overseas employees doesn’t make you eligible for corporation tax in the other country, you will have to be careful about permanent establishment. Essentially, this means if you are generating revenue from a fixed location in another country, you will usually be subject to local taxes. 

 

How can a US company hire a foreign employee abroad?

In order to avoid the above complications, there are a few steps US companies can take to safely hire overseas employees. 

Hire Contractors

Engaging an overseas contractor is generally much simpler than hiring a permanent employee. However, US companies that hire foreign workers need to be careful of misclassification. Make sure you are engaging your contractors appropriately and not treating them as full employees, and take care to note the specific local regulations surrounding this.

Use an employer of record

An employer of record is a third-party legal entity that employs people for you. For example, if you’re looking to hire employees in Sweden, you could contract a company based in Sweden to be an employer of record. They would hire people as their employees, taking care of all the payroll and local regulations, and contract them out to you. You could then use them as your own employees without having to worry about international hiring laws.

Set up your own legal entity

For businesses looking to make a long-term move into another country, this is generally the best option. You set up a company or other legal entity in the target country, and that entity employs the overseas staff. This means paying all the relevant taxes for that country, but it usually means easier hiring in the long run.

 

How do I pay a foreign employee?

Hiring overseas employees means working out how to pay them, and how to do so will depend on the method you use to hire them. For example, if you set up a legal entity in the target country then you will pay them in much the same way you pay your US employees, only taking into account the various obligations and taxes of your worker’s nation.

Paying a contractor or using an employer of record will usually be much simpler. Usually, it is as easy as paying any other invoice. However, there are a few other considerations. You will need to think about how to send the money across borders, as some methods incur a small expense. This is generally not a lot, but it can add up over time.

You will also need to think about currency exchange rates when paying overseas employees. Because these fluctuate, it can be hard to forecast a budget as the value of your overseas employee’s salary will change from month to month. Of course, a contractor or an employer of record may accept payment in dollars and absorb the costs of exchange fluctuations themselves.

 

Using An International Recruitment Agency

US companies that hire foreign workers will have to find the employees that match the skills, qualifications and experience they’re looking for. This can be a tricky task internationally. Widening your hiring scope across borders gives you access to a much deeper talent pool, but accessing it requires knowledge of the companies and institutions in the country from which you’re hiring.

This is where an international recruitment agency can be a big help. Not only will they have a solid knowledge of what qualifications and experience to look for in overseas hires, but they will also be able to help you understand the regulations and processes needed to employ someone across borders. Some will even act as an employer of record for you.

If you still have questions surrounding foreign hires, why not contact Allen Recruitment?

We’re experienced international recruiters who can help you with any questions you have, and even find elite overseas talent for you. Get in touch today to find the employees that best meet your needs, no matter where they’re located.

 

Posted in: Belgium / Blog / France / Ireland / Netherlands / Poland / Spain / Sweden / UK

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