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Paying International Employees: Everything You Need To Know

Written by in Business on October 15, 2020

Paying International Employees: Everything You Need To Know
As an employer, learning the ins and outs of paying international employees may be something you’ll need to face at one point during your brand’s growth!


Whether you’re operating across borders or you’ve simply opted to hire a skill set that you’ve found overseas, there are several things you should take into account. This user-friendly guide will walk you through the things you need to consider when paying international employees and various tactics to protect yourself from loss while doing so. 


Expansion into foreign markets is a fantastic way to increase both your reach and your profits. Hiring employees from other countries than your headquarters is an excellent way to stay informed and relevant in new markets and uncover the best possible talent for the job.


Though you’re bound to run into red tape at one point or another, so it’s best to cover all your bases before you recruit or hire internationally. Here are some things to keep in mind:


You Need To (Really) Set Up Shop

This is an aspect of international hiring that many businesses don’t take into account beforehand. Unfortunately, this one can be quite a headache. You will need to actually make your business an employer in the country you’re looking to hire by setting up an entity, putting together proper local documentation, foreign banking accounts, and the list goes on. 


This part of the process can be long and expensive. In fact, this is one of the reasons many employers are discouraged from international hiring. 


Though, it’s important to note that if you are looking to expand into the country in question in a significant way, you will need to go through these processes regardless. 


The only instance that it would perhaps not be worth it is if you were hiring a sole employee in a new country without further expansion places in that location. If you’re looking to grow, you might as well ensure you’re doing it right and lawfully right from the start. 

New Country, New Laws When Paying International Employees

Regardless of where someone is employed, their place of residence will dictate their payroll and employment standards. This means that the laws of your country don’t necessarily apply. You must become acquainted with the payroll, tax, overtime, holiday pay, and vacation laws, among others.


You will need to adhere to the federal, state, and local laws of your potential new employee. While laws may not always change within a country, some states have their own holidays and payroll standards that you need to be aware of. 


Doing your research in the regions you’re looking to recruit will help you understand if a new hire is feasible. At the very least, we highly recommend taking this into consideration before sending a job offer. 


Do A Cost Of Living & Salary Analysis 

Another thing that’s worth adding to your research checklist is gaining a thorough understanding of salary standards and the cost of living in the region. What you pay your team in one country may be wildly inflated in another economic climate. 


Or, you may be underpaying if your new hire lives in a place where the cost of living is particularly high. Survey the industry standards in your new region and set the base salary accordingly.


Protect Yourself From Loss With Currency Hedging 

You must always consider conversion rates when you have an international staff member or members or your payroll. While you likely budget for your team’s salaries each pay period, it’s far more difficult to budget with fluctuation in mind. 


Using currency hedging as a tactic to mitigate risk is an excellent way to be forward-looking and proactive about your salary spend. 

Decide How You’d Like To Process Your Payments 

Finally, you must select an international payment method. Luckily, there are a number of different ways to go about paying employees in different countries, so you can easily find one that suits you and your needs. 


A couple of options include international wire transfers, cheques from existing accounts in the country of operation, or the utilization of a global payments platform like Shift Connect.


When looking to hire employees in foreign markets, you may also look to expand your accounting department to keep a finger on the pulse of foreign exchange and hedging trends and best practices. As an alternative, partnering with a forex firm can allow you to tap into the knowledge of an entire team of experienced professionals. 


If hiring abroad seems like the right avenue for your company’s growth, take the above into account and be sure to protect yourself, your funds, and your team every step of the way. 

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