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Do You Need a US Bank Account to Hire US Workers?

Posted by Stacey Jones

|

Jul 17, 2019 5:00:00 AM

Opening a US bank account can be a difficult process. There are many reasons a company chooses to do so, but there are also times when it may not be the right solution.

Many global companies worry that they won’t be able to hire American workers if they don’t have a US bank account to draw from. Is it absolutely necessary to have a US bank account before you hire an American worker?

Identify the Type of Worker

Do you need a US bank account to hire US workers? The answer is, “it depends.” The first step is to take a look at the type of worker you’re entering into an agreement with.

If you’re hiring an independent contractor, you don’t need a US bank account. You and the contractor will negotiate the terms of payment, which will include currency and method of payment. If you pay large sums, it may help you to have a US bank account and maintain a balance in it.

Does the situation change when it comes to hiring employees for your business? While it’s not strictly necessary to have a US bank account, opening one can make it much easier to administer US payroll for employees.

How a US Bank Account Helps

Foreign employers may be required to withhold payroll taxes and remit them to the IRS. To do so, the employer will need to register with and receive an employer identification number from the IRS.

Once you have an EIN, it becomes easier to open a US bank account, although you’re not out of the woods yet.

Not every foreign company will want to register. You might be testing out the US market before committing to opening a branch office there, for example. If you plan to hire American employees, however, you’ll need an EIN.

Without the EIN, you can’t administer payroll taxes for your US employee. You don’t necessarily have to open a US bank account to pay these taxes, but there are some complex rules if you want to pay through a foreign institution.

First, all funds sent to the IRS must be in US dollars. If you send your payments from a foreign bank, they must be affiliated with a US bank. Smaller banks may not be able to provide this requirement.

Having a US bank account simplifies the process. It also helps you avoid fluctuating exchange rates and additional fees, such as wire transfer fees.

No Bank Account? No Problem

Suppose you’re setting up in New York, and you want to hire an employee to help. You’ll need an EIN, but the process of getting one can be difficult for international companies.

You could choose to wait and maybe miss out on hiring the brightest talent for your new office. Or you could partner with a professional employer organization.

The PEO is already established where you want to do business, and they’ll act as a co-employer when you want to hire an employee. They already have an EIN, which may speed the process along.

They can also assist you by providing access to a US bank account, which they already have set up. Better yet, they could help you navigate US payroll taxes and regulations. It’s the easiest solution to what can otherwise be a convoluted and slow process.

Start Hiring Employees Today

The world of business won’t wait, so work with a PEO to cut through the red tape around hiring American workers for your business.

You don’t need to have your own US bank account, although it can simplify your payroll. What you really need is a partner with the expertise and resources to help you get started today.

 

Topics: Pay International Employees, international business, Workers Overseas

What's the Difference Between PEO vs. Employer of Record?

Posted by Stacey Jones

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Jul 11, 2019 10:54:16 AM

Did you know businesses that partner with a professional employer organization can expect to grow up to 9 percent faster than those who don’t?

These statistics may have you wondering if a PEO (professional employer organization) partnership is right for your business. Within HR circles, though, you might have heard the term “employer of record.” Some people use these two terms interchangeably, but they’re actually two very different entities.

What can you expect working with a PEO vs employer of record? The differences might surprise you.

PEO vs Employer of Record Relationships

The most fundamental difference between a PEO and an employer of record is how either organization relates to your business and your workers.

An employer of record assumes all legal responsibility for the people who work for you. They are, in effect, the employer. They’ll handle almost every task related to hiring, termination, and everything in between. Your workers will answer to the employer of record.

A PEO, on the other hand, becomes your co-employer. Together, you’ll handle HR tasks related to employment.

Who’s Driving?

Another way to think through the differences between a PEO vs employer of record is to consider the subject of control.

With an employer of record, you have relatively little say. The EOR assumes responsibility for hiring and employment contracts, as well as benefits, insurance, and even business registration. This can be a good option for employers who want to enter a new state or country, but don’t necessarily want to set up shop there.

When you work with a PEO, you’ll have much more control over HR processes. The PEO offers valuable advice, but you generally have full control over hiring and employment contracts. The PEO may offer you access to insurance or benefits plans as well.

Think about Your Needs

The best way to settle the PEO vs employer of record debate in your business is to ask what you need.

If you plan to open a new branch office or establish a subsidiary, a PEO might be the right partner for you.

A PEO is also the better choice when you want to stay in the driver’s seat, but expand your HR capabilities. The PEO is there to help you maintain compliance with local employment laws and enhance your HR capabilities.

For this reason, a PEO is a better long-term solution than an EOR. If you just want to get people hired on quickly, an EOR might be the right move for your business.

An employer of record also reduces your liabilities when you enter a new market. Since they assume the employment relationship, the EOR alone is responsible for compliance, insurance, and employment contracts.

Expanding Your HR Operations

Perhaps the biggest advantage of working with a PEO is that it could help expand your HR team almost instantly. Many small and medium-sized businesses can offer much more to their employees when they work with a PEO than they could otherwise.

The employer can also find a balance between managing their responsibilities on their own or giving up control.

A great example is payroll. A PEO will administer payroll for your employees in compliance with all the local laws. Your HR team doesn’t need to get bogged down in the details of learning Canadian payroll, but they can rest assured it will be done correctly every time.

Which Is Better?

Many HR experts ask this question, and the answer is always “it depends.” Choosing to work with either a PEO or an employer of record means carefully examining your business needs.

If you haven’t determined which is the best choice for you, get in touch with the experts. They can help you assess what your business needs and goals are, then help you decide which solution is the right fit.

 

Topics: PEO, Professional Employer Organizations, Pay International Employees, Employment of Record Services

How to Pay International Employees

Posted by Karen McMullen

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May 23, 2016 9:00:00 AM

How_to_Pay_International_Employees.jpgMore and more businesses have been reaching out internationally in order to find the best talent possible. As technology makes it easier for us to connect, it follows that the workplace is becoming a more globalized space as well. Whether the company is expanding into a new environment physically or digitally, one problem constantly crops up—the matter of how to pay international employees.

It's a tricky question and often a frustrating one as well. You need to consider the laws in your own country which dictate how and when an employee should be paid, but also observe and follow the laws of another country, too. You'll find different standards and practices, but also unspoken rules—cultural expectations and the like. Thankfully, there is a way to navigate these murky waters that has the business world sighing with relief.

Research and Planning

Businesses looking to pay international employees face a challenge. Remaining compliant while ensuring that everyone is fairly compensated is difficult and that's why the first step is research. It's important to know the social security, tax, and tax withholding position, and to determine how and where you'll be directing the payments themselves. In Canada, even a US business needs to concern itself with ensuring the appropriate deductions are made—things like the Canadian Pension Plan, Employment Insurance, and income tax must all come off each paycheque. Failure to comply can lead to serious trouble with the Canadian Revenue Agency, and might even lead to violation of labour and employment laws. This doesn't apply to all employees, though, such as certain types of independent contractors and workers. You'll want to understand employee classification before you begin to pay international employees.

Financially, many companies set aside a sum of cash in their own currency to pay out to international employees, while others convert their currency to that of the country they're working within. This too can come with some challenges, as exchange rates are subject to constant fluctuation and can lead to risks (or gains) as the market changes. Be careful if you’re transferring money as well, since some countries have limits on the amount that can be transferred legally.

Engage a PEO

When it comes to how to pay international employees, many turn to PEOs (or professional employer organizations) for help.

A PEO is a third party organization that manages support services on behalf of other companies—most commonly, this means handling payroll and all the complications that come with it. In the case of businesses that have expanded into other countries, or businesses that have hired international employees, they're especially useful. In effect, once partnered with, q PEO acts as the legal employer of your worker, which means they take responsibility for paying them and ensuring everything is completely compliant. As the main partner, you have final say on all things, as dictated by a contract agreed upon at the beginning of the arrangement. When it comes to how to pay international employees, a PEO helps your business navigate tricky employment and tax laws. This means you don't have to register a business account, you don't have to set up a separate payroll department, and best of all, you don't need to worry about exchange rates or compliance. Problem solved.

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Topics: Pay International Employees

How to Pay Your International Employees the Right Way

Posted by Ray Gonder

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Aug 28, 2015 9:00:00 AM

How_to_Pay_Your_International_Employees_the_Right_WayExpanding your business operations into foreign markets can be a great way to increase your brand recognition and your profit margin. However, it also requires you to deal with many technical and administrative tasks. One of the most important things you’re going to need to do is hire international employees to work for you in the new markets—and then you’re going to need to pay them the right way. This isn’t so easy.

Here’s how to pay your international workers correctly.

What Is the Right Way to Pay International Employees?

Paying your international employees isn’t the same as paying workers in your own country. The right way to process payroll is to ensure you understand and follow the local payroll and tax laws of the foreign country you’re operating in. That means knowing the federal, state, and local laws that apply to your company. Though the federal laws will be the same no matter where you work in the country, the state and local laws will vary depending on your specific address.

Though the payroll regulations and tax legislature might be similar to those in your home country, they will not be the same. Tax rates might differ, the deductions will be different, and the deadlines and due dates will vary. There might also be different laws surrounding overtime, holiday pay, and leave than you’re used to.

It is your responsibility to ensure that you are paying your international employees correctly. Tax fraud and illegal payment methods, like misclassifying employees as independent contractors and cutting cheques without making the required deductions, sending the government remittances, and filing the right paperwork, will land you into trouble.

Not only will you need to learn the current payroll and tax laws, you’ll need to check for updates since these laws are always changing. And you’ll likely have to buy brand-new payroll software that is specifically created for processing in the country you’re operating in.

Consider Optimal Conversion

Your payroll budget might be affected by conversion. You will likely be creating your budget based on your country’s funds, but this might not correspond exactly with the funds of the country you’re in. To ensure you don’t go over budget when paying your international employees, make sure you always consider conversion rates. These rates fluctuate often, so you should be converting your funds for payroll at the most advantageous times. A huge exchange rate can hurt your payroll budget.

Do Your Salary Research

The type of international employees you need to hire might be paid a typical salary rate in your country, but the skills demand in the country you’re working in might be different. You should do salary research ahead of time so you know what compensation you should be offering—you might catch a break and be able to pay them less, or you might have to dish out more to get the skills you need in that country.

Engage an Employer of Record (EOR)

The most efficient and cost-effective way to pay your international employees accurately, promptly, and within the law is to engage an EOR, often called a professional employer organization (PEO). Many foreign companies benefit from handing over the responsibility of paying their workers to an EOR.

Under the law, whoever pays the workers is legally responsible for them, so once you sign over your workers to an EOR, you’ll still have access to their services as you would if you were their employer, but you won’t have to worry about correctly processing payroll, dealing with government bodies, ensuring tax compliance, or filing paperwork. The experts at the EOR will take care of all of the administrative work that comes with payroll and human resources.

An EOR helps you protect your company while paying international employees. It will also save you time from handling administrative tasks, so you can focus on your expansion efforts.

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Topics: Pay International Employees

How to Pay International Employees Effectively

Posted by Ray Gonder

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Jan 1, 2015 9:00:00 AM

How_to_Pay_International_Employees_EffectivelyExpanding your business operations to emerging markets is a logical step for many companies. Sometimes, your company’s future growth depends on it. But your expansion efforts rely on the use of international employees to work in your new markets. Regardless of where your business is located or how far away your international employees reside, you need to know how to pay them effectively or risk getting into a heap of government trouble, which can lead to heavy fines and penalties.

If you’re using international employees, you need to take a cohesive approach to your new payroll and compensation plan. Here are a couple tips that can help you stay compliant when paying foreign workers.

Know and Understand the Local Laws

You probably know everything there is to know about the business payroll laws in your country. But the local laws can be drastically different when you’re expanding into new countries. Each area has its own tax regulations and payroll legislature.

It’s up to you to know the local legislature and understand how it fits within your company if you’re going to be doing business on foreign soil. Unfamiliarity and ignorance are no excuse for tax fraud or illegal payment methods. You’ll need to sign up with the appropriate payroll authorities, maintain accounts, and regularly submit required information. And since payroll legislature is constantly changing, you’ll need to stay up to date on all the current data in order to stay compliant.

Consider Conversion Rates

Naturally, you’re going to have a payroll budget—but this budget is set in your country’s funds. Do you know what it actually amounts to in the funds of other countries? To ensure you don’t accidentally go over your budget because of the difference in funds, always consider conversion rates before you hire international employees. Additionally, currency conversion rates fluctuate, so consider this fluctuation and try to convert your funds at the most advantageous times so you don’t get hit with a huge exchange rate that can hurt your budget unexpectedly.

Of course this is on the assumption that the salary you offer in your own country for a specific position will be the same expectation of someone with the same type of qualifications in another country.  Understanding salary expectations in another country should be part of your research due diligence when hiring any foreign team members.

Consider Cultural Nuances

Depending on where you’re hiring your new international employees, the cultural nuances when it comes to payment can be vastly different from yours. For example, in some countries, employees are paid monthly rather than bi-weekly. The rules surrounding paid time off, overtime as well as family obligations vary from country to country as well as the worker’s expectation of health benefits and retirement investments.  On top of learning and understanding the local payroll laws, you’ll also need to take some time to learn the unwritten rules in the country you’re considering expanding in.

Outsource Payroll

Some payroll providers specialize in helping foreign countries expand into their country.  Often called a Professional Employment Organization (PEO) or Employer of Record (EOR), they have the knowledge and experience needed to make sure you’re always compliant from not only a payroll perspective but also when it comes to meeting employment standards within the worker’s country.  They’ll take on the responsibility of compliance, make sure you’re always in line with the local employment and tax laws, and keep track of all the appropriate information you need to protect your company while paying foreign workers. They take over the time-consuming and complex responsibility so you can stay focused on more important business tasks during your expansion.

Protect Your Company in Foreign Markets

When you’re expanding into foreign markets, it makes sense to hire international employees to work from their respected countries. However, if you don’t know and understand the local laws, exchange rates, and cultural nuances, your new endeavour can end up costing you far more than you expected. Stay up to date or outsource your payroll and HR to a local employer of record for best results.

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Topics: Pay International Employees, International Employees

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