More 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.