If you’ve ever considered outsourcing, you’re not alone; 90% of small businesses in the U.S. had the same plans in 2022. That’s a considerable jump of 10% from 2021!
After all, outsourcing, which entails hiring third parties, can cut overhead costs. It also boosts efficiency and productivity, even letting you access talent worldwide. So, it’s no wonder experts project this practice to become a $731 billion industry this 2023.
However, with outsourcing, you must consider your would-be employees’ mode of payment first. In particular, you must learn how to pay international employees, as you don’t want to be on the wrong side of the law.
Don’t worry, though, as you’ve come to the right place. We’ll teach you the basics of paying employees abroad, so read on.
Determine Your Employees’ Citizenship
Before deciding how to pay international employees, consider their citizenship or nationality. There may be tax laws in place that dictate or govern their salaries or wages.
Let’s say you’re running a company based in the U.S. and have employees abroad who are U.S. citizens or residents, too. While they may not be in the U.S., U.S. tax laws may still apply to them. For example, their pay may be subject to Medicare and Social Security taxes.
An accountant specializing in international employment can help you navigate such laws. So consider hiring one to aid you in structuring your employee payroll system.
If no tax laws apply to your employees, you only need to consider the most affordable option to pay them.
Use an Employee Monitoring Tool
A 2020 Microsoft study found that remote work led to a 10% increase in weekly hours. One reason for this is that remote employees commute less, so they have more time to work. Indeed, another study found they save an average of 72 minutes from not having to commute.
But with remote workers working unsupervised, confirming if they work can be challenging. So, it’s no wonder 85% of bosses say they’re not confident of their hybrid workers’ productivity.
You may face the same problem if you’re hiring remote international employees. But you don’t have to worry about this, provided you use an employee monitoring tool.
An employee monitoring tool is a software program that tracks employee work time. It can record when workers log in, log out, are idle, take breaks, or are absent. Most also let you integrate them with accounting, billing, or invoicing software.
All those features help make international remote employee management simpler. For one, they help you ensure your people are productive and tell you if they’re not. They also make it easier for you to pay your workers accurate salaries or wages based on their work time.
Explore Online Payment Service Providers
Online payment service providers (PSP) are third-party companies offering payment solutions. They let businesses and individuals accept and process various online payment methods.
An online PSP allows you to pay your international employees via bank, credit, debit, or cash card. Your employees can choose the same methods (except credit cards) to get their salaries.
With 429 million active users, PayPal is the world’s largest online payment processor. Its expansive market coverage consists of over 200 countries and regions. So wherever your international employees are, they likely can open a PayPal account.
Opening a PayPal account is free. There are no membership fees to worry about, either. However, users may incur charges when converting currencies or withdrawing money.
Your international employees only need to link their existing bank account with PayPal. Then, once they get their salary, they can withdraw it to their account. Depending on the bank, it may take between 2 and 4 business days.
Like PayPal, Wise services many international markets and accepts multiple currencies. While its user base isn’t as massive, it still has an impressive 10 million active users. Its fees and rates may also be lower than PayPal.
When you pay your international employees with Wise, they get it in their home currency. As a result, they don’t have to worry about recipient fees, such as conversion charges. They also don’t need a Wise account, as you can use Wise to send money to their local banks.
SWIFT stands for Society for Worldwide Interbank Financial Telecommunication. It’s a global financial messaging system that allows financial institutions worldwide to communicate. It lets them exchange financial information and messages about transactions securely.
SWIFT payments are transactions you can make via an intermediary bank. If accepted, they let you send and receive global electronic payments to other banks.
The SWIFT network doesn’t do the actual funds transfer. Instead, it facilitates the communication between the sender’s and recipient’s banks using codes. It’s like an instruction that tells the sender’s bank to send money to the recipient’s bank.
With SWIFT, you can send salaries directly to your international employees’ home banks.
Despite what its name suggests, though, SWIFT transfers aren’t quick. It depends on the recipient’s bank, but the average range is between one and four days. It varies based on the time zone, banking hours, and public holidays where the payee’s bank is.
Consider Outsourcing Your Payroll
Companies with numerous international employees may choose to outsource payroll services. You can also opt for this if you lack the resources to run your payroll effectively.
A payroll outsourcing service can run a portion of or the entire payroll of your company. It may also offer tax reporting, data security, and regulatory compliance services.
By outsourcing your payroll needs, you can rest assured your employees get their pay on time. Your employees can also worry less about salary discrepancies.
That’s How to Pay International Employees
And there you have it, your comprehensive guide on how to pay international employees. You now know that the first step is to confirm their nationality or citizenship for tax purposes. Then, consider investing in a monitoring tool to ensure you can pay them accurately.
From there, you can choose from various online PSPs. Alternatively, you can outsource your payroll needs to save time.
For more business tips like this, browse our other recent news articles and blog posts!