Hiring international employees: A complete guide for employers

It’s been clear for a while now that remote work isn’t just a passing trend—it's the new normal. As geographical boundaries blur in our interconnected world, US companies are increasingly tapping into a goldmine of global talent.

The numbers speak for themselves: our research shows that 91% of companies have already expanded globally or are planning to do so in the next year. This surge in international hiring isn't just a knee-jerk reaction to recent global events; it's a strategic move reshaping the future of work.

But why are so many companies casting their nets across oceans and borders? The answer lies in the irresistible blend of diversity, specialized skills, and, often, cost-effectiveness that international talent brings to the table.

However, international hiring isn't always smooth sailing. From legal complexities to payroll processing, the journey comes with its own set of challenges. Whether you're a startup looking to diversify your team or a multinational corporation expanding your global footprint, this guide will be your compass in the world of international hiring.

Can a US company hire a foreign employee?

The short answer to this question is yes! US companies have several ways to legally hire employees based outside the States. This opens up a world of possibilities for businesses looking to tap into global talent pools and expand their operations across borders. 

However, the process of hiring from another country isn't as straightforward as hiring domestically, and there are important legal considerations to keep in mind.

US companies generally have three main options for global hiring:

1. Establish a local legal entity and hire foreign employees directly
2. Hire through an employer of record (EOR)
3. Engage with independent contractors

We’ll talk about each option more in detail later on in this guide.

Can companies around the world hire international employees?

Also yes! Similar rules apply no matter where your company is based—international companies also have a few options for hiring foreign employees:

1. Establish a local legal entity and hire foreign employees directly
2. Hire through an employer of record (EOR)
3. If hiring employees in the US, international companies can use a professional employer organization (PEO)
4. Engage with independent contractors

4 ways to hire international employees

Depending on your company’s goals, expansion plans, budget, and other factors, you may choose from the following ways to hire globally:

Establish a local legal entity or foreign subsidiary

To hire and pay employees in any country, a local legal entity is required—whether you use an EOR (which we’ll explore more in the next section) or establish yourself.. Setting up your own legal entity gives your company the most control and integration with your existing workforce, but it requires significant upfront and ongoing investment and compliance management in each country where you have employees.

Setting up a local legal entity often involves registering or incorporating your business in the country, investing a certain amount of capital, hiring a local manager or director, setting up local bank accounts, establishing an office space, and managing ongoing compliance with local corporate governance rules and employment laws that apply to any employees you hire (including minimum wages, tax withholding, statutory employee benefits, and other laws). The requirements vary by country—some are much stricter than others, and some countries take more time, resources, and financial investments to establish and maintain a local entity.

No matter where you hire, though, setting up your own legal entity is the generally most time-consuming and expensive way to tap into the global talent pool. The total cost of ongoing compliance, legal and accounting support, salaries, and other aspects of maintaining a local entity can quickly add up.

However, direct employment through a local entity offers several advantages:

• You can build a strong local presence and brand in the local market, connecting with your target audience and new customers locally
• It signifies a long-term commitment to the local market
• You don’t have to pay monthly fees to a third-party service
• If your business has plans to scale in the country, hiring a large number of local employees, establishing a legal entity can be the more cost-effective option vs. using an EOR that charges per-employee fees

This option is typically best suited for companies planning significant, long-term business in a country, with plans to hire a substantial number of employees.

Hire through an employer of record (EOR) service

For some US companies, using an employer of record can be a more flexible and accessible option than setting up a local entity. An EOR allows you to hire full-time employees in countries where you don't have a business entity.

An employer of record acts as the legal employer, handling legal and HR responsibilities like payroll, employee benefits, and compliance with local labor laws, while you maintain day-to-day management of the employee. This arrangement ensures your global employment practices adhere to local laws, with significantly lower costs and less complexity than setting up an overseas entity.

Here's a more detailed look at how EORs work and their benefits:

• With an EOR, you can start hiring in a new country within days or weeks, rather than the months it might take to set up a local entity
• EORs take on the responsibility of ensuring compliance with local labor and tax laws. This includes, for example, drafting locally compliant employment contracts, managing payroll taxes, and handling terminations.
• The fees associated with EOR services are typically much lower than the costs of setting up and maintaining a local entity
• EORs allow you to easily scale up or down in a country without the commitments associated with a local entity
• EORs can help set up and manage both statutory and supplementary benefits packages competitive in the local market

If you're hiring in multiple countries, using an employer of record can provide a unified approach and single point of contact for all your international employment needs (as opposed to opening a legal entity in each country, which could take months and hundreds of thousands of dollars).

Partnering with a global EOR like Rippling can help you reach your global hiring and expansion goals faster. With Rippling EOR, you can:

• Onboard in minutes. Hire and onboard global employees to maximize productivity on day one. Rippling handles everything from benefits enrollment to assigning required trainings.
• Pay locally in days—not weeks. Pay all of your employees around the world without delay. Rippling does the calculations and money movement for you. You’ll be free to focus on what matters.
• Automate global compliance. Double-checking compliance risks takes time. Rippling runs securely in the background, continuously flagging potential risks.
• Unify HR, IT, and Finance. Data entry and duplicate systems waste time. Every team has one source of employee data, so speedy automation can take on manual work.

Engage with independent contractors

Unlike employees, companies can hire and pay independent contractors in other countries without needing to establish a legal entity, which can be helpful when testing out a potential new market.

However, while hiring foreign workers as independent contractors offers flexibility, it can still come with risk. It’s crucial to classify workers correctly when engaging with independent contractors—misclassifying employees as contractors (even unintentionally) can come with harsh financial and legal penalties.

Classification rules vary by country, and it’s up to businesses to know and comply with labor and employment laws wherever they hire contractors to ensure they treat workers fairly and minimize their risk of misclassification.

Despite the risks, there are many benefits to working with international contractors. Here’s why you may consider engaging contractors instead of employees:

• Hiring international independent contractors may be the quickest way to start working with talent in a new country. There's often less paperwork and fewer regulatory hurdles compared to hiring employees.
• Independent contractors are generally responsible for their own taxes, benefits, and equipment, which can result in lower overall costs for the company
• International contractors can help companies fill skill gaps, especially when they have short-term, specialized, or project-based needs
• If you eventually need full-time employees in the country, it can be easier to convert contractors to employees than start from scratch (and a service like Rippling EOR can make this process even more seamless)

If hiring employees in the US: Use a professional employer organization (PEO)

If you’re an international business looking to hire foreign employees in the US, you have one more option: a professional employer organization (PEO). 

A PEO is an organization that co-employs your workers and helps with employment-related HR tasks like payroll, benefits administration, workers’ compensation, and compliance work, so you can focus on directly supervising your employees and running your business.

What are some benefits of hiring US workers through a PEO?

• PEOs provide access to better and more affordable benefits packages than small to medium-sized businesses can often obtain on their own, due to their larger pool of employees
• PEOs stay up-to-date with federal, state, and local employment laws and regulations, helping to ensure your company remains compliant
• PEOs help companies save money by streamlining and automating many of their HR tasks, reducing their administrative overhead
• PEOs help your business scale by handling the manual, administrative parts of onboarding new employees
• PEOs share some of the employer-related risks, providing an extra layer of protection for your business

If you’re considering a PEO for hiring international employees in the US, however, there are a few considerations to keep in mind.

On the same note, your employees might initially be confused about what the co-employment relationship means, so you’ll need to communicate transparently to clarify the arrangement and the employee’s rights and responsibilities.

Also, while initially cost-effective, as your company grows, there may come a point where bringing HR functions in-house becomes more economical—especially if you use a PEO that charges per-employee fees.

Rippling PEO is the right choice for your US business—or your international business hiring US employees.

With Rippling, you get:

• HR, IT, and Finance in one platform
• Powerful and customizable reporting on any employee data
• Remote team management features, including state and local tax registration, digital onboarding, and app and device management
• Access to top-notch benefits plans with below-average, predictable renewal rates
• Automatic flagging for potential federal, state, and local compliance infractions, along with recommended action plans 
• Automated processes, including ACA and COBRA administration, anti-harassment training, and distributing digital labor law posters to your employees
• Access to hundreds of comprehensive HR resources, guides, and templates

Benefits of hiring international employees

What kind of advantages may your business experience when you start hiring employees from other countries? There are many, but all come down to gaining access to:

1. New, international markets
2. Global talent

We’ll break down both benefits below, explaining how they contribute to your company growth and success:

Challenges of hiring international employees

Now, your business may only experience the benefits we outlined above if you come up with strategies to overcome the challenges of global hiring. Signing a contract and paying a foreign employee isn’t as simple as hiring someone within your country’s borders, as international compliance and regulations come into play. Here are some most common hurdles companies need to deal with when hiring international workers:

Compliance with local labor and tax laws

Each country has its own unique set of employment regulations and taxation systems. Staying compliant across multiple jurisdictions requires extensive knowledge of local employment laws, tax codes, and reporting requirements.

If you fail to comply with these rules, you risk stiff penalties, including legal action and reputational damage to your company. This challenge is compounded by the fact that laws can change frequently, requiring constant vigilance and updates to HR practices.

Offering competitive benefits and compensation packages

Developing attractive benefits packages that are both competitive in local markets and equitable across a global workforce is the number one challenge for 42% of HR teams worldwide. What's considered standard in one country may be unusual or less valued in another.

You must research local norms, legal requirements, and employee expectations in each country to build competitive compensation packages that help you attract and retain top talent while maintaining internal equity.

Local legislation compliance when setting up an entity

If you decide to set up a legal entity in a foreign country, you will likely face complex local bureaucracies, regulations, and business practices.

This process can be time-consuming and expensive, requiring local language knowledge and legal expertise to ensure compliance with corporate registration, taxation, and employment laws. Each country has its own unique requirements, making this a significant hurdle for companies expanding internationally.

Paying international employees and contractors

Managing payroll across borders involves dealing with multiple currencies, banking systems, and payment regulations. You will need to understand currency fluctuations, international transfer fees, and varying pay schedules.

Additionally, correctly classifying workers as employees or contractors in different jurisdictions is crucial to avoid legal and tax complications.

Different time zones complications

Managing a team spread across multiple time zones presents significant logistical challenges, especially if you rely on synchronous work more than async. It can be difficult to schedule meetings, ensure timely communication, and maintain consistent work hours.

This can lead to delays in decision-making, reduced collaboration, and potential burnout for employees who frequently work outside their normal hours to accommodate global teammates.

Managing global compensation

Creating a fair and consistent global compensation strategy is complex. Companies must balance local market rates, cost of living differences, and internal equity across countries.This may involve developing location-based pay scales or using other strategies to ensure employees feel fairly compensated regardless of where they reside. You also need to bear in mind that your employees may change their country of residence often, given the rise of digital nomad visas, global mobility, etc.

How to hire international employees: 6 essential steps

Now you understand your hiring options for workers outside of your country and why you should consider bringing foreign talent into your team. You’re ready to tap into the actual steps of hiring overseas. Here are the steps:

1. Determine where to hire from

Before you begin the hiring process, you should identify the target country or region where you plan to hire international employees.

For example, if you’re looking to hire software developers for your team, you may have decided to primarily source in well-known talent hubs for this role, like Ukraine or Argentina.

Research local labor laws, work permit requirements, and visa regulations to understand the legal landscape. Don’t forget to factor in time zone differences (which is why US companies sometimes prefer candidates from LATAM) and cultural nuances that may impact communication and team dynamics.

Lastly, assess the cost of living and typical employee benefits in the area to ensure you can offer competitive compensation packages.

2. Explore hiring options for foreign employees

Time to determine how you’re going to approach international employment. We’ve outlined the primary options for companies hiring internationally: setting up a local entity and hiring through an EOR. And if you’re hiring employees in the US, you can also consider PEO services.

Compare these hiring methods with your company’s future expansion and growth plans and available budget. Don’t forget that you can start by hiring contractors, for example, and once the market proves to be a good choice for your company, move to hire full-time employees, whether through an EOR or your entity.

3. Understand legal requirements

Familiarize yourself with the local employment laws, tax regulations, and compliance requirements in the country where you're hiring. These include:

• Mandatory benefits and social contributions
• Working hours, minimum wages, and overtime regulations
• Termination procedures and severance requirements
• Data protection and privacy laws

Consider consulting with local legal experts or working with an EOR to ensure full compliance with all applicable regulations.

4. Define the candidate profile

The next item on your to-do list should be to determine the qualifications, skills, and experience required for the role you’re filling.

Consider factors like language proficiency, cultural adaptability, and experience working in global teams. Tailor your job description to attract candidates with global appeal, and consider localizing your job postings to resonate with candidates in different regions (making sure you’re using inclusive language!).

5. Leverage international recruitment channels

Use online job boards with global reach (like LinkedIn or Glassdoor), industry-specific platforms (Stack Overflow Jobs or Flexjobs), and your professional networks to connect with potential international candidates. Also, consider using a local job board if you're targeting candidates from a specific country.

You may also consider working with recruitment agencies that specialize in international hiring to access a broader network of qualified professionals. Don't overlook the power of employee referrals and your company's social media presence to attract global talent.

6. Conduct a video call interview

Just like with remote hiring, when hiring international employees, you’ll conduct video-call interviews with potential candidates. This step is crucial for assessing the candidate's language skills and cross-cultural communication abilities. Prepare scenario-based questions to understand how the candidate would handle challenges in a global work environment, such as managing time zone differences or resolving cultural misunderstandings in a diverse team.

During the interview, be mindful of potential cultural differences in communication styles and expectations. Allow time for candidates to ask questions about the role, company culture, and what it's like to work in a global team. This two-way dialogue can help ensure a good fit for both the candidate and your organization.

How to pay foreign employees

While managing global payroll can be complex, careful planning and partnering with experienced providers can significantly simplify the process and reduce risks, creating a smooth, compliant process for paying your international employees.

Determine your compensation strategy

When paying international employees, it's crucial to establish a fair and consistent compensation strategy. Consider these approaches:

1. Global standardization: Pay everyone the same rate based on their role and experience, regardless of location. While simple, this may lead to overpaying in some markets and underpaying in others.
2. Local market-based: Adjust salaries according to the local job market and cost of living. This ensures competitiveness in each location but may create perceived inequalities within your global team.
3. Hybrid model: Use a base salary with location-based adjustments. For example, offer a standard base salary for each role, then apply a multiplier based on the employee's location.

Choose a payroll solution

Selecting the right payroll solution is critical for managing international payments efficiently and compliantly. Consider these options:

1. In-house payroll: Companies hiring globally can choose to manage everything internally. This offers full control but requires significant resources and expertise in international tax laws and regulations.
2. Local payroll partners: Work with payroll providers in each country. This ensures compliance but can be complex to manage with multiple providers.
3. Global payroll service: Use a single provider that handles payroll across multiple countries. This simplifies management but may be more expensive.
4. Employer of Record (EOR): An EOR, among other responsibilities, handles all aspects of employment, including payroll, in countries where you don't have a legal entity.

Consider currency exchange

When paying employees in different countries, currency exchange rates can significantly impact both your costs and your employees' earnings. Here are some considerations:

1. Decide whether to pay in the employee's local currency or your company's base currency. Local currency payments provide stability for employees but may fluctuate in cost for you
2. Be prepared for how currency value changes might affect your payroll costs over time
3. Factor in the costs associated with exchanging currency, which can add up, especially with frequent payments
4. Consider using a specialized foreign exchange service for better rates and lower fees compared to traditional banks

Understand tax implications

Navigating international tax obligations is complex but crucial for compliance. You need to understand your responsibility for withholding income tax, social security contributions, and other mandatory deductions in each country.

1. Be aware of any treaties between your country and the employee's country to avoid double taxation
2. Hiring in some countries may create a taxable presence for your company. Consult with tax experts to understand and mitigate this risk
3. Work with local tax experts to ensure compliance with all relevant tax laws and regulations in each country where you have employees

Ensure compliance with local labor laws

Each country has its own set of labor laws that affect how you pay employees:

1. Minimum wage: Be aware of and adhere to local minimum wage requirements, which can vary not just by country but sometimes by region or city.
2. Mandatory benefits: Understand what benefits are required by law in each country, such as paid time off, maternity/paternity leave, or health insurance.
3. Pay frequency: Comply with local regulations on how often employees must be paid (weekly, bi-weekly, or monthly).
4. Overtime rules: Familiarize yourself with local overtime pay requirements and restrictions.

Hire international employees quickly and compliantly with Rippling EOR

Your employees may not all be in one spot, but your HR, compliance, and payroll management can. Rippling offers the best-in-class solution for hiring and paying global employees in 185+ countries worldwide, consolidating your international workforce management under one roof.

With Rippling EOR, you can:

• Onboard new hires in 90 seconds
• Make payments to your employees in days instead of weeks
• Run global payroll smoothly no matter where your employees reside
• Put compliance on autopilot, always ready to flag potential risks
• Talk to local experts when you need country-specific advice
• Offer quality benefits to attract top talent

Frequently asked questions about international hiring

How much does it cost to hire international employees?

The cost of hiring international employees varies widely depending on the hiring method and location. Costs may include:

• Salaries (which vary by country and role)
• Mandatory benefits
• Taxes and social contributions
• Administrative costs (like EOR fees or legal consultations)

For a rough estimate, expect to budget 1.2 to 1.4 times the employee's salary for total employment costs.

How many foreign workers can a company in the US hire?

There's no specific limit on the number of foreign workers a US company can hire abroad. However, if hiring within the US on work visas, there may be limitations.

For example, H-1B visas are capped at 65,000 per year, plus 20,000 for advanced degree holders. Other visa types may have different or no numerical limits.

Can you hire someone who is not a US citizen?

Yes, US companies can hire non-US citizens, both within and outside the US. For hiring within the US, non-citizens need appropriate work authorization (like Green Card, work visa). Employers must also verify work eligibility using Form I-9.

For hiring from another country, non-US citizenship is typically not an issue when using methods like EORs or contractors.

What roles are suitable for international hiring?

Many roles are suitable for international hiring, especially in today's digital age. Common examples include:

• Tech roles (software developers, IT specialists, QA testers)
• Creative positions (designers, content creators)
• Professional services (accountants, lawyers)
• Customer support roles
• Marketing and sales positions
• Project managers
• HR specialists
• Data scientists and analysts

The suitability often depends more on the company's needs and ability to manage remote work than on the specific role.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.