Aussie Businesses’ guide to hiring international employees and contractors

Hiring international talent isn't only for big global corporations anymore. There's an increasing number of Australian businesses of all sizes looking to overseas markets for talent. A 2024 Censuswide survey of 500 Australian business leaders from companies with 20-500 employees revealed that 89% of businesses plan to consider global hiring in 2025.

Some businesses look to hire internationally to fill skill gaps. Others consider it for cost cutting reasons or to expand into new markets.

But unfortunately, it isn’t as simple as signing a contract and sending a paycheck. There are tax laws, employment rules, and compliance risks to think about. And getting this stuff wrong can land your business in hot water. You could end up with fines, legal trouble, or a misclassified worker who's owed employee benefits.

In this guide, we summarise the process of hiring international employees and contractors. We discuss the steps to hiring overseas workers and flag common challenges so you know what to look out for. By the end, you'll have a clear overview of what's involved and how Rippling can do a lot of the heavy lifting for you.

This guide is based on current information, but employment laws and regulations change frequently. Always check the latest requirements before hiring internationally.

Understanding international hiring basics

Hiring foreign employees or contractors isn’t the same as hiring locally. Every country has its own rules around employment, tax, and worker rights. Before commencing the hiring process in any country, you need to understand exactly how hiring works there. You also need to be clear about your responsibilities as an employer. Here's a look at some of the basics to be aware of when hiring international workers:

The difference between employees and contractors

One of the biggest decisions is whether to hire someone as an employee or a contractor. Beyond just job titles, they're strict legal definitions. And the finer details of each can vary from one country to another. Generally speaking:

• Employees work for your company under an employment contract. You control their work hours, provide their benefits, and handle their taxes.
• Contractors are self-employed and may work for you as well as other clients. They're in charge of their own schedules and sort out their own equipment. They also handle their own taxes.

Why does this matter? Because misclassifying a worker can get your business in trouble. It can lead to fines, lawsuits, and backpay for unpaid benefits. Similar to Australia, countries like the US and UK don't take lightly to businesses that get this wrong.

Take the US, for example. If you pay a worker as a contractor but treat them like an employee, you could face tax penalties and be forced to pay past wages and benefits. In the UK, IR35 rules are in place. These rules determine whether a contractor should really be classified as an employee for tax purposes.

Key legal and tax considerations

When hiring overseas workers, you have to follow the employment laws of the worker’s country. Here are a few of the things you have to check:

• Tax obligations: In some countries, withholding employees' taxes is your responsibility as the employer. To make things trickier, countries like France and Germany also have contractor tax rules you need to know about.
• Employee entitlements: Many countries require businesses to provide employee benefits. These can include benefits like paid leave, retirement contributions, and health insurance. For example:
• Japan: Employees get a minimum of 10 days of paid leave after working for six months.
• Brazil: Employers have to pay a 13th-month salary at the end of the year.
• Singapore: Companies must contribute to the Central Provident Fund (CPF) for employees’ retirement savings.
• Intellectual property (IP) protection: Some countries require you to have a contract stating that work belongs to your business. If you don't, the person who created it is the legal owner of it. If you're hiring global developers, designers, and writers, getting your head around this is especially important.

Work visas and Right to Work laws

Before hiring someone from overseas, you need to check if you're allowed to employ someone in that country without setting up a local entity. Some countries expect foreign employers to have a registered business presence. Others have strict visa rules that can complicate things. For example:

• US: Australian businesses need a US entity to hire a US-based employee. Or, in rare cases, the employee would need a visa that allows a foreign company to employ them.
• Indonesia and Malaysia: Many countries in Southeast Asia require foreign businesses to register a local entity or hire through an Employer of Record (EOR).
• European Union: If you hire a full-time employee in the EU, they might need to prove that your company follows local tax and labour laws. Sometimes this means setting up a local entity or registering for payroll in the EU.

Severance pay and termination rules

Many countries don’t allow at-will employment. This means you can't just let an employee go whenever you want. In some jurisdictions, strict notice periods and severance pay form a part of the equation. For example:

• Mexico: If you dismiss an employee unfairly, you could owe three months’ salary plus 20 days of pay per every year worked.
• France: Employers must justify terminations. Employees with one year or more of service have a right to severance pay.

Data protection and privacy laws

Most countries have unique requirements when it comes to how you handle employee data. Whatever they are, you need to comply with them. This applies when collecting personal details, payroll information, or even tracking employee activity. For instance:

• European Union: The General Data Protection Regulation (GDPR) mandates that companies follow rigid data security practices.
• China: The Personal Information Protection Law (PIPL) stringently restricts how you store and transfer employee data outside of China.

Managing time zone and cultural differences

It doesn't end at legal challenges. Hiring foreign workers also means juggling time zones and cultural differences. For instance:

• Time zones: If your business in Australia hires someone in Europe, there’s a 9–11 hour time difference. That means limited crossover for meetings and communications.
• Cultural expectations: Countries typically have their own work habits. In Japan, employees typically expect ordered processes and distinct hierarchies. But in Scandinavian countries, workplaces can be quite casual and collaborative.
• Public holidays: Countries typically have unique public holidays. Many have regional or religious holidays that aren’t observed nationwide. This means your international team member may be off on days you might not expect.

Steps to hiring international employees

You need a solid plan before you start hiring international employees, or things can get messy fast. Here’s a step-by-step guide to help you do it properly:

1. Define your needs

Before you go writing a job description and posting a job ad, you need to figure out exactly what you’re looking for. For instance, do you need a full-time or part-time person? An employee or contractor? Do they need to be available during certain hours? How should they fit into your team? The more precise you can be here, the better.

Example: You run a Sydney-based SaaS company and want to hire a full-time customer support rep. For this role, it's important they're available when your customers need help. Instead of hiring from Europe (10-hour time difference), you look at hiring from the Philippines. This scenario offers a time zone overlap, which will make things much easier.

2. Choose the right employment model

Now that you know who you need, it's time to decide how to hire them. You’ve got two main options:

Option 1: Direct hire

This means hiring them as an employee under their country’s laws. Sounds simple, but there's a catch. A lot of countries won’t let you do this without setting up a local entity.

Example: You want to hire a software developer in Germany as a full-time employee. German law requires you to register a local entity. They also require you to run payroll and provide benefits. Unless you're planning on building an entire team there, this may be rather expensive and time-consuming.

Option 2: EOR

An EOR hires employees for you. They take care of things like payroll, contracts, and compliance. This means you don’t have to stress about staying on the right side of local employment laws. It's also the fastest way to hire employees in international markets legally. And means you don't have to set up a local business.

Example: You need a full-time marketing manager in Canada. But you don't want to register a company there. An EOR hires them under Canadian employment laws. They manage their taxes, benefits, and compliance. And the employee still works for you, just like a local employee.

3. Navigate payroll and benefits

When hiring foreign employees, you need to follow local payroll and benefits laws. As discussed, every country has different rules about wages, entitlements and benefits. Some might require you to withhold and pay income tax for your foreign employees. Some will require you to allocate a specific amount of paid leave. And others might have specific rules for pension contributions.

Example: You hire an employee in Brazil. By law, you must pay them a 13th-month salary at the end of the year. If you don’t budget for it, you’ll get a nasty surprise when December comes.

4. Onboarding international employees

Hiring is only half the battle. Once you've hired them, you need to onboard them. And it's important to get it right so you can set them up for success. It's not the same as onboarding a local employee. You’re working across time zones, cultures, and legal systems. So, you need to be extra organised. Here are some things to focus on:

• Get the paperwork sorted early: International employees aren't always aware of the tax, banking and payroll requirements in your country or theirs. Make sure they receive all contracts, tax forms, and benefits information before their first day. If they need to submit anything to a government agency, let them know early so there are no payroll hold ups.
• Provide the tech and tools they need upfront: Remote international hires rely heavily on digital tools to do their job. Make sure they have access to everything they need from day one. This might include a company email, communication tools, or project management software.
• Be mindful of when they work: If your new hire is in Europe or the US, they probably won’t be online when you are. And that’s fine, as long as expectations are clear. Make sure they understand crossover hours, response time expectations, and meeting schedules.
• Set expectations around communication: Every workplace has different norms. Some cultures value direct and informal chats. Others prefer emails and detailed documentation. Make sure your new international hire understands how your team communicates from the get-go.

Example: You hire a software developer in Poland. They’re used to formal emails and scheduled meetings. But your Australian team works fast and chats over Slack. On their first day, you jump on a call and explain how the team communicates. You show them which Slack channels to use, when to reply to messages, and how decisions get made so they don’t miss important updates.

Hiring global contractors

When hiring global contractors, you aren't required to run payroll, and they typically come with less legal obligations. Plus, they're far easier to onboard. But there's still stuff to know! So, before you go down this path, you should understand the pros, risks, and best practices for working with contractors in different countries.

Benefits

A contractor can be a quick and cost-effective way to bring on international talent. Unlike employees, they usually manage their own taxes and benefits. And there's a lot less to deal with as far as local employment laws go. Here’s why many businesses choose international contractors over international employees:

• More flexibility: Contractors work on a project or contract basis. So you don’t have to go all-in with full-time employment. If your workload changes, you can adjust their hours or stop working with them. And without going through a lengthy and complicated termination process.
• Faster hiring process: You can hire global contractors without a local entity, work visa, or payroll setup. This means you can hire them and start working with them almost straight away.
• Lower costs: You don’t have to pay for benefits like health insurance, retirement contributions, or paid leave. You can also avoid employer payroll taxes. And these can add up in some countries!
• Access to highly skilled specialists: Many skilled professionals work independently and prefer contract work. This can be especially true in fields like software development, marketing, and design.
• Easier international payments: Contractors invoice for their work. And you pay them like you would any vendor. This means you don't have to worry about foreign payroll compliance.

Legal considerations

Just because you call someone a contractor doesn’t mean the government agrees. Remember, many countries have specific rules about what makes someone a contractor vs an employee. If you treat a contractor like an employee, you could get fined for misclassification. Here are a few pointers for staying compliant:

• Let contractors control how and when they work.
• Don’t provide company laptops, email addresses, or software unless absolutely necessary.
• Make sure they work with other clients, not just you.
• Have a clear contract stating that they're an independent contractor, not an employee.

Payment best practices

Paying overseas contractors isn’t as simple as a bank transfer. Different countries have different rules, currencies, and tax requirements. You need to make sure payments are fast, cost-effective, and also compliant. Below, you can find some options for payment methods:

• Workforce payment software: Some platforms take care of international payments, tax forms, and compliance in one place. This can make it a lot easier when paying multiple foreign contractors.
• Wise (formerly TransferWise): This is a low-cost option for bank transfers. It generally offers good exchange rates.
• PayPal: This can be a convenient option for small payments. But it can come with high fees.
• Payoneer: This payment platform is popular amongst freelancers. It allows for multiple withdrawal options.
• Direct bank transfer: This option can work if the contractor has a local account. Though, it's worth noting that fees and conversion rates can vary.

Below, you can have a look at some common pitfalls to avoid:

• Paying in the wrong currency: Find out what currency contractors want to be paid in. Always confirm before sending money.
• Skipping tax forms: Some countries require paperwork to confirm a contractor’s tax status. While you may not need to withhold tax for international contractors, you may still need proof that the contractor is responsible for their own taxes.
• Not protecting your IP: Always have a contract stating that any work the global contractor creates belongs to your business.

How Rippling simplifies international hiring

It's clear to see that hiring international workers extends far beyond just finding the right people. It requires an in-depth understanding of local regulations, hidden costs, and legal risks. The good news is that you don't need to navigate these complexities on your own. Rippling is here to help. The best part? It combines everything you need for global HR, Payroll, IT, and Spend management in one innovative and easy-to-use platform.

Hire full-time employees without a local entity

Usually, hiring a full-time employee in another country means registering a local business. It also means taking care of payroll taxes, and figuring out local labour laws. With Rippling’s EOR, you don’t have to do any of that.

• Rippling acts as the legal employer for your international workers.
• Your employees get local contracts, benefits, and compliance coverage.
• You manage them directly while Rippling sorts out the legal side of their employment.

Pay international employees and contractors in a few clicks

There can be a lot to get right when paying international workers. There are taxes, deductions, and compliance to think about. And the requirements are likely to vary in every country you operate in. Rippling lets you run payroll across multiple countries in minutes.

• You can pay employees and contractors in their local currency without juggling multiple providers.
• Rippling calculates and withholds the correct payroll taxes in alignment with local laws.
• Employees receive country-specific payslips that meet local requirements.

Manage a global workforce in a single system

Hiring internationally doesn’t stop at contracts and payroll. You also need to onboard employees properly, manage their devices, track their performance, and keep them engaged. And you need to do it all while staying compliant with local laws. Rippling lets you do exactly that, and all in one place.

• You can send contracts, collect tax forms, and set them up with payroll, benefits, and company apps in one go.
• You can ship, track, and remotely configure company laptops and software anywhere in the world.
• Rippling also helps you set goals, track employee progress, and gather feedback across multiple countries.

Managing a global workforce has never been this simple. With Rippling, everything is connected. Everything is automated. And you can manage it all from one system. What does this mean for you? Less time spent on busywork and more time spent on growing your business.

Global hiring FAQs

How do I know if I need an EOR?

If you’re hiring a full-time employee in another country and don’t have a local business entity, you probably need an Employer of Record (EOR). Without one, you might run into legal, tax, and payroll issues because every country has different employment laws.

You generally need an EOR if:

• You want to hire an employee in a country where you don’t have a business entity.
• You don’t want to deal with the stress of local payroll, tax compliance, or worker benefits.
• You need to hire foreign workers quickly without setting up a foreign subsidiary.

If you're hiring contractors or short-term freelancers, you don’t need an EOR. But if the worker is essentially acting like an employee (set hours, ongoing work, company-provided tools), you could be misclassifying them. So, an EOR would be the safer option.

What is the best EOR solution?

The best EOR solution is one that lets you hire, pay, and manage international employees legally. And without needing a local entity. It should easily take care of contracts, payroll, tax compliance, and benefits. And it should do all this while letting you manage your overseas employees like they’re part of your local team.

A good EOR solution, like Rippling, should:

• support multiple countries so you can scale without breaking a sweat
• offer local contracts that comply with employment laws in different regions
• manage payroll, taxes, and benefits so you don’t have to
• integrate with your HR and finance systems so everything is in one place

Can you employ someone from overseas to work for you in Australia?

Yes, but it depends on their visa and work rights. If they’re not an Australian citizen or permanent resident, they’ll need a valid work visa to work for you here legally. Below, you can find a few things to check before hiring a foreign worker to work for you in Australia:

• Do they already have a visa that allows them to work (e.g., Temporary Skill Shortage visa, Working Holiday visa)?
• If not, are you willing to sponsor them for a work visa?
• Does the role meet the requirements for skilled migration?

If they don’t have work rights, you can’t legally hire them as an employee. They might be able to work for you as an independent contractor. This would depend on their visa status, though. It's important to always check with Australian immigration laws before hiring.

Can Australian employees work overseas?

Yes, Australian employees can work overseas. There are a few legal and tax implications to think about, though. Here are some things to consider before letting an employee work remotely from another country:

• Tax residency: If they stay overseas for too long, they may need to pay income tax in that country.
• Visa requirements: Some countries don’t allow foreigners to work remotely without a work visa. This applies even if the job is for an Australian company.
• Employment laws: If they’re working from another country for an extended period, local labour laws might apply. This means they could end up having a right to benefits in accordance with that country’s laws.

For instance, if one of your Australian employees moves to Bali and asks to work remotely. Depending on how long they stay, they might need to pay Indonesian taxes or get a work permit. If you have employees working from other countries, it’s best to get legal advice. You can also consider using an EOR to make sure you’re staying compliant.

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.