How To Employ & Pay Remote Employees Around the World

The global workforce has transformed dramatically over the past few years. Companies no longer need to limit their talent search to local candidates. With the right approach, you can hire top professionals from anywhere on the planet. This guide walks you through the practical aspects of building and paying a global team. We’ll cover everything from the different employment models to handling payroll across borders. By the end, you’ll have a clear roadmap for expanding your team beyond geographical boundaries.

What Are the Main Ways To Pay Remote Workers?

When it comes to paying employees in foreign countries, you basically have three main options. Each comes with different levels of complexity, cost, and control.

Use an Employer of Record

An Employer of Record (EOR) is a service that hires the employees on your behalf in other countries where you don’t have a local entity. The EOR acts as the official employer on paper, managing all the local compliance, payroll, and taxation needs, and your remote employee does the work for your company.

Using an EOR means you don’t need to understand all the employment laws in each country where you hire. They manage everything from employment contracts to benefits administration and tax withholding. Your company simply pays the EOR, which then pays the employee according to local regulations.

This solution is an especially good fit for companies that are just starting to hire people internationally or only need a few employees in foreign countries. The main drawback is cost—EOR services tend to range from 15-20% of the employee’s salary.

Set up a Local Entity

Creating your own legal entity in another country gives you the most control over your international workforce. This means establishing a subsidiary, branch office, or other form of legal presence that allows you to directly employ workers in that country.

Setting up a local entity makes sense when you plan to hire many employees in a specific country long-term. It provides more flexibility in how you structure employment and can be more cost-effective at scale.

The catch? It’s expensive and time-consuming to set up. You’ll need local legal expertise, significant upfront investment, and ongoing administrative resources. Many companies only take this route after they’ve established a substantial presence in a particular market.

Partner with a Local Company

Sometimes, you can work with an existing company in your target country through a co-employment or similar arrangement. This partner becomes the legal employer of your remote workers while you maintain day-to-day operational control.

This middle-ground approach can be less expensive than an EOR but offers more flexibility than contractor relationships. It works well when you have a trusted partner in the region who understands the local employment landscape.

The drawback is that you’re dependent on this relationship, and finding the right partner requires careful vetting and strong contractual protections.

Key Considerations Before Paying International Employees

Before deciding which approach is right for your business, you need to evaluate several factors that will impact your international hiring strategy.

Hire International Contractors

Most companies start international expansion through the use of contractors rather than employees. It is easier in terms of compliance but is subject to important restrictions.

Contractors are individuals whom you employ to work on a project without being obligated to offer them a job, benefits, or taxes. You merely pay an agreed rate for services rendered, typically through wire transfers, payment websites like PayPal, or services tailored specifically for international freelancers.

Remember that just calling someone a contractor doesn’t make them one. Many countries have strict rules about worker classification, and misclassifying employees as contractors can result in severe penalties. Generally, if you control when, where, and how a person works, they’re likely an employee under local laws.

Establish a Local Entity

Organizing a local entity can be worthwhile if you’re committed to one particular market and will have a number of employees based there. This could mean establishing a subsidiary, branch office, or other official form of entity within that country.

The process varies extensively country to country. In some countries, you are able to start a business within a few days and with a minimal amount of capital investment. In others, it can be months and may require deep pockets, local directors, or other collateral.

The advantages of having your own entity include:

• Complete control over employment relationships.
• Potentially lower costs per employee at scale.
• Stronger local presence and credibility.
• More flexibility in how you structure compensation and benefits

However, maintaining compliance with local corporate regulations, tax filings, and employment laws requires ongoing attention and expertise. You’ll likely need local accounting and legal support to manage everything properly.

Use an Employer of Record (EOR)

For many companies, an Employer of Record service offers the best balance of compliance and convenience. These providers have established entities in multiple countries and take on the legal responsibility of employment while you maintain control over day-to-day work.

When using an EOR, you typically follow this process:

1. You select your candidate and determine their compensation
2. The EOR drafts compliant employment contracts
3. The EOR handles onboarding, payroll, benefits, and tax withholding
4. You pay the EOR the employee’s salary plus their service fee
5. The employee works directly with your team while legally employed by the EOR

Modern EOR providers like Deel, Remote, and Rippling have streamlined this process with technology, making international employment almost as simple as domestic hiring. The cost premium is often worth it for the compliance assurance and administrative simplicity they provide.

How to Hire Remote Employees in Other Countries

Once you’ve determined your employment model, you’ll need to navigate the actual hiring process across borders.

Form a Local Entity

If you choose to establish your own entity, the process typically involves:

1. Researching entity types available to foreign companies
2. Working with local counsel to prepare and file necessary documentation
3. Obtaining tax registrations and identification numbers
4. Opening local bank accounts
5. Setting up payroll systems compliant with local regulations
6. Creating employment contracts that satisfy local requirements

This process can take anywhere from a few weeks to several months, depending on the country. Some jurisdictions are notoriously difficult for foreign companies to enter, requiring local directors, minimum capital deposits, or special permits. Remember that forming an entity is just the beginning. You’ll need ongoing local expertise to maintain compliance as regulations change and your team grows.

Use an Employer of Record Service

Working with an EOR dramatically simplifies the hiring process. Instead of navigating foreign bureaucracy yourself, you leverage their established infrastructure.

The typical process includes:

1. Selecting an EOR with coverage in your target country
2. Providing details about your hiring needs and compensation plans
3. Working with the EOR to develop compliant employment packages
4. Interviewing and selecting candidates (or converting existing contractors)
5. The EOR handles employment paperwork, onboarding, and ongoing administration

A good EOR will help you understand country-specific requirements like mandatory benefits, notice periods, and termination procedures. They should also provide transparency into the full employment costs, including all statutory benefits and contributions.

Can You Hire Someone From Another Country to Work Remotely?

The short answer is yes, but the details matter enormously. Legal remote employment across borders requires careful attention to:

• Employment classification (employee vs. contractor).
• Tax obligations in both the employer’s and employee’s countries.
• Work authorization requirements.
• Currency exchange considerations.
• Data protection and privacy regulations.
• Intellectual property protection.

Each country has its own approach to these issues. Some actively encourage remote work for foreign companies through digital nomad visas and simplified compliance frameworks. Others maintain strict requirements that make compliant remote employment challenging.

The key is understanding that you must follow the employment laws of the country where your worker is physically located, not where your company is based..

Conclusion

Building a global team offers tremendous advantages in terms of talent access, diversity of thought, and often, cost efficiency. But doing it right requires careful planning and an understanding of your options. Whichever approach you choose, investing time in understanding the compliance requirements will save you from costly mistakes and legal headaches down the road.

Remember that employment practices that seem standard in your home country may be unusual or even illegal elsewhere. Approach international hiring with cultural sensitivity and a commitment to treating your global team members fairly under their local standards.

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