As outsourcing to overseas contractors becomes more popular in the business world, hiring managers must navigate the complexities of foreign laws.
Organisations have to understand and obey local labour regulations, but this could confuse the employment process and disrupt proceedings within the company. After all, laws are constantly evolving, and staying on top of changing legislation isn’t easy.
That’s why due diligence and payroll compliance are vital. Find out why below.
What you need to know
Compliance depends on understanding local legislation in the countries where you employ contractors. International contractors are subject to wage and tax laws in their country of residence, even if their employer is overseas. And it gets increasingly complex if you engage multiple contractors.
For instance, an American contractor working in Scotland for a Swedish company must pay US tax. Yet, a French employee for the same company would pay tax to the French government. Now, imagine the headache your payroll department suffers handling international tax laws on an organisation-wide scale.
Further complicating matters, some countries, such as Canada, have regional and federal jurisdictions. This means that two contractors from the same country must comply with different laws.
So, what should businesses consider before hiring contractors from overseas?
Minimum wage: The basic pay rate differs around the world – sometimes even between territories of the same country.
Fringe benefits: Added employee benefits are illegal in some places but expected in others, so make sure you get this right.
Taxes: Statutory fees, income tax, social safety, and employment taxes change from country to country.
Currency: Businesses should specify how, where, and what currency they’ll pay an overseas contractor.
Misclassification: The way you pay a contractor may impact their classification. Ensure you don’t penalise yourself or your employees.
It’s easy to overlook the many intricacies of engaging overseas contractors. Here are our tips to ensure compliance when dealing with international payroll and tax laws:
Keep up to date with changes
Keeping your finger on the pulse is one of the best ways to avoid potential penalties. Regularly check the news and relevant government websites to stay informed about international laws. Don’t forget to use reliable and legitimate sources.
Pay attention to nationality
Whenever you seek new talent, consider their nationality. The country they work in will dictate the wage and tax laws you must comply with. It might also initiate new avenues for your business to avoid overly costly or complex employment regulations.
A bespoke solution from WRS
Does your company hire contractors from different locations?
An all-encompassing, end-to-end bespoke service will remove payroll pain points with overseas hires.
WRS offers a tailored service to clients, matching skilled contractors with suitable positions around the world. We go further than just connecting contractors with organisations – we help you understand what to watch out for, and ensure compliance when handling overseas contractor payrolls.
Our team also takes care of the next steps to assist you with international payroll legislation and visas.
Contact the team today to find out how we can help you.