Quick look: Almost 44 million employees work for U.S.-based multinational companies, and for good reason. A global workforce can improve business, provide highly sought-after flexibility, and boost regional economies—but it doesn’t come without potential liabilities. Here’s what employers should keep in mind as they hire international employees, and how a PEO can simplify the process.
The global workforce is growing. An increasing number of workers employed by U.S.-based organizations are moving either state-to-state or outside of the country.
The latest data from the U.S. Bureau of Economic Analysis shows that nearly 44 million people work for U.S. multinational companies. Hiring international employees is most common in the manufacturing and retail industries, and there was the highest employment abroad in China, the United Kingdom, Mexico, India, and Canada.
There are several reasons why businesses choose to employ a global workforce:
- Develops a multilingual staff, which can help organizations provide better service to current customers and attract new ones who speak different languages
- Provides first-hand cultural experience with different areas’ business landscapes, marketing best practices, and more
- Can increase productivity; a 1% increase in racial diversity between upper and lower management has been shown to increase productivity by between $729 and $1,590 per employee each year
- Builds a bigger talent pool, which can help businesses fill much-needed positions with top talent faster
This arrangement also offers advantages to workers, from a flexible schedule to increased opportunities. And a growing global workforce can positively impact regional economies by retaining talented civilians, providing higher-quality broadband to underserved areas, and supporting local businesses.
However, despite its many benefits, hiring international employees also comes with many hidden challenges that employers should consider.
Top challenges of hiring international employees
Any remote workforce presents possible compliance issues, but even more challenges arise when employees work outside of the U.S., as business registration, payroll and income tax, and workers’ compensation insurance rules vary by country.
These issues are at risk of going undetected, as employees may believe there is no problem with them working outside the U.S. since many countries offer remote work visas to attract mobile professionals. The problem exists within the U.S., too, where businesses may be unaware that they employ remote workers in regions where they may not be licensed or pay taxes.
These reasons (and more) make it critical for employers to set rules for employees working outside the U.S.—failure to do so means the organization could experience unexpected taxation and liabilities.
For example, unintended consequences can arise if one of your workers is in a state or country where your business is not insured or not registered to operate.
If organizations are unaware of their employees’ work locations, they may receive business or income tax demands, unemployment insurance claims, or workers’ compensation requests. Companies should note that if a remote employee files for unemployment or gets injured, laws in their state or country apply, even if the organization does not operate there.
6 tips for hiring international employees
Growing your global workforce can feel cumbersome, but keeping a few simple tips in mind, or relying on a professional employer organization (PEO), can make it manageable.
- Establish a clear policy on which countries and states are acceptable to work remotely.
- Outline maximum stay limits for different regions. To do this, organizations should research their obligations if an employee spends more than one to three months in a particular state or country and set limits based on visa, taxation, and residency rules.
- Proactively coordinate with employees to set expectations and require approval for any deviation from their work location plan. Employers should also determine a course of action if an employee moves to a different country without prior authorization. This protocol protects the organization and encourages proactive communication.
- Maintain your company’s HRIS with all employees’ current state and information.
- Advise your payroll professional so they can ensure your state unemployment and workers’ compensation insurance and policies are updated accordingly. Please note that some companies or PEOs may require employees working outside the U.S. to have a U.S. mailing address, bank account, and/or citizenship.
- Remind employees to do their part by tracking days worked in each state or country and by budgeting for additional professional accounting and tax services to ensure their taxes are filed appropriately.
All the benefits, none of the burden
You may already know that a PEO can help you manage HR, payroll, benefits, compliance, and more. But did you know that some PEOs can assist with hiring international employees, too?
For example, ExtensisHR’s PEO Premier® solution—the industry’s first turnkey, all-inclusive, completely outsourced HR offering—provides international payroll management and healthcare coverage in 187 countries.
By onboarding employees, handling payroll and compliance, and paying in-country taxes at the local level, small- and medium-sized businesses (SMBs) can quickly, compliantly, and cost-effectively hire international employees without setting up a full entity. These global services offer many benefits, including:
- Eliminating the need to hire lawyers, accountants, and payroll providers in multiple countries
- Quickly securing top talent and reducing the contractor risk
- Avoiding costs associated with maintaining an overseas business left behind if the employee leaves
- Minimizing severance and termination issues
- Establishing a low-risk, cost-controlled presence in multiple regions
With an emphasis on personalized support, PEO Premier® also provides:
- A fully managed, concierge approach to HR with a dedicated PEO Premier® Account Manager
- An attentive HR Manager and Payroll Associate assigned directly to your business
- A comprehensive solution that all but eliminates your company’s and employees’ HR workload
- Platinum-level HR services and experiences like healthcare advocacy, concierge medicine, a dedicated employee support line, and one-on-one benefits meetings for your new hires
Looking to broaden your business’ horizons quickly and compliantly? Contact the experts at ExtensisHR today to learn more about how PEO Premier® can help.