How to Pay International Employees & Remote Teams Compliantly

Expanding your business globally means hiring top talent worldwide. However, paying international employees comes with complex compliance, tax, and regulatory challenges. From tax residency to payroll setup, missteps can lead to legal penalties and operational inefficiencies.

This guide explains the best strategies to pay remote international employees while ensuring full compliance, minimizing risks, and optimizing costs.

1. Key Considerations Before Paying International Employees

Before selecting a payment method, you must assess:

• Legal Classification: Is the worker an employee or contractor? Misclassification leads to compliance risks.
• Tax Residency: Employees pay taxes in their country of residence, not where your business is registered.
• Payroll Contributions: Some countries require employer-paid benefits like healthcare, unemployment insurance, and pensions.
• Payment Currency & Exchange Rates: Many jurisdictions mandate salary payments in the local currency.

Failing to comply with local regulations can result in fines, legal action, and reputational damage.

2. Best Ways to Pay International Employees

A. Establish a Local Entity

If you plan to hire multiple employees in a country long-term, setting up a local entity ensures compliance. This includes:

• Registering the business with local authorities.
• Setting up local payroll & tax withholding.
• Complying with local labor laws (minimum wage, benefits, termination policies).

Pros: Full control over payroll, long-term cost efficiency.
Cons: High setup costs, time-consuming (can take months).

B. Hire International Contractors

For short-term projects or specialized tasks, hiring independent contractors is a cost-effective solution. They handle their own taxes and benefits, reducing employer liabilities.

However, misclassification risks are high. Some countries, like the UK, have strict worker classification laws. A contractor who performs full-time work for your company with company-provided tools may legally be an employee.

Best Practices:

• Use secure international payment platforms (Wise, Payoneer, Deel).
• Draft clear contracts outlining payment terms, scope of work, and liability waivers.

Pros: No need for local payroll setup, cost flexibility.
Cons: High misclassification risks, limited control over work terms.

C. Use an Employer of Record (EOR)

An Employer of Record (EOR) is the fastest and safest way to hire and pay international employees. The EOR acts as the legal employer, handling:

• Payroll processing & tax compliance.
• Employment contracts compliant with local labor laws.
• Benefits administration (healthcare, pensions, paid leave).

Pros: Rapid expansion, full compliance, minimal administrative burden.
Cons: Service fees apply, less direct control over payroll.

Ideal for companies hiring across multiple countries without setting up local entities.

3. Tax Compliance & Payroll Contributions for Remote International Employees

A. Employer & Employee Tax Contributions

Every country has mandatory tax contributions. Examples include:

• Payroll Tax (US, EU, Canada)
• Social Security & Pension Funds (Germany, South Korea, Australia)
• Healthcare & Unemployment Insurance (France, Spain)

You must withhold and remit the correct amounts to avoid penalties. Partnering with a global payroll provider ensures real-time compliance with changing tax laws.

B. Tax Residency & Income Tax Withholding

Employees pay taxes based on where they live and work, not where your company is based. Some regions, like the US, have multi-layered taxes (federal, state, local).

Employers must:

• Determine tax residency at hiring.
• Withhold the correct income tax per country regulations.
• Ensure tax reporting aligns with international tax treaties to avoid double taxation.

4. How to Choose the Best Global Payroll Solution

Selecting the right global payroll partner depends on:

1. Geographic Coverage – Can they handle payroll in all your target countries?
2. Compliance Management – Do they offer tax filing, contract support, and benefits administration?
3. Currency & Exchange Rate Stability – Can they pay employees in local currency while minimizing currency conversion losses?
4. Integration with Existing Payroll – Can it sync with your HR and accounting software?

5. Key Takeaways: Streamlining International Payroll

✅ For long-term, high-volume hiring: Set up a local entity.
✅ For short-term, project-based work: Hire contractors via secure platforms.
✅ For fast, compliant global expansion: Use an Employer of Record (EOR).
✅ Ensure tax compliance: Understand employer contributions, tax residency, and local labor laws.
✅ Minimize risks: Work with a trusted global payroll provider for tax compliance and seamless payments.

Scale Globally with Hassle-Free Payroll

Managing international payroll shouldn’t slow down your growth. The right strategy—whether using a local entity, hiring contractors, or partnering with an EOR—ensures compliance and operational efficiency.

For a turnkey global payroll solution, Omnipresent simplifies hiring and paying employees in 150+ countries. Get started today with expert-backed, compliant payroll services tailored to your expansion goals.