CLIENT KNOWLEDGE BASE

    Hiring International Contractors

    As the world continues to become borderless with business transactions, we have more and more clients looking to hire internationally.

    The common question we get is: "Employee or contractor"?

    The easiest way to hire someone that lives in another country is as a contractor.  The US does not require much documentation and this eliminates the need for tax withholding and international compliance. 

    There are only rare circumstances where hiring someone outside the US as an employee makes sense.  This is more expensive, complex and opens your company up to additional compliance in some cases.

    Onboarding an International Contractor:


    1. 1

      Step 1:

      When you identify an international contractor, simply have them sign a contractor agreement with an IP assignment clause and specify the payment terms.  The contract should include these items (working with a lawyer):

      • Payment method
      • Confirmation of no tax withholding
      • 13 Month Policy and Paid Time Off
      • Work Confidentiality
      • Overtime rules
      • No benefits (401k, health)
    2. 2

      Step 2:

      In the last couple of years, paying international contractors has become much more efficient!  Several solutions now exist to streamline your process. 

      Here are several options:

      1. Gusto - They allow for international contractor payments if you have the correct subscription.  Once you onboard the contractor you simply need to add their payment each pay period.  Gusto does the rest!
      2. Melio or Bill.com: Allows you to upload invoices from the contractor and then pay them internationally.
      3. Bank wire or Bank Transfer: An old school method, but not always the best option due to limitations in the banking system or risks of fraud.

      Can you hire an international team member as an employee?

      Yes, but we generally do NOT recommend this unless this is a necessary step to expand your team.

      The most expensive and complex method is starting a subsidiary, which involves establishing a separate legal entity in the country where the talent is located. You will need to hire local legal counsel and work within the laws of that country.  Again, not recommended. 

      Option 2 is to use a global Professional Employer Organization (PEO), which provides HR solutions and handles employment directly, eliminating the need for a subsidiary.  Deel is a good solution here and can streamline compliance for both the employee and your company.

      What about Taxes, W9s and 1099s?

      Hiring as a Contractor:
      • No W9 and NO W8 BEN unless the person has a US residency or tax requirement (unlikely)
      • No 1099s!
      • No W2s!
      • No international taxes
      • No benefits responsibilities (health, 401k etc)
      Hiring as Employee:
      • The local equivalent of a W2
      • Company tax filing in a foreign country
      • US Tax obligations become more complex
      If you are thinking of onboarding a contractor from outside the US, please reach out to our team on Soraban and we can go over the best options to get things up and running for you!

    If you still have a question, we’re here to help. Contact us