Hiring someone in another country

A common situation: a small company finds the ideal candidate for a role, but they live in another country. The work can be done remotely, the candidate is keen and the founder sees no reason to wait. They send the company's usual contract, agree a salary in the candidate's currency and add them to the team chat. It is only when the first payment is due that someone asks how payroll, tax and benefits will actually work there.

Remote work has made hiring across borders far more common. The legal side has not become simpler. In most cases, hiring someone in another country means engaging with that country's rules on employment, tax and more.

Whose rules apply?

As a general starting point, employment protections are usually set by the place where the person physically works, not where the employer is based. A contract may say it is governed by your home law, but in many places mandatory local protections still apply regardless. Those protections can cover things such as minimum pay, working hours, holiday, sick leave, notice and the reasons for which employment can be ended. They vary widely.

Where someone works usually matters more than where the company is. Plan around their location, not yours.

The main routes

Businesses typically choose between a few broad approaches. Each comes with different responsibilities, costs and risks.

• Engaging the person as an independent contractor. This can be simpler, but only if the relationship genuinely is one of independent business. Many countries look at the reality of the arrangement, and treating an employee as a contractor can lead to claims and penalties.
• Using a third-party employer, sometimes called an employer of record. A local company employs the person on your behalf and handles payroll and local obligations, while you direct the day-to-day work. The terms and responsibilities of these arrangements vary, so read them closely.
• Setting up your own local entity, such as a subsidiary or branch, which then employs the person directly. This is usually more involved, but can make sense if you plan to grow there.
• In some places, registering as a foreign employer and running local payroll without a full local company.

Tax and payroll

Employing someone abroad often means withholding local income tax and paying social security contributions in that country, which are payments that fund public pensions, healthcare and similar benefits. The details depend on the country and sometimes on agreements between countries. There is also a question for the business itself: in some places, having staff there can create a taxable presence, meaning the business may owe tax in that country on some of its profits.

These questions are best answered by a tax adviser familiar with both countries, before the person starts work.

The right to work

If the person is a citizen or permanent resident of the country where they will work, this is usually straightforward. If they are not, they may need a visa or permit, and the rules on who can sponsor one differ. If the person might later travel to work in your home country, that raises its own immigration questions.

The contract itself

A contract written for your home country is rarely suitable as it stands. Some clauses may be unenforceable locally. Others may be missing things the local rules require, such as specific information about pay or notice. Some countries also expect the contract to be in the local language.

• Make sure pay, hours, holiday and notice meet or exceed local requirements.
• Check how restrictions after employment, such as non-compete clauses, are treated locally.
• Include clear terms on ownership of work and confidentiality that work under local law.
• Address equipment, expenses and data security for remote work.

Data and privacy

You will hold personal information about the employee, and some countries have strict rules on how employee data is collected, stored and transferred abroad. If your systems are based in another country, check whether those transfers are permitted and what safeguards are needed.

Questions to ask before making an offer

1. Where exactly will the person work, and is that likely to change?
2. Is this genuinely employment, or genuinely independent work?
3. Which route will you use: contractor, third-party employer or your own entity?
4. Who will handle payroll, tax and benefits locally?
5. Does the person have the right to work there?
6. Has the contract been adapted for the local rules?

Starting with your situation

Hiring abroad involves employment, tax and sometimes immigration questions at once, and the answers depend on the specific countries involved. Through Get Legal Help, you can describe the role and where the person will be based, and ArieFirm works out the legal support it calls for.