Opening a Business Abroad? Here are Options on Paying your Offshore Employees.Posted by On


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Starting an offshore business can present several complications. Prioritizing business opportunities, navigating the legal landscape, establishing supply chains, and hiring competent people are only some of these. Workers are the supporting pillars of businesses. Ensuring they are paid timely is a fundamental. Businesses need reliable ways to pay offshore workers. Here are some ideas.

Locals as offshore workers

Initially you may send some of your more tenured employees to scan the new geography. This is how most growing businesses approach an offshore expansion prospect. Your seasoned scouts would conduct reconnaissance and build key contacts abroad. There are several payroll services that offer employers solutions for paying US personnel stationed on foreign soil. Although these services ensure legal compliance, they may prove to be too expensive. You may be able to keep overseas employees on your regular payroll as long as their foreign duties fall within the definition of a ‘temporary assignment’. They would certainly need to access funds abroad, even though they may not have bank accounts in the new geography yet. This problem can be solved through international money transfers, which your employees can initiate themselves. Simply ensuring your people have the right visas should be enough at this stage. Note that many countries specify what constitutes a ‘temporary assignment’. There are limits to how long US citizens can continuously live and work abroad without paying taxes there. Also note that taxation, payroll and immigration requirements may not be in sync. Consulting legal experts is advisable.

Contract offshore workers

One of the primary motives to take your business overseas is the appeal of a cost-effective workforce. However, you may not need to setup a full-fledged branch office, or get into foreign taxation formalities. You may bypass much legality by hiring contract workers. You can assemble an overseas workforce on your own, or through specialized contractors. This is extremely popular in transcription, translation, software design, graphic design, and many other service industries. By not hiring staff on your payroll you don’t have to pay salaries or personnel benefits as mandated by either country’s laws. Instead, you pay fees as per your contractual terms. Fees are linked to output, so you only pay for the results. Your personnel overheads remain minimal. You may renew a contract if you like, or engage a different contactor in case you are less than satisfied. Overseas contract work is the ideal solution till your business achieves economies of scale.

Note that many countries have clear legal differentiations between employees and contract workers. Local attorneys can help you ensure compliance. The optimum way to pay your offshore contract workers would be to send money online. A robust, reliable and speedy international money transfer service which consistently offers good exchange rates would be your best bet.

Full-time offshore workers

As your foreign venture continues to grow, at some point you may find it more efficient to hire full-time overseas workers, and have them on your company’s payroll. By doing this you can give them job titles, benefits, incentives, performance-based rewards, training, periodic evaluations, and promotions. You can also send your US employees on foreign assignments to your branch office, with spouses in trail and everything.

Now we must really get into the legalities. To incorporate a foreign subsidiary is a big step, so you would only do so when it makes very good business sense. You would be required to register your business with the local government and get a local tax number. From a payroll perspective you would be expected to pay salaries in local currency, ideally directly into your overseas employees’ bank accounts. For this purpose and others, it would become essential for your business to have an overseas bank account. Payroll would flow into and profits would flow out of your overseas account. You may be able to offset the sizable outflow of funds toward payroll with your profits from overseas. Doing so could also reduce your tax burden. Skilled local accounting and legal personnel would be the best people to help with this. In either case you would invariably require international money transfer services on a recurring basis to keep money flowing smoothly between your two territories.

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