How to Pay Your Overseas Employee Remotely

How to Pay Your Overseas Employee Remotely

When your company employs workers overseas, the instant interrogation that comes up is by what means you are going to pay them ? Can you pay your overseas employee remotely ? This is not as simple as it first seems, and the resolution is going to diverge conditional on the type of employee, country, and duration of service.

Supposing that you don’t have a branch, office, or entity in charge of payroll duties in the foreign country, then you may be considering paying them remotely. But, is it really conceivable for you to pay overseas employees remotely?

In this article, you will learn everything you need to know about how to pay your overseas employees remotely. In addition, you will find out how to comply with every law and mandated guideline to successfully accomplish this task.

1. Scenarios in which you may have to pay employees remotely

2. What factors should you take into account when paying employees remotely?

3. What options do you have to pay your employees remotely?

4. Requirements to pay employees overseas remotely

5. How to calculate employer and employee contributions for remote workers

6. Reasons to hire and pay overseas employees remotely

7. How can EOR Middle East help you?

 

1. Scenarios in which you may have to pay employees remotely

There are a number of cases in which your company must comply with remote employee payment. Therefore, you must prepare yourself for any situation that may come around where you must assign payments remotely.

Picture the following scenarios:  

1.1. Employing a foreign who will be working from home remotely

Example: your corporation employs a technology expert in Oman for a full-time remote position.

1.2. Transferring an employee from home on a six-month project overseas

Example: your US construction business sends a project executive to Dubai to supervise the start of an innovative development.

1.3. Constructing a remote team centered on abilities rather than location

Example: In order to access a workforce outside its borders, your company builds a remote team across the UAE.

1.4. In order to break into a new market, you are hiring local advertising and sales agents

In each of these cases, the enticement is to simply pay the employees remotely from your home payroll and treat them as though they are really working out of your location. This can work for provisional foreign projects of home-country workers, but for longer projects, you possibly will need a different solution.

The challenge that comes up is that once you hire a local employee in a foreign country, is that you are now responsible for two different tax and payroll schemes. For example, if you’re hiring abroad for a US company, you’ll need to comprehend the pertinent US tax laws as well as those in the overseas country.

You already know how to meet the terms of your home country’s laws for your workers, but how do you comply with foreign protocols if you are new to hiring in the host country?

EOR Middle East will arrange everything for you, this way you´ll be able to grow fast without worrying about compliance and legal guidelines. You can get in touch with us at once to know more about the services we provide and how we can help you in expanding quickly and successfully.

2. What factors should you take into account when paying employees remotely?

There are a few factors that will play into the decision on how to pay your overseas employee remotely:

2.1. Type or nature of the worker (remote worker or contractor)

The use of contractors is rising, and it does seem to provide a stress-free solution to the international payroll issue since they are self-employed, and it is more of a B2B arrangement. But the real issue is the risk of misclassification, where their own country essentially sees them as your worker based on how you assembly and manage their work.

In contrast, official workers (locals and expats equally) are suitable to a full range of benefits and labor safeguards in the host country, and those can’t just be overlooked. At some point, you will need to find a way to meet the local terms and regulations.

2.2. Currency

Oscillations in currency can affect a foreign employee’s net pay, so you might have to fix the payment in their home currency. An additional possibility is to have some sort of currency exchange contract to counterbalance fluctuations in either direction. For example, if an employee is paid in your home currency but is paying their expenses in another currency, then he or she is suitable for compensation.

2.3. Tax and Social security

Workers who are citizens in the host country will pay tax and social security just like any working citizen, at constitutional revenue tax rates. Those sums will need to be withheld in the payslip. Home-country workers on projects overseas will typically have to pay tax in a foreign setting, but your corporation may possibly have to withhold tax at home.

Tax residency for expatriates is usually in place when any stay surpasses six months. Therefore, to avoid dual taxation, you will need to look into tax accords between the two countries. Equally, the home and host countries will want to have social security contributions paid cooperatively by the owner and worker.

3. What options do you have to Pay Your Overseas Employee Remotely?

You have four basic options to pay your overseas employees remotely:

3.1. Pay the worker on your home country payroll

For short projects or projects overseas, you may be able to retain the employee on the home payroll. Some countries do allow this and will have singular instructions for remote payment. In addition, this could comprise some type of registration without the requirement for a legal entity.

But, if you are employing a local, they will need to have a payroll in their own country for tax and social security purposes, and they won’t have a tax id or presence in your home country. It can be possible for expatriates, but then you have to deal with two distinct tax arrangements if they are staying abroad long term and come to be tax residents.

3.2. Ask a local partner or third party company to place them on their payroll

If your corporation has current business associations in a foreign country, then you could ask them to payroll your worker locally. The third party becomes the ‘employer’ for payroll administration. So, in this case, your company forwards the salary through them for withholding and obligatory contributions.

3.3. Outsource payroll to handle your remote employee

There are two ways to do this, either through a payroll source or an employer of record service. Payroll providers are really only administrative, and cannot function as a legal employer, so that is an inadequate option. The employer of record is a broader solution that offers a local company of record. The EOR is usually already incorporated and in place to hire, payroll, and withhold taxes for your worker. This is far desirable to the remote home payroll possibility and evades non-compliance problems altogether.

3.4. Pay them as independent contractors

This can work fine for certain types of positions or assignments that are more self-starting and where the corporation does not exercise control over the employee’s time or procedures. For example, salespeople working on commission might be securely employed as contractors, as well as hourly experts such as lawyers or accountants.

4. Requirements to Pay Your Overseas Employee Remotely

When you are going over these options for hiring and paying employees overseas remotely, your main concern should be compliance with foreign tax, employment, and social security laws. Primary compliance concerns include:

• First, offering employees all statutory entitlements.
• Following labor laws on notice periods, just termination and severance.
• Also caking correct employer social contributions.
• You need to avoid misclassification penalties if hiring contractors.
• Lastly, take the easy route of attempting a remote payroll.

5. How to calculate employer and employee contributions for remote workers

Company and worker contributions are compulsory payments that contribute to a deferred benefit, like a retirement fund or healthcare. The payment must be in agreement with the law of the country or region where the employee is resident. Therefore, it’s imperative to confirm your remote worker’s tax residency when you employ them.

Common types of employee and employer contributions are:

• Payroll tax.
• Healthcare.
• Unemployment insurance.
• Pension or superannuation funds.

Each jurisdiction will estimate payroll taxes and obligatory contributions for remote workers according to local guidelines. In some cases, employers will counterpart employee contributions; in other cases, they don’t have to.

5.1. Do you have to pay Social Security in the UAE?

There is no social security system available to emigrants. Therefore, ex-pat employees are not necessary to make social security donations. In addition, suitable health care insurance is mandatory for an individual to obtain a UAE Residence Permit.

 

It is required for all companies to be responsible for medical insurance for their workers. It is compulsory for the employer to register a UAE national/GCC national with the General Pension and Social Security Authority (GPSSA) after one month of employing the worker.

Contributions should be made by both the employer and employee:

• Employer contribution – 12.5% of employee’s monthly salary (Basic + Housing Allowance)
• Employee contribution – 5%
• Late payment fee – 10%

For GCC nationals, pension rates will vary depending on their country’s pension scheme. The monthly minimum salary subject to social security contributions is AED 1,000 and the maximum is AED 50,000. Furthermore, the 5% employee contribution will be deducted from the employee’s salary each month while the payment to GPSSA should be done before the 15th of the following month.

The social security payments that have to be made for the UAE nationals/GCC nationals must be processed through the UAE Funds Transfer System (UAEFTS). UAEFTS payments are facilitated by the UAE commercial banks.

6. Reasons to Hire and Pay Your Overseas Employee Remotely

There is a number of good reasons available if you choose to pay your overseas employees remotely, like:

• If your team members are working remotely, then your company can save money on renting large office spaces.
• If your company hires a remote team (for example, web developers, coders, software developers, app developers, or programmers), it can give your business an opportunity to grow because you can invest saved funds into other business areas.
• Your company can attract top professionals worldwide because the most qualified specialists may be located overseas.
• If you hire remote specialists, you may get highly engaged and motivated team members and increase the overall productivity of your company.
• Your company can reduce sick absences because the remote employees can work from home without infecting others or return to work quicker.
• You may save money on the payroll because you can hire remote specialists with low local rates.

As we have mentioned, there are a lot of advantages of hiring remote specialists, but it is important to know the local remote employee payroll legislation in order to avoid legal problems in the future. You should always remember that depending on where your remote employees reside different laws may be applicable.

7. How can EOR Middle East help you?

If you’re looking forward to expanding internationally and are ready to start hiring employees in other countries, EOR Middle East can help. We act as the Employer of Record for your international team. In addition, we ensure that country-specific payroll requirements are met and that your employees get paid on time and in the currency of their home country.

Similarly, EOR Middle East will help you to set up payroll payments without the risk of running a remote payroll from home. Despite finding an above-board way to pay your foreign employee remotely, you will still be subject to the host country’s labor laws. In addition, these legal guidelines most likely include contributions, unemployment insurance, leave, notice periods, justifiable termination, and severance.

Would you like to contact EOR Middle East? You can call at 00 971 433 16 688 or send an email to [email protected], and you’ll talk to one of our representatives that will gladly answer all of your questions.

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