How to Pay Your Remote Workers
One of the most important issues to address as a company starts to develop a remote workforce in various regional areas is how to pay remote employees. Payroll can be difficult to manage as remote workers are located in various countries. Based on the employee's location, there are a number of payroll management choices. Remote payroll, reimbursement to a local partner, or contracting payroll to a third-party “employer of record,” such as a GEO provider, are examples of these options. In this article we will go over ways on how to pay your remote workers.
When paying remote workers, there are a few things to keep in mind. A company's decision on how to pay remote employees is influenced by a number of factors.
Is The Person Working For You An Employee Or An Independent Contractor?
Paying is easier if the remote worker is a contractor because there aren't any withholding or tax responsibilities for the company. Depending on their residence and payroll position, employees would be required to deduct money from their paychecks.
Are they in a different country?
If local laws allow for remote payroll, a remote employee in another country can require a company to outsource or operate a local payroll.
What is the base currency for calculating and disbursing compensation?
A remote employee can ask for payment in their own currency, but it may be challenging to equalize pay rates among team members based on exchange rates.
Is the worker a full-time employee or do they work on a contract basis?
Full-time jobs should be compensated on a regular basis, and the payment system can be largely automated after it is configured. Project-based contractors would continue to be billed by the end of the project, which would necessitate manual payment processes.
The 4 Methods
There are four payment options open to most remote employees. Setting up an office where any remote team member is situated is impossible. So, one of these four alternatives would be great and cost-effective.
Using a Local Partner to Pay Remote Workers
If a business has a local associate in the worker's home country, the company will be able to put the employee on their payroll. In reality, the worker will be the partner's legal employee, covered by their accounting, withholding, and insurance program. The workers' jobs will continue to be directed and supervised by the parent company.
Paying Remote Workers from the Payroll of Their Home Country
In some conditions, remote workers may be compensated by the company's home country payroll. Some countries prohibit remote payrolls from multinational companies. Special rules can exist that allow it as long as the employer registers the employee. In any situation, payout to the employee will be made when adhering to the host country's withholding conditions.
Outsource Payroll for Remote Workers
Payroll outsourcing to 3rd parties is a reasonable choice for paying a remote worker in a different country.
One choice is to use a local payroll agency that performs withholding, payment, and check delivery. A GEO service, which provides complete payroll and job enforcement in the worker's region, might be a wiser alternative. The GEO service varies from payroll services in that it has a legal entity in place that acts as the remote worker's local employer of record.
Paying Remote Workers as Independent Contractors
- PayPal and other electronic payment systems are examples of 3rd party electronic payment services. The transfer is immediate, and the contractor will then have the funds in their bank.
- Channels like Western Union may still be used. However, the rates could be higher than other alternatives for regular transfers.
- Using freelance job sites that have a payment or billable hours feature is a good option for new remote workers.
- To the contractor's account, submit a bank wire or an ACH transfer. While global bank wires can be costly, ACH transactions are mostly free.
Remote Workers Can Take Advantage of Tax Deductions
Based on the country they reside in and where their payroll is handled, tax withholding may be an issue for remote employees. There are tax treaties in place to cover the possibility of double taxation of jobs. As well as tax deductions and balances.
If a remote worker is a citizen of the area, withholding local taxes would be necessary if using local partners. If the worker stays overseas, the home employer may be required to deduct taxes. However, this is only if the worker is paid from the home country payroll. As a non-resident, the worker will have to make an application for a tax refund from their home country, as well as pay the necessary taxes in the new country.
Remote Workers' Social Security and Workers' Compensation
Wherever the payroll is managed, statutory services such as social security and workers' compensation are generally available. If a company pays a remote worker on a home country-payroll alternative, the worker won't be eligible for statutory compensation. That's because they are a non-resident (they still may have access to some social security benefits).
Using a GEO approach to run the payroll where the worker lives will effectively address both the tax problem and the statutory benefits concern. The GEO serves as the worker's local employer of record. So, they handle all tax withholding and compensation while running a completely functional payroll.
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