A Complete Guide to Employing Foreign Workers Abroad
Although the shift to remote working brought about by the Covid-19 pandemic may have created challenges for employers, it's also creating opportunities for businesses to tap into a talent pool further afield.
By employing foreign workers abroad in an increasingly global marketplace, your business can find people who are the best fit for the job wherever they are based. Whether you have them work remotely or relocate to the UK will depend on the needs of your business.
Here’s what you need to know if you’re considering the benefits of expanding your recruitment pool and looking to understand how to employ a foreign worker.
Reasons for employing overseas workers
Recruiting employees from abroad can be more complex than hiring locally. But there are several advantages to employing overseas workers that can contribute to your company’s growth, particularly if you plan to expand into new markets.
Skilled talent pools
By casting a wider net, you can find employees with particular skill sets that may be harder to find among the local workforce. You do need to consider that identifying and onboarding the right overseas candidate will take longer than recruiting someone locally, so you should allow enough time to avoid rushing the process to fill an urgent vacancy.
One of the main benefits to employing foreign workers is that average salaries tend to be lower, particularly if they work remotely from their home country and you pay them in their local currency. Recruiting skilled workers in developing nations can offer a significant cost saving.
The challenge is to understand local pay scales in other countries where you may be looking to find employees. You will also need help from legal or employment advisors to handle complex international employment laws, payroll and tax requirements.
Building culturally diverse teams can bring together people with varied experiences and knowledge, increasing their problem-solving abilities. Having diversified views can contribute to strategic thinking that will help to make your business more agile in the fast-evolving global marketplace. Employing foreign nationals can also help you overcome language and cultural barriers if you intend to expand your business into other markets.
You should be aware that there can be communication issues and different expectations of management style that you may need to overcome.
How to employ a foreign worker
If you decide to recruit people abroad to work for your company remotely, you’ll need to decide whether to hire them as a full employee or as a contractor or sole trader. The tax liabilities for hiring an employee abroad can be complex, so you may need to establish a local branch abroad. It’s best to take legal advice to find the right approach for your business.
Here are the steps you need to take when employing workers abroad:
1. Establish an overseas entity
If you choose to employ remote workers as full employees, you’ll need to set up a legal entity in their country. This can be a cost-effective option if you plan to recruit many workers in the country or have business interests in the region, such as local customers. Having a local presence also gives your business more control. Alternatively, you can use an employer of record to handle compliance with local regulations on behalf of your company.
2. Find prospective employees
Advertise the vacancy on international sites and job boards online where foreign nationals will see it. You can also hire an international recruitment agency to take on the process for you. While this will incur additional costs, it can save time, identify candidates you might not otherwise find, and help you to navigate other countries’ hiring requirements.
3. Run remote payroll
While an existing employee who moves to work remotely may be able to remain on your central payroll, you will likely have to set up an alternative system for remote employees. Some countries do not allow this for tax residents, so you would need a local system, either through a registered entity or employer of record.
What to consider when employing foreign workers
Beyond the sponsorship process, there are several things to consider when employing foreign workers to ensure they make a smooth transition to working for your company.
If your employee works remotely from abroad, you need to make sure to pay them in full, on time and in their local currency. It’s important to use the right money transfer provider to avoid costly currency exchange fees for your company to send the payment and your employee to receive their salary.
Online payment platforms like Clear Currency make the process easy with instant exchange rates, same-day transfers and secure payment systems.
Currency transfer tips:
- Choose a low-cost money transfer provider to save on currency exchange fees.
- Paying overseas employees on time in the correct currency fosters job satisfaction.
- Online payment platforms offer fast transfers and 24/7 account access.
Depending on the tax laws where your remote employees are located, your company may be liable to pay withholding taxes on their income and corporation tax if it is considered a permanent establishment in the country.
Tax obligation tips:
- Consult a tax advisor on the relevant rules where employees are located.
- Register with the relevant tax authorities and ensure your business fulfils its obligations.
Foreign worker employment contract
When hiring a foreign national to work abroad, you’ll need to sign an employment contract that includes details such as:
- Expected duration of their employment
- Details of their pay and currency
- Applicable taxes and national insurance contributions
- Benefits including pension contributions
- Terms of termination and notice periods
- The applicable employment law.
Foreign worker employment contract tips:
- Ensure the contract complies with relevant employment laws.
- Consult with legal advisors on overseas employment requirements.
If you make a job offer to a candidate you expect to relocate from abroad at some stage in the future, you should also provide a fair relocation package as part of the benefits. This should cover travel costs, medical and travel insurance, temporary accommodation for a defined period at the start of the contract, transport costs for relocating possessions, and a certain number of visits to the employee’s home country. You can also provide practical help like applying for a bank account, phone contract, driving licence and other services.
- Good relocation packages incentivise and retain employees.
- Relocation support isn’t just financial – practical support reflects well on your company.
Induction and training
To help your new employee hit the ground running in their role, they will need to follow your company’s standard induction and training programmes. You might also want to provide extra orientation to help them adjust to working with colleagues and clients from your home country.
A good induction programme will help your employee quickly settle into the role and their team. This will enable them to fulfil their potential and become a productive member of the workforce.
Induction and training tips:
- The induction process is an opportunity to give a new employee a positive first impression.
- Consider assigning another employee as a “buddy” or mentor.
- Design an effective induction programme that will help the new employee to feel valued.
Employing foreign workers can enhance your business
Recruiting foreign employees can bring new skills and perspectives to your business while saving on costs. But it’s more complex than simply adding them to your payroll. You need to navigate international employment laws and foreign exchange payment systems. It’s advisable to consult legal and tax experts to make sure you avoid problems down the line.
Use Clear Currency for a simple way to pay your employees abroad
Looking for a currency exchange service to pay your employees abroad? Choose Clear Currency. Our specialist foreign exchange team will help your business secure lower fees and the best available exchange rates to save on the cost of money transfers. Our dedicated platform makes it easy to manage payments and always pay your overseas workforce on time.
How to Mitigate Foreign Exchange Risk
Currency risk can have a significant effect on the efficiency and profitability of any international business. Each exchange rate movement affects how much you receive from sales and what you pay to suppliers.
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