What you need to Know About hiring Workers from Abroad

Many US companies are hiring their workers from abroad. This is done for a variety of reasons and it’s proven to be an effective human resources management technique in most cases. It’s a way for the company to save and remain competitive on the global market.

At the same time, it gives the company a link with the foreign markets it wants to work with. Outsourcing isn’t something to be taken lightly. You need to prepare for this type of hiring both in terms of legality of the process and its managerial aspects.

Legality

First and foremost, it’s important to know that it’s legal to hire remote workers from abroad. There are strict and complicated rules as it comes to getting the worker permit or a green card, but these rules don’t apply for those who are based in their own countries while working in the US, according to the labor laws.

The legality of the process is therefore covered by the laws of the countries in which the workers will be based and you should hire someone to let you know what your obligations towards those governments are.

IRS

IRS also states that it’s possible to hire workers abroad and that you don’t have any tax obligations towards the US government in regards to their salary. That’s because all the tax rules in the US apply to residents.  IRS states that:

“…wages earned by nonresident aliens for services performed outside of the United States for any employer are foreign source income and therefore are not subject to reporting and withholding of U.S. federal income tax.”

Again, there might be tax obligations towards the countries in which the workers are based, and you’ll need to be informed about these.

Fewer forms

Every business owner and every tax accountant in particular knows how much paperwork there is when it comes to taxation. This is especially true for so called payroll taxes meaning the taxes that are paid on the salaries of your employees since these are paid every week.

There’s much less of this work when it comes to paying your employees abroad. The tax forms that are used to pay these taxes for the US workers No W-2 or 1099 IRS forms aren’t used at all. That’s another reason to outsource and simplify your work. The expenses made in this regard should be shown in your yearly income return, however.

Fewer deductions

There are also other expenses that a business needs to handle in regards to their employees, that aren’t strictly taxes, but are connected to their income. The most prominent of these are Social Security payments and Medicare.

These too aren’t paid when you’re hiring workers abroad. You could make arrangements with individual workers to add to their payments and help them handle those issues in their country, but even with this kind of arrangement you’re still saving on salaries.

Infrastructure

Have in mind that the employees that are based abroad still need to be managed. There are tools available to help streamline this process and those tools should be considered as an additional expense needed to handle the outsourcing itself. This isn’t a place to save since a well-managed infrastructure makes the whole arrangement that much easier.

Even with all the technology and communication infrastructure, there still need to be a manager assigned to the outsourced workers, and it’s customer for them to be based in the US.  That person needs to have all the qualities and expertize of a manager working with employees in house.

Should you do it?

This is no easy question to answer since it’s an individual decision that can be made only by accessing the needs and abilities of your company and its staff. However, it’s safe to say that the practice is both legal and common.

There are already companies in US with the majority of workers living and working outside of it. There are many advantages to this approach saving is the most important of which. It’s important however, to set up a system for managing the employees that’s based in house.

Conclusion

Outsourcing is a common practice these days since the economy is truly global. That’s a way to lower the expenses that are related to hiring and salaries but also to have a team that’s closer to where your customers are. There are no legal reasons not to do so at least not in the US.

Those who aren’t residents of the US don’t need to pay income tax or Medicare or social security costs which are expenses obligatory for those who live in the US. That’s just one of the reasons this option is so popular amongst the US companies.