Expanding business operations internationally can be an exciting opportunity for U.S. companies. However, one of the crucial aspects they need to consider is how to pay their international employees. The process can be complex and challenging, with different legal, administrative, and financial considerations to keep in mind.

But fear not, because, in this blog post, we will explore different methods that U.S. companies can use to pay their international employees and provide some useful tips to streamline the process. Read now!

Set up a legal entity

One of the most common ways for U.S. companies to pay international employees is by setting up a legal entity in a foreign country. This involves establishing a branch, subsidiary, or representative office that complies with the local laws and regulations. By having a legal presence in the country, companies can open local bank accounts, hire employees, and ensure compliance with tax and employment laws. While this approach offers more control and flexibility over the payment process, it can be time-consuming and expensive to set up and maintain.

Use an employer of record (EOR)

Another option for U.S. companies is to use an employer of record (EOR) service. An EOR acts as an intermediary between the company and the international employees, handling all the legal, administrative, and payroll responsibilities on behalf of the company. This allows the company to hire employees quickly and easily without the need for setting up a legal entity in a foreign country. The EOR takes care of payroll processing, tax withholdings, and compliance with local labor laws, ensuring a hassle-free payment process. This option can be particularly beneficial for companies looking to enter new markets or test the waters before committing to a full legal entity setup.

Outsource payroll

To save time and money, many companies choose to outsource their payroll processes to a third-party provider. Outsourcing payroll for international employees can be beneficial as it allows companies to focus on their core business activities, while experts handle the complexities of payroll calculations, tax filings, and compliance.

By partnering with a reputable payroll provider with global expertise, companies can ensure accurate and timely payments to their international employees, regardless of the country they are based in. This option not only saves administrative resources but also ensures compliance with local tax regulations and labor laws, reducing the risk of penalties or legal issues.

According to research done by payroll experts, the average cost of processing payroll in-house is $2,700 per year per employee. The cost of outsourcing payroll is typically much lower, ranging from $50 to $200 per year per employee. This means that companies can save an average of $2,500 per year per employee by outsourcing payroll.

Pay employees as contractors

In some cases, companies may choose to pay their international employees as contractors rather than hiring them as full-time employees. This approach can offer flexibility and cost savings, especially for short-term projects or freelancers. However, it's essential to carefully navigate the legal and tax implications of classifying workers as contractors, as misclassification can result in legal consequences and financial liabilities. Before opting for this method, it's crucial to consult with legal and tax professionals to ensure compliance with local regulations.

Tips for paying international employees

In addition to considering different payment methods, there are several tips that U.S. companies should keep in mind when paying their international employees:

1. Be aware of the local tax and employment laws: Each country has its own tax and employment regulations that companies must adhere to when paying international employees. It's crucial to stay informed about these laws and ensure compliance to avoid any legal or financial repercussions.

2. Choose a payment method that is convenient for your employees: When paying international employees, it's essential to consider the payment methods that are accessible and convenient for them. This can include options such as direct bank transfers, online payment platforms, or even international payroll cards. By offering convenient payment methods, companies can enhance employee satisfaction and minimize delays or complications.

3. Be transparent about your payment terms: Clear communication is key when it comes to paying international employees. Companies should establish transparent payment terms, including details about the frequency of payments, currency conversion rates, and any additional fees or charges. By setting clear expectations, companies can avoid misunderstandings and build trust with their international workforce.

4. Consider using a payroll provider: As mentioned earlier, partnering with a reputable payroll provider can simplify the payment process for international employees. These providers have the expertise and infrastructure to handle payroll calculations, tax filings, and compliance, ensuring accurate and timely payments. Moreover, they can navigate the complexities of international payroll, such as currency conversions and legal requirements, saving time and resources for the company.


Paying international employees can be a complex task for U.S. companies, but with the right approach, it can be streamlined and efficient. Whether it's setting up a legal entity, using an employer of record service, outsourcing payroll, or considering alternative payment methods, there are various options available to ensure timely and compliant payments. 

Additionally, by keeping a few tips in mind, such as being aware of local tax and employment laws, choosing convenient payment methods, being transparent about payment terms, and considering the use of a payroll provider, companies can navigate the challenges of paying international employees successfully. With the right strategies in place, U.S. companies can expand their global reach while ensuring a smooth payment process for their international workforce.