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International PEO

A Guide to Hiring Foreign Workers Without Setting Up a Legal Entity

By September 1, 2022September 13th, 2022No Comments

If your company is hiring foreign workers, you might consider setting up a formal establishment in another country. While establishing a formal entity is one route to hiring international talent, it’s not the only option. This guide outlines how to grow your business in a foreign country without setting up a legal entity.

Can You Hire a Foreign Employee?

Yes, you can hire a foreign employee, but the process is not as straightforward as putting them on your payroll and cutting a check each month. While some companies opt to set up a legal entity in a different country to hire foreign employees, it’s a time-consuming process that has some hidden costs. Fortunately, there are other options.

How to Hire Foreign Workers Without an Entity

You don’t have to establish a permanent foreign entity to hire foreign workers. Rather than setting up a legal entity, companies can either engage contractors with the help of a contractor management solution or partner with an employer of record to hire employees and avoid the risk of noncompliance.

Two options for hiring foreign workers without an entity: hire and pay contractors, and partner with an employer of record

Hire and Pay Contractors

Companies often hire contractors to avoid the time-consuming and often costly process of onboarding new employees. There are plenty of benefits to hiring contractors, including avoiding paying certain taxes. However, some countries have strict rules around hiring contractors which, when overlooked, can lead to hefty fines.

Even for companies that are savvy with foreign employment law, there’s always the risk of noncompliance such as misclassification and the need for locally compliant contracts. Compliance issues make it important for businesses to seek a contractor management partner and use secure payment platforms.

Partner With an Employer of Record

An employer of record (EoR) is a powerful solution for companies who want to ensure compliance when hiring foreign employees.

An employer of record allows companies to hire foreign employees in a new country without needing to set up a local entity. Beyond managing compliance requirements, an EoR ensures locally compliant employment contracts, manages payroll and tax withholdings, and provides ongoing support for local labor laws and regulations.

An EoR is an efficient and compliant solution for businesses that plan to expand and hire foreign employees without establishing a permanent presence in a new country.

How Does an Employer of Record Work?

An EoR legally employs your foreign talent, manages all payroll withholdings, pays supported employees on time, and ensures compliance with terminations and offboarding. Partnering with an EoR means companies don’t have to worry about maintaining compliance and can focus on growing their business.

Learn more about what an employer of record is and how it works.

FAQs About Hiring Foreign Workers

Companies that choose to hire foreign workers take on an enormous responsibility to ensure compliance and avoid fines. Let’s look at some common questions around global expansion and hiring foreign workers.

How Do I Pay an International Employee?

Paying international employees varies depending on how you employ the foreign worker.

If you employ the worker as an employee through a legal entity, it’s important to work with a payroll partner that is well-versed in running payroll in that country, such as a multi-country payroll partner. Multi-country payroll allows businesses with international entities to pay employees across multiple countries.

If you choose to hire employees with an employer of record, the EoR pays your supported employees on your behalf. An EoR’s global payroll function includes accurate tax withholdings and timely payments.

Alternatively, if you decide to hire workers as contractors, a contractor management or contractor payments solution allows you to pay, invoice, and manage your international contractors.

Can US Companies Hire Foreign Workers?

Yes, US companies can hire foreign workers, but they must follow the foreign country’s local labor laws. Employment laws vary widely in different countries, which is why many companies opt to partner with an EoR to ensure compliance for all new foreign hires.

Read more about how US companies hire and pay internationally.

Do Foreign Workers Need Visas or Work Permits?

It depends. If the foreign worker is a citizen or is allowed to work in that country, then the individual does not need a visa or work permit. However, if the worker is not legally allowed to work in that country, then the individual will require the correct visa or permit.

Businesses that expand into new countries should seek relocation or immigration services if their workers are not legally allowed to work in that country.

Save Time and Costs While Hiring Foreign Workers

Expanding into a new country is exciting for any business, but that progress can easily slow down by red tape and compliance issues. Hiring foreign workers by setting up an entity proves to be complex, time-consuming, and costly.

Partnering with Velocity Global’s Employer of Record allows companies to fast-track hiring and operations on the ground in their new location. EoR solutions provide invaluable services such as payroll, immigration, onboarding, and ongoing support for partners expanding into foreign countries.

Contact us today to hire without setting up a legal entity.