The Ins and Outs of Hiring International Remote Workers for Your Small Business

By Alice Williams

The 21st century workplace has seen some radical changes from years past—smart devices, BYOD policies, and non-traditional office spaces are prevalent. But one trend stands out from the others in popularity with both employees and employers: remote working.

Remote work opportunities are growing by leaps and bounds. But as you jump on this trend and start building out your small business’s remote workforce, you may encounter applicants based outside the United States. If a foreign candidate shows promise as a remote worker, can you still hire them?

Though managing international remote workers (whether contractors or employees) does require a different set of practices and procedures, it’s absolutely possible. Read on for a deeper look at why—and how—to hire international remote employees.

Benefits of hiring international remote workers

Remote work situations have a lot of benefits for all involved—employees given flexible schedules are usually happier with their positions, and employers can save up to $11,000 per year per remote employee. But for small business owners and entrepreneurs especially, there are a few things that make hiring international remote workers particularly advantageous.

Between 2014 and 2015, FlexJobs reported a 26% increase in postings for remote workers, indicating that competition over these workers in the United States is on the rise. Fortunately, if you’re not constrained by hiring someone in your company’s city, state, or country, your pool of potential candidates is widely enlarged. When geography is removed from the equation, you’re free to focus on the most qualified and compatible candidates, no matter where they live.

More articles from AllBusiness.com:

• How to Effectively Manage Remote Employees: Lessons Learned From Apple and Google
• 7 Benefits to Hiring Remote Workers
• Top 5 Tips to Motivate Remote Employees
• 7 Tips for Conducting a Successful Virtual Job Interview
• 10 Lessons I Learned From Building and Managing a Remote Team

Further, studies have found that many remote workers show substantially higher productivity than office workers, which is good for both bottom-line finances and efficiency. Add to that the benefit of getting a more global perspective from foreign-based employees on day-to-day work functions, and it’s clear that hiring internationally can be more than worth the effort.

How to hire international remote workers

Small business owners that truly embrace employing international remote workers may be intimidated by the legal hurdles of who live outside the U.S. Fortunately, a lot of the red tape around foreign-based hiring exists to regulate American companies that hire and physically relocate international candidates—not those hiring freelance workers.

There are still things to be aware of as you hire contractors outside the United States, but the process is manageable. Here’s a quick guide to help set you on the path to successful international contracting:

1. Interview carefully

Whether your favorite candidate comes from upstate or another country, the interviewing process for remote workers differs somewhat from a typical in-house position process. Skype or another video conferencing tool can facilitate the actual interview, but you’ll want to ask questions that address the remote work situation—specifically about communication and self-management. Don’t forget to check out past experience and references, too, the same way you would with any other hire.

2. Specify the employment type in the offer

It’s common for remote workers to be hired as independent contractors, and that arrangement is highly recommended for international remote hires. This puts the responsibility of reporting income on the worker you’ve hired, rather than on your business.

Keep in mind that there is a strict set of rules governing independent contractor classifications, so you should verify that your position and expectations don’t violate those parameters. Before signing any offer letters, double-check with the IRS and the foreign applicant’s country of residence to make sure the arrangement meets the definition for an independent contractor.

If you want to hire a non-U.S.-based worker as an employee instead of a contractor, it’s a good idea to reach out to a legal advisor to ensure that all elements of the contract, visa, and tax arrangements comply with U.S. regulation.

3. Understand visa requirements for international remote workers

If you hire a foreign worker who does not have U.S. citizenship, you might be worried about obtaining work visas. Luckily, if the worker will not be living in the United States or performing work on American soil for the duration of the contract, you won’t have to deal with visas at all. However, if you want to bring a foreign remote worker to the United States for even a short time, you will need to obtain the proper documentation. The worker would most likely be considered a temporary (nonimmigrant) worker, which would require you to file a nonimmigrant petition on their behalf.

On the other hand, if your remote employee holds U.S. citizenship—as either a dual-citizen or a U.S. citizen living abroad—they should be fine to come and go as needed.

4. Brush up on tax laws

There are a few different ways to determine tax withholdings for foreign workers, and it’s crucial that you handle the taxes on wages appropriately. Failure to properly withhold taxes on compensation may result in hefty fines down the road.

If your remote employee is not a U.S. citizen and all work will be performed outside the country, your remote worker will need to complete a Form W-8BEN as documentation. Assuming the contractor meets the criteria and properly fills out the form, their wages as nonresident aliens likely won’t be subject to withholding. In the event that their status can’t be verified, you may need to withhold up to 30% of their earnings for taxes. Keep in mind that, as with visas, the location of the performed work matters—if the contractor does work from within the United States, the tax requirements for both parties will change.

For U.S. citizens living and working abroad, you’ll need to request a W-9 form. The employee will be responsible for managing taxes on earned wages, though you’ll be responsible for sending out a 1099 form each January for reporting purposes. The only exception is if the contractor is paid via PayPal, as the service itself deploys 1099s.

Though hiring foreign remote workers is definitely different from hiring traditional in-house workers, many employers find that the benefits make up for the required effort. If your dream candidate turns out to live across the pond, use the above tips to make sure you are adequately prepared for the onboarding process.

Note: Because tax and residency status can vary drastically based on specific circumstances, always seek legal assistance when drafting contracts, arranging visas, or setting up payments and withholdings for employees who are not U.S. citizens.

RELATED: Here’s What You Need to Know About Hiring Non-U.S. Workers