Remote hiring, payments, compliance and taxes - All you need to know
The idea of Remote work is simple; it gives you more ‘freedom’. The freedom to choose how you manage your time, the freedom to set your priorities, yourself. But, like many things on Earth, freedom of work also comes with a cost. The dividend you pay in return for an option to work remotely spans different horizons. From managing your time to managing a virtual team, remote work is a costly affair.
Speaking of cost, the option to work out of your backpack can set you thousands of dollars away from your financial goals. And the value multiplies to thousands more if you manage a remote team. The remote work veterans today like to speak of themselves as mafia of the crowd and define themselves as citizens of the world. But they still hold a passport, and that represents their home country. So, if you want to hire top-notch remote talent, you may have to look beyond your line of sight and get onboard non-native captains for your ship. Hiring remote talent from across the border is a challenging task. Mostly because of local government policies. These policies may include a ‘close-minded’ taxation structure or outdated compliance policies.
So what should you do if you want to hire overseas remote candidates?
Well, here is a one-stop guide to help you understand remote workers, know how to manage payments and learn about remote work compliances.
Relationships between remote companies and remote workers
Hiring remote employees is not just about skimming through resumes and sending calendar invites for video calls. The process goes beyond general HR KRAs and involves understanding the different types of remote workers. These different types of remote employees work on a different set of rules, and that is why it’s essential to know all of them. Also, Because the nature of remote work is so diverse, setting a filter on what kind of remote worker you want to hire will only put a bottleneck for global talent.
Generally speaking, there are three types of remote workers:
- Full-time Remote Worker
A full-time remote worker is someone who is associated with a company generally on 9 to 5 bases. This type of remote worker is a real asset to a remote company and reports to virtual teams.
Sole proprietors, on the other hand, are individual remote workers who set up a sole company in their home country and work with virtual companies. The idea of a sole proprietor is based on tax evasion by associating on business terms.
Contract-based remote workers are the one who works under a signed contract. This segment of remote employees generally include freelancers and individual contributors.
Complications in hiring remote talent
The idea of hiring talent from across the globe is intriguing to many organizations. The practice promises the best people to work on your projects and contribute to a steeper success curve for your company. But, not everything is ‘roses and apples’ on the remote hiring front. Onboarding remote employees outside your home country or registered location of your business comes with complications. These complications may include things like:
- Managing all remote employees on a single payroll is almost next to impossible.
- Hiring remote workers come with a considerable cost in terms of various taxation policies in different countries.
- Government compliance such as ‘accepted working hours’, overtime laws and minimum wages can pose a threat to your financials.
- Embracing multiculturalism is a massive problem in diverse teams.
- Paying remote employees across the globe is a hassle.
But, in the wake of this year, the coronavirus has disrupted work values in organizations to a tremendous extent. One of the crucial changes the virus has caused is in the way companies work today—acceptance of remote work has increased by many folds in the last few months. Remote employees are now much more intimate with remote organizations and are blurring the complications. Better taxation policies, digital payment options and easy compliance has made it possible for organizations like yours to hire remote workers, hasslefree. On top of this, there are organizations such as Starkflow who can not only assist you in finding remote employees but can also manage compliances. We are a one-stop solution to all your needs when it comes to hiring remote talent. We can help with tax deductions, payments and payroll for you so that you can hire the best of talent without facing constraints.
How to manage payments as a remote company
Technology has a vital role in changing the way we work. The disruption in the finance industry has made it possible to transfer money around the world within minutes. Paying your remote employees whether they are contractors or fulltime assets can be powered by these digital transactions. On the other hand, payroll is a different ball game altogether. Paying full-time remote employees comes with the hassle of managing tax filing, which includes income tax and health insurance. The most crucial factor to consider when hiring a remote resource is to see where they are based out of and what is your relationship with them.
If you are hiring remote employers from within the United States, the cheapest way to pay is to set up a bank transfer. However, this method comes with the added taxation cost. You will have to fill up 1099 forms for employees you repay more than $600 in a month. Filing such forms doesn’t look like a lot of work but imagine if you have a large workforce. The hassle will increase multiple folds and bite the crucial time out of your schedule. To save the effort, you can choose to pay contract remote employees via digital transfer platforms such as Paypal and Transferwise. But remember that this is a good option only when you hire contract-based talent. A full-time remote resource will come with similar hassles of taxation, health and unemployment insurance.
So, Digital transfer is a good option if your employees are residing in the same country as yours, but what about the rest? What if you have to make payments to employees from outside your home country?
Most of the ways which are suitable for within the country transfer are valid for off-shores too. You can pay your employees anywhere in the world using a wire transfer service such as SWIFT. But, if the options are similar, it doesn’t mean that the costs are identical too. If you want to pay a remote worker outside your home country, you may have to shell out as much as $30 per employee. On top of this, there are currency exchange rates that you have to consider. Many payment services providers charge a hidden exchange rate and can differ from each other. Although, there are services like Transfermate who charge market exchange rates but charge a flat fee on transactions.
We have shared a detailed report on options you can choose from when paying your remote workforce here.
How to manage compliances and taxes as a remote company
Location of your remote employees is the deciding factor in managing taxation and compliances. The general notion is that you will have to deal with taxes and compliances only when you hire employees from a different country, but this is far from the truth. Taxation and compliance laws can change within the state or even within the local community. Such is the case with the United States. If you reside in Texas for example and want to hire someone putting up in upstate Newyork, you will have to deal with different paperwork. In the case of America, there are two taxes that you should care about. These are income tax and payroll. The employer pays both of these for the state the employee is based out of. The notion is true for both type of remote workers, whether they are full-time or contractors. Although, the hassle eases a bit in the case of a contract based remote employee.
If you are hiring remote employees from outside your home country, the woes multiply by many folds. Generally, you will have to set up a local branch for your organization in the country and abide by the local policies. These policies may include overtime wages, minimum pay, health benefits and insurances. In such a scenario, companies choose to hire contract based remote employers and ask them to pay taxes as a freelancer in their home country.
How to avoid the hassle of the remote hiring process
Like we mentioned earlier, hiring employees from outside your home country comes with numerous challenges. This could be in terms of how you manage the paperwork involved and how you manage their payroll.
To automate this entire process and keep you away from all the hassle, we at Starkflow are committed to offering payroll, compliance and taxation service. We can manage the whole process of hiring a remote worker for you so that you can focus on other commitments and scale with a breeze.
Our experts will be willing to speak to you about your payroll needs.