Hiring International Employees for Startups: Pros, Cons, and How to Hire

Success in business is never guaranteed, but one thing you can do to improve your chances is to staff your startup with top talent. Sometimes, that means thinking outside the box, for example, hiring international employees.

It’s not as easy as hiring local or remote workers from your country, but hiring international workers can set you up for long-term success. Read on to learn the pros and cons of bringing on international workers and how to go about hiring your first international employee.

Why should you hire international employees for your team?

When it comes time to hire highly specialized workers into important roles, it might be time to consider adding international employees to your workforce. Hiring remote international workers brings multiple benefits to startups.

Access to a global talent pool

Sometimes, top talent doesn’t live in the same city, state, or even country as you. When you expand your hiring pool, you also expand the list of excellent workers who are available to your company. Offer remote work (rather than expecting applicants to move) for the broadest appeal.

Cost savings and competitive advantages

Depending on the strength of your country’s currency and the cost of living in your target markets, international workers may cost less to hire. Employees who live in countries where necessities cost less, like many European nations, are likely to have lower salary expectations. Plus, $1 USD often goes further in local currency denominations.

Access to highly skilled workers at a lower cost can give you a leg up on your competition. Hiring from countries that offer tax breaks for foreign employers can also add up. With your savings, you might hire more staff or shift more resources to important growth initiatives like marketing or sales.

Building a diverse and innovative workforce

Hiring workers with a wide range of views and experiences can help your company create better solutions that fit more people. An employee from halfway across the globe may come up with a brilliant idea that’s new to you but seems obvious to them because it’s so embedded in their culture.

Likewise, teams are more efficient and effective when they’re composed of people from different backgrounds who use different approaches to solving problems. It’s valuable to have people who know how things are typically done in the US, but other cultures may contribute workflows or processes that can push “the usual” to the next level.

Expanding your business presence internationally

When you think long-term, do you plan for your services to stay in your state or country, or will you grow to serve new markets? If your goal is the latter, hiring remote international talent helps you build the groundwork for those eventual expansions.

Long-lasting business relationships in another country will help when it comes time to build up operations in or for that area: You’ll have people willing to tap their networks for potential new hires.  Plus, your staff can help you figure out how to best meet the needs of local populations.

Each country has a different culture that’s hard to learn from the outside. Your on-staff insiders can tell you what’s likely to work as-is in their home country and what you’ll need to adapt to meet locals’ expectations. For example, mass-marketing initiatives will be less successful in European nations, where businesses expect more tailored messaging.

What are the challenges that come with international teams?

Hiring international workers carries a higher legal risk and requires more internal work to maintain a cohesive company culture. If your business isn’t ready to solve for the following issues, you’ll want to hold off on international hiring until you’re ready to address them.

Navigating legal and compliance requirements

Hiring foreign remote workers is fairly simple in the US, especially compared to sponsorship. However, you’ll need to comply with employment laws in their country and yours. We recommend consulting tax and legal experts to help.

Typically, foreign regulations fall into three categories:

• Permanent establishment concerns: If you have an office in another country, or if you conduct business (generate sales or revenue) there, you’ll need to pay local corporate taxes. Having one or two remote employees in a location isn’t enough to trigger this designation, but you’ll want to keep it in mind as your operations grow.
• Local labor law violations: US employment laws differ from those of other nations and, in many areas, are much more lax. You’ll need to comply with local regulations that cover things like employment contracts, PTO and leave, overtime pay, and more.
• Misclassification: Misclassifying employees in the US is a big deal; it can be even worse to misclassify foreign workers. The laws governing who can and cannot be considered a contractor are often stricter in other countries, meaning someone you could hire as a contractor in the US would need to be considered an employee elsewhere.

HR may be able to help you navigate some of these questions, but it’s also helpful to speak to international employment lawyers who can answer specific questions regarding the ramifications of international hiring.

Overcoming time zone and communication barriers

Offshore employees may work a far different schedule than, say, California-based teams. If your company doesn’t already have practices and tools to support a remote and asynchronous work environment, you and your team are facing a big adjustment.

Time zones aren’t the only potential hiccup when it comes to workflow and collaboration. Most foreign workers will be speaking English as a second language. Passing fluency tests isn’t quite the same as being embedded in an environment with native speakers.

Cut out work jargon, slang, and idioms from communications to avoid confusing non-native speakers. These individuals may also appreciate written copies of communications they can translate on their own time.

Managing cultural differences in the workplace

Employees with different cultural backgrounds bring a different set of expectations to work. Your US-based team members may find themselves confused by or even at odds with the practices that seem natural to international workers.

For example, the workplace culture in Spain is a lot looser, with people encouraged to share personal emotions and stories as part of their communications. Spanish workers are also more relaxed regarding time, so they won’t appreciate back-to-back meetings and may not see it as a big deal if they show up a few minutes late.

By contrast, workers from India are likely used to hierarchical environments and formal communications. They value working toward shared goals and making decisions as a group, so they may bristle at celebrating “maverick” team members who strike out on their own and take big risks.

You could expect all your workers to conform to local cultural expectations, but doing so would erase some of the benefits of having a global team. Consider training your local team on other countries’ work cultures while training your managers on how to navigate disputes they cause.

Addressing payroll, taxes, and benefits for foreign remote workers

Paying international workers is undoubtedly complex. Because they work (and live) under different circumstances than your US workers, you’ll need to build a pay package that considers:

• What currency you pay them in (and its exchange rate and stability)
• What method you use to pay them
• Their country’s cost of living
• The typical standard of living offered to your local employees
• The cost of any additional benefits you’re required to offer foreign workers
• Tax equalization for employees who have tax obligations in two or more different countries

Running payroll for international employees also involves:

• Following any regulations that govern the payroll cycle
• Paying local social insurance taxes (like the US’ FICA taxes)
• Withholding any necessary taxes
• Submitting tax documents to local authorities, if required
• Submitting the appropriate tax documents to the IRS

Mistakes can lead to costly fines and tax penalties, so talk to a tax expert if this is your first time running international payroll.

How to hire international employees

If you’re ready to reap the benefits of hiring international workers, it’s time to start thinking about the specifics. Here are five steps to follow as you prepare for your global hiring process.

Determine the employment structure and details

The first question to ask is whether you need an employee or a contractor. When hiring remote international workers, you’ll likely use independent contractors only for limited-time projects that don’t fall in the scope of the company’s typical work. Otherwise, you may run afoul of local employment laws.

For example, A CPG company that needs a marketing plan could bring on a foreign contractor to create one; a marketing agency needing ongoing creation of marketing plans for their clients would likely require an employee instead.

Understand employment laws, work visas, and immigration compliance

The next question to ask is whether you’re looking to hire a remote international worker or a foreign national who works in the US. The answer will determine which country’s laws you need to be most concerned with.

Managers looking for remote international workers will need to consider factors like time zones, salary expectations, and local employment laws as they start their search. Be aware of how regulations in the countries you’re considering can affect your obligations to the employee and the budget of the role.

Those hoping to hire a foreign national will need to apply for a foreign labor certification from the Department of Labor. If you’re okay with relocating a worker to the US, you’ll also need to look at the various visa programs available to you. Foreign nationals already in the country will need to verify their employment eligibility (which you’ll confirm on IRS form I-9 if you hire them).

Hiring an international worker on US soil requires more prep work, time, and money. Start early and consult a business immigration attorney on the requirements.

Partner with an employer of record (EOR) or set up a local entity

To hire a remote employee in another country, you’ll need to be a valid employer in that individual’s country. There are two methods you might use.

The first is to set up a legal entity in the employee’s market. Doing so requires significant time and money. Creating a local entity in a new country makes sense for global companies, or those large enough to look at expanding their footprints. For startups, however, it’s probably more expensive than it's worth.

Small businesses can work with an employer of record (EOR), a third party that acts as the legal employer of your international workers. Your EOR essentially serves as your global HR team, handling payroll, benefits administration, and other such concerns for your foreign employees. It’s a much simpler solution, and your EOR can help keep you in compliance with local employment laws.

Create a clear hiring and onboarding plan

Your hiring and onboarding process should set your international talent up for success.

As with any hiring process, start with a clear job description. Then, figure out the salary bands you’d offer in each country, considering the required benefits and local competitors’ salaries to get a baseline of what’s reasonable and expected.

When you’re ready to seek out candidates, use job boards for the localities you want to hire in. Some (like LinkedIn) are international, but different countries and regions often have their own popular job boards. You may also choose to bring on an international recruitment agency to help you find the best candidates.

Your onboarding plan should account for cultural differences and (if applicable) the time-zone gap between the new employee and the hiring manager. An onboarding process that requires hours of one-to-one training might be hard to complete if an employee is eight time zones away from other team members. Make sure your training courses or projects can be completed by the employee on their own and questions saved up for regular meetings or answered on an async schedule.

You may also want to expand your training documents to explain the company culture and expectations. (Formalizing this information will help keep everyone in your company on the same page.)

Use remote work technology to manage teams

Thankfully, most companies have at least dipped their toe into remote work since 2020. Audit the tools your company has and how they’re used by team members. If the reality doesn’t meet expectations, for example, no one uses your virtual scheduling tool because it’s a hassle , it’s time to upgrade to better options.

You may also find that while your tools are fine, your company culture doesn't serve asynchronous workers. Slack, for example, is excellent for sharing files and conversing about work, but what happens when the document an international remote worker needs gets lost amidst the hundreds of new messages they see when they log on each day?

Be open to feedback from employees as you adjust to new workflows that serve international remote workers. This sort of change is often a learning experience for everyone, but effective collaboration in building new processes can strengthen the ties between team members.

Tips for making the most out of an international workforce

To benefit from your international workers’ skills and perspectives, make sure your workplace is set up to support them. Here are a few things you can do to get more from your international employees:

1. Let go of your assumptions: Some things that may seem obvious or automatic to American bosses and employees won’t to international workers, and that’s okay! While you shouldn’t lower your standards regarding their actual work product, keep an open mind regarding their processes and perspectives. Their experiences and background may have a lot to teach your company.
2. Offer flexible scheduling: Most American workforces offer days off that are in line with our federal holidays and Christian celebrations. International workers will have their own civic holidays, and they may not be Christian. (For that matter, not all Americans celebrate Christian holidays, either!) Give your workers a set number of “holiday” hours and let them choose their days off according to local and religious customs.
3. Provide EAL (English as an additional language) support: Non-native speakers, no matter how fluent, may still struggle to communicate certain ideas in English. Classes, reading materials, and mentorship programs that tap native speakers can help international workers improve their business English and overcome language barriers.
4. Welcome differences in the workplace: Workers from other countries have their own customs and norms for workplace communication. International employees may be happy to share these details with everyone in Slack, or they may prefer disclosing them in a private conversation. Managers should be prepared to lead these conversations and speak to other employees, if necessary, to smooth over any unintentional conflicts.

Keep your finances in order with Digits

Hiring international employees is a big milestone. But, managing your books afterward shouldn’t be.

Digits is an AI-native accounting platform built to keep your finances organized automatically. From real-time categorization to always-accurate reporting, our platform makes it easy to stay on top of your growing business. And if you do work with a CPA, they can be added to Digits so they have access to all of your financial data in one convenient place.

Growing globally shouldn’t mean losing financial clarity. Try Digits for free and take your next steps with financial confidence.