Key Takeaways
1. A US company can hire a foreign employee, and there are several options available.
2. Where the employees is to be relocated to the US, and they do not currently have a right to work there, it will be necessary to sponsor that individual’s visa.
3. Where the individual can work overseas, the company can hire that individual through a local entity/subsidiary, a branch, or a PEO arrangement.
For US companies on the talent search, it is important to consider the options available for hiring a foreign employee. Here we look at the benefits of overseas hire for US companies, as well as the three main mechanisms for doing so.
Is it possible for a US company to hire a foreign employee?
The answer is yes — and there are a few different ways to do it. If you have carried out a talent search and found an individual you would like to hire, but find out that they are based overseas (and have no automatic right to work in the US), you have a few options:
- You can arrange for a visa
- and for that individual to be relocated to the US. This involves going through the complex, and often time-consuming, visa and sponsorship process.
- You can set up a business presence of your company overseas
- whether a branch or a foreign subsidiary, and hire an individual employee through that presence.
- You can use a Professional Employer Organization (PEO)
- arrangement to hire employees who will remain overseas.
- We discuss each in turn.
What are the benefits of a US Company hiring a foreign employee?
There are several benefits for US companies hiring employees from other countries. By hiring overseas, a US company can:
- Tap into the global talent pool
- For example, Eastern Europe and India are well-known sources of software developer talent. Why restrict the company to only hiring developers in the US where talent can also be found elsewhere?
- Cost savings
- Often you will save on hiring costs by hiring in countries where the cost-of-living is lower.
- Provide extended coverage to your customers
- If your business sells internationally, it is sensible to have customer support and other staff based in non-US timezones.
How can US companies hire overseas?
Sponsor visa for US entry
There are a few different types of visas that allow foreign nationals to work in the US. The most relevant for US businesses seeking to hire abroad is usually the H – 1B visa, which allows highly-qualified workers to come to the US on a non-permanent visa. To sponsor an employee for an H – 1B, the US company must first file a petition with the US Citizenship and Immigration Services (USCIS). The petition must include evidence that the company is unable to find a qualified US worker for the position, and that the foreign national will not displace an existing US worker. Once USCIS approves the petition, the employer can then apply for a work visa on behalf of the employee. There are also other types of visas that may be available for foreign workers, depending on the role and business needs. This includes the L – 1A and L – 1B visas (covering intracompany transferees who are executive managers, or with specialized expertise); there is also the E-visa class for treaty traders and investors, and Australian workers in specialty occupations. A similarly stringent visa petition and sponsorship process applies for these classes as it does for the H- class.Employ overseas via a local entity or branch
Another option for US companies looking to hire overseas is to set up a local entity or branch in the country where they wish to hire. This can be a complicated process, but it may be necessary if the company wants to have a long-term presence in the country or needs to hire multiple employees. To set up a local entity (such as a foreign subsidiary) the company will generally need to:- Incorporate that entity overseas
- Meet any minimum paid-up capital requirements (e.g., €25,000 in Germany)
- Register that entity with the tax authorities in the country where it is located
- Register the entity as an employer in that country.
Operating a branch overseas means that the international company is registered in the destination country with tax and labor authorities, but no distinct entity is incorporated. Once the branch is registered, it could hire your employees there. The disadvantage of a branch is that, as an integral part of the US company, the US company would be exposed to unlimited liability overseas.
Employ overseas via a PEO
Another option for companies looking to hire overseas is to use a professional employer organization (PEO). A PEO is a company that provides, payroll, HR and employment services to businesses, both domestically and internationally. This can be a convenient option for companies that don’t have the resources or expertise to set up their own entity in another country.
To use a PEO, the company will first sign an agreement with the PEO. The PEO will then become the ’employer of record’ for the company’s workforce in the overseas location. The PEO will handle all formal aspects of the employment relationship, including processing payroll and ensuring compliance with laws and regulations. However, the employee would still work under the direction of your company on a day-to-day basis.
Hire overseas with Horizons
Frequently Asked Questions
If you have an employee working outside the US, you will need to set up a foreign payroll in order to process their salary or wages. This can be done through a professional employer organization (PEO) or by setting up your own entity or branch in the country where the employee is working. You will also need to comply with all applicable laws and regulations in the country where the employee is working.
No, you do not necessarily need to set up a foreign entity to hire someone overseas. You may be able to sponsor an employee for a work visa through your US company, and relocate that employee to the US. Another option (especially if the employee is remote) is to use a Professional Employer Organization (PEO) to formally hire the employee overseas while they continue to work in your business day-to-day.
