You found the perfect candidate for your engineering team. They have exactly the experience you need, they interviewed brilliantly, and they’re ready to start next month.
And they live in Amsterdam.
Suddenly, what seemed like a straightforward hiring decision turns into snowballing questions. How do you legally employ someone in the Netherlands? What about taxes, benefits, and local labor laws? Do you need to set up a Dutch entity just to hire one person?
Welcome to international hiring—where the talent pool is global, but the logistics can feel overwhelming.
The thing about remote work is that it didn’t just change where people work; it changed where companies can find their best people. That brilliant developer might be in Berlin. The marketing strategist you need could be in Toronto. The designer who gets your vision might be working from Buenos Aires.
For U.S. companies, this represents an incredible opportunity. Access to specialized skills, cost-effective talent markets, and the ability to build truly global teams. But it also means navigating employment laws, tax requirements, and compliance issues across different countries.
The good news is that thousands of U.S. companies are already doing this successfully. They’ve figured out how to hire internationally without getting tangled up in legal complexities or drowning in administrative overhead.
This guide breaks down everything you need to know about hiring international employees for your company in the U.S.—your options, the common pitfalls to avoid, and how to build an international team that drives your business forward rather than holding it back.
Can a U.S. company hire international employees?
Yes, you absolutely can hire employees who live in other countries. U.S. companies do this every day—from startups hiring their first remote developer to Fortune 500 companies building global teams.
But hiring internationally isn’t just about finding great people and sending them job offers. You’re stepping into a world of foreign employment laws, tax obligations, and compliance requirements that vary dramatically from country to country.
Many companies discover this the hard way. They hire someone in Germany, then realize they need to understand German labor laws, handle local payroll taxes, and navigate mandatory benefit requirements. Some try to sidestep the complexity by classifying international workers as contractors, only to learn that misclassification can create bigger legal problems down the road.
The smart move? Most successful companies either partner with an Employer of Record (EOR) to handle the legal complexities or work with properly classified global contractors when the arrangement truly fits.
Here are the most common challenges U.S. companies run into when hiring internationally:
- Permanent establishment. If a U.S. company has a fixed location in another country and generates revenue there, this usually triggers permanent establishment, subjecting the company to local corporate taxation. Companies that overlook their permanent establishment obligations face fines, tax arrears, and litigation.
- Unfamiliar labor laws. Labor and employment regulations worldwide usually differ significantly from U.S. regulations, creating a serious compliance risk for U.S.-based companies. Failure to draft compliant international employment contracts that satisfy things like statutory benefits requirements, leave entitlements, and overtime regulations when hiring employees in foreign countries results in fines, limited business opportunities, and other noncompliance penalties.
- Payroll setup and accurate contributions. Payroll for international employees requires employer contributions to more state-backed insurance programs compared to the U.S., such as healthcare and retirement benefits. Fines and other penalties result if a U.S. company doesn’t correctly calculate payroll taxes and contributions for their foreign employees or satisfy local payroll regulations, like following the appropriate payroll cycle or reporting regulations.
- Misclassification risk. Misclassification is most common when a company engages a contractor but treats them like a full-time employee. For example, if you start managing your contractor’s work schedule or pay them a fixed salary, local authorities will see the contractor as an employee under local labor regulations, subjecting you to back taxes, back benefits, and potential fines.
Read our complete guide to employee and contractor misclassification.
Your three options for international hiring
Despite the challenges of hiring overseas employees, you have several options for hiring international workers, including setting up a legal entity, partnering with an employer of record, and engaging contractors.
We discuss each of these options in detail below.
1. Set up a legal entity
Setting up a legal entity in the target market is the traditional approach global companies take for hiring remote employees in other countries and building a long-term, global presence. Establishing a foreign entity allows you to hire and pay local employees directly.
Entity establishment is a desirable option if your company has a large budget, plans to hire a sizable workforce in another country, and is ready for long-term investments.
Still, entity establishment is expensive and time-consuming. It also requires extensive expertise in local legal, corporate, and payroll regulations. Entity establishment is usually more trouble than it’s worth if you don’t have the bandwidth or capital investment or only plan to hire a few employees in your target market.
Learn more: How to Hire Foreign Workers Without Setting Up a Legal Entity
2. Partner with an employer of record
A simpler, more streamlined approach to hiring international employees is to partner with an employer of record. An employer of record is a third-party entity that acts as the legal employer of your international workforce, allowing you to quickly and compliantly hire and pay remote employees in foreign countries without setting up local entities.
An EOR serves as your global HR team, handling the heaviest tasks associated with building international teams, including hiring, onboarding, compliance, global benefits administration, running global payroll, and providing ongoing HR support so you can build an international workforce without the added burden.
An EOR is an ideal solution for companies that want to hire international employees and test a foreign market before making long-term investments. It’s also a great bridge employment solution for companies that are undergoing entity establishment but don’t want to wait months or years until they can hire employees in their target market.
3. Hire and pay contractors
An alternative to hiring full-time international employees is to engage global contractors instead. Contractors provide their services as self-employed individuals. Using and paying a contractor allows you to work with global talent, target specialized skills, and benefit from cost savings and flexibility.
Engaging global contractors is also a great way to test a foreign market. Should you want to convert your international contractors to employees down the road, an EOR easily facilitates this as well, ensuring compliance and forgoing entity establishment requirements along the way.
However, as mentioned earlier, engaging contractors creates misclassification risks. Many countries have unique worker classification regulations, but in general, companies cannot attempt to control the work methods or schedules of their contractors. If this happens, the employer can face fines, employee back pay, reputational damage, and even imprisonment.
FAQs on hiring international employees in other countries
When you hire someone living in another country, U.S. employment laws don’t govern that relationship—local laws in their country do. That means understanding how international employment actually works becomes crucial for staying compliant and avoiding costly mistakes.
Whether you’re hiring your first international employee or building a global team, these questions come up repeatedly. Here’s what U.S. companies typically want to know about hiring and paying people overseas.
How much does it cost to hire a foreign worker?
U.S. companies sometimes find it less costly to hire abroad than to hire domestic employees. Still, the cost of hiring a foreign employee varies drastically, depending on factors like job role, cost of living, employment laws, and payroll contributions.
Do you want to calculate how much it costs to hire a foreign employee? Use our employee cost calculator below to get reliable insights into employee costs and payroll contributions around the globe:
When considering the total cost of hiring international employees, be sure to factor in the following:
- Visa sponsorships. If an employee is not a resident in their country or if you need to relocate talent to another country, you must follow specific immigration requirements, like obtaining authorizations, securing relevant permits, paying fees, and ensuring compliance with the visa application and process.
- Compensation. Total compensation-related costs for foreign employees vary based on the employee’s role, their experience level, local minimum wage laws, the local cost of living, and local statutory employee benefits like 13th-month pay.
- Mandatory employer costs. Along with monthly salaries, employers must contribute to social security and other mandatory insurance programs for their foreign employees according to local regulations. Contributions and rates vary between jurisdictions.
- Competitive benefits. Many employers offer supplemental benefits to improve their employees’ quality of life and secure top talent. Supplemental benefits include things like additional private health insurance, supplemental retirement plans, and extended leave.
- Cost of living. When calculating competitive wages and deciding which supplemental and fringe benefits to offer a foreign candidate, employers should consider the cost of living in their candidate’s country of residence and what financial challenges they face.
- Work arrangement. Because of the mandatory payroll tax contributions and benefits associated with employment, the cost of hiring international employees is generally higher than engaging foreign contractors. Still, engaging contractors creates a misclassification risk, which leads to back pay and hefty fines, and it limits your ability to create a strong, unified team over time.
Learn more in our complete guide to employee cost.
Does an international employee have to pay U.S. taxes?
Remote foreign employees legally residing and working abroad do not have to pay U.S. taxes even though a U.S. company employs and pays them. Because foreign employees are tax residents in a foreign country, they are subject to local laws, and U.S. taxes do not apply.
Keep in mind that U.S. citizens who work abroad are still subject to U.S. income taxes unless they can prove their tax home is in a foreign country and that they qualify for foreign-earned income exclusion.
Do you need to handle U.S. taxes for employees living in other countries?
U.S. companies that hire international workers abroad are not responsible for withholding U.S. taxes from their foreign employees’ wages or reporting their earnings to the IRS. According to the IRS, wages earned by a nonresident for services performed outside of the U.S. are foreign source income and are, therefore, not subject to U.S. tax reporting or withholding.
Does an international employee need a visa to work for a U.S. company?
Foreign employees who work for a U.S. company do not need a U.S. visa or work permit if they reside and work outside of the U.S. However, should the employee relocate to the U.S. or come to the U.S. for training purposes or a business trip, their employer would need to acquire an appropriate visa for them, such as the H1-B visa, or explore other H1B visa alternatives.
Is a U.S. company responsible for providing benefits to hired international employees in another country?
Yes—U.S. companies that hire internationally are responsible for providing benefits to their foreign employees according to local employment regulations. Statutory benefits requirements vary worldwide, and U.S. companies must comply with the requirements of each country where their employees reside.
However, if a U.S. company engages global contractors instead of hiring employees, it needn’t offer benefits.
What are your options for hiring someone in another country?
You’ve got three main routes when you want to hire internationally:
- Set up a local entity. This gives you the most control and reduces compliance risks, but it’s expensive and time-consuming. Think months of paperwork, legal fees, and ongoing administrative overhead just to hire one person.
- Partner with an employer of record. An EOR lets you hire employees in other countries quickly and legally without setting up your own entity. It’s perfect when you want to test a new market or hire internationally before committing to a full local presence.
- Work with global contractors. This is the simplest option upfront—lower costs, less commitment, and faster to get started. But it comes with serious compliance risks if you misclassify someone who should actually be an employee under local laws.
Each approach has its place depending on your timeline, budget, and long-term plans for that market.
Build your global team with Pebl
You’ve seen the opportunity that international hiring creates—access to incredible talent, specialized skills, and cost-effective markets. But the compliance complexity can feel overwhelming. Do you really need to become an expert in German labor law just to hire one developer?
Not when you partner with Pebl. Our EOR services let you hire, pay, and support employees in 185+ countries without setting up foreign entities or navigating local regulations alone. You get the talent you want; we handle the legal complexity you don’t.
Whether it’s hiring and onboarding, managing immigration and relocation, administering global benefits, or running international payroll, we’ve got the in-country expertise to keep you compliant while you focus on growing your business. No legal headaches. No surprise compliance issues. Just straightforward international hiring.
Think of it this way: we already know the rules in every country where you want to hire, so you don’t have to learn them. You can build your global team confidently while we handle the behind-the-scenes complexity.
Ready to turn international hiring from a compliance challenge into a competitive advantage? Let’s talk about how Pebl makes global expansion straightforward.
This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. The content in this guide is provided “as is,” and no representations are made that the content is error-free.
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