An Employer's Guide on How to Pay Remote Employees

When a company hires remote employees in another country, it gains access to a broader talent pool. However, this approach also comes with practical challenges. For instance, how will you manage payroll for your new employee? Access to a global payroll service can make this task much more manageable. This article outlines how to pay remote employees, offering a practical guide for employers.

One helpful way to manage remote payroll is through Cercli’s global HR system. It enables timely and accurate payments to remote employees while helping you comply with local employment laws.

How To Set Compensation For Remote Employees

As remote and international hiring becomes more common, companies are rethinking how they set fair and consistent pay for employees in different locations. In 2024, over 30% of US business leaders reported plans to expand their teams globally. This trend broadens access to talent and gives employees greater flexibility in where and how they work.

The Location Factor: How Geography Affects Pay for Remote Employees

Location is often a key factor when paying remote staff, particularly when ensuring compliance with minimum wage laws. The process tends to be more nuanced for salaried positions. Two main models have emerged: geography-based pay and national rate structures.

Geography-Based Pay

This is the more traditional model, where salaries are based on the employee’s location, factoring in local labour markets and cost of living. For remote employees not based near a company office, their location, whether a high-cost city or a more affordable rural area, typically affects their pay.

This model can make it easier for businesses to align wages with local norms and budgets. It also has drawbacks. Pay differences between employees in similar roles can create tension, especially if someone earns more solely because of their postcode. It also requires regular adjustments if employees move.

National Rate Structures

Many organisations offer a flat rate regardless of location to avoid such inconsistencies. In this model, all employees in the same role receive the same salary, irrespective of where they live. This simplifies payroll, promotes pay transparency, and can boost morale by reducing disparities.

Companies like Reddit and Zillow have adopted this approach, basing pay on role rather than location. Research indicates that between 60% and 75% of businesses are moving away from location-based compensation in favour of this model.

Documenting Your Pay Policy

Whichever model you adopt, it’s essential to document your remote pay policy clearly and communicate it to your employees. This will promote consistency, reduce the risk of disputes, and support fair employment practices.

Remote compensation is not one-size-fits-all. Each model has its strengths and challenges, and the best choice will depend on your organisation’s: 

• Structure
• Locations
• Values

What matters most is that your pay strategy is transparent, fair, and aligned with your long-term workforce goals.

Considerations When Paying Remote Employees

Remote Worker Classifications: Who’s Who in Payroll

Remote work involves various classifications that affect how you pay your global team. Some companies classify remote workers as independent contractors, while others consider them part-time or full-time employees. It’s essential to understand how remote worker classifications are defined so you can categorise and compensate your staff accurately.

Paying Local vs International Remote Workers

Local remote workers live and pay taxes in the same country as their employer, while international remote workers submit tax returns in a different country. Employers must consider key differences when paying local and international staff. 

• Local employees generally receive payment through: 
  
  • Direct deposit
  • Cash
  • Cheque
• International remote workers, however, may require different payment methods. 

Payroll frequency may also vary; while some international employees are paid monthly or per project, local remote employees are usually paid fortnightly or monthly, depending on the payroll process.

Due to currency exchange rates, international payments can incur additional fees and complexity. As a result, many employers use international payment services to pay remote employees. These services offer a secure and cost-effective way to transfer money overseas, and they often support a variety of currencies.

Permanent Employees vs Independent Contractors

Permanent employees and independent contractors differ in several ways. Whether to hire one or the other should depend on your business requirements and operational needs. Consider all relevant factors before making a decision.

Tax-Related Matters When Paying Remote Workers

Paying remote workers can be complex, particularly when it comes to tax. As an employer, you must pay all taxes accurately and on time. This section outlines what’s involved in meeting tax obligations for remote workers.

Relevant Payroll Forms for Remote International Contractors

In the United Kingdom, hiring remote employees may require collecting certain forms. One important form is the W-8BEN or Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding, commonly used by US-based entities paying non-US individuals. Any non-US individual receiving payment from a US source, such as salary or commission, must fill out this form. US-sourced income refers to work performed inside the US and is not typically taxed if performed offshore.

The W-8BEN form ensures the individual pays any relevant taxes in their home country and allows employers to avoid withholding US taxes on such payments. It must be completed thoroughly, including the individual’s name, address, Social Security number (if applicable), date of birth, and other relevant information. Incomplete forms may lead to penalties or compliance issues for the employer.

Income Tax for Remote Foreign Workers and Contractors

When you hire a remote contractor, you are generally not required to withhold taxes, as the contractor is considered self-employed and responsible for their tax obligations. Contractors should be informed that they are accountable for meeting tax requirements in their own country, including registering for self-employment tax or obtaining a tax identification number.

While companies can provide basic guidance, it is ultimately the contractor’s responsibility to understand and comply with their local tax laws.

Laws in the Foreign Country: What You Need to Know About Compliance

Different countries have regulations around tax residency and employer obligations. These may depend on where the employee pays taxes, where the company is based, and local employment laws. For example, some EU countries, such as Spain, require companies to provide minimum employment terms, including paid holiday entitlements for full-time employees, typically 30 calendar days.

Employee Benefits: What Do Remote Workers Want?

Employee benefits are an essential aspect of a compensation package and can help attract and retain global talent. In most countries, social security contributions are mandatory for employers. These contributions may cover: 

• Healthcare insurance
• Pensions
• Unemployment benefits
• Compensation for work-related injuries

Many countries also require employers to provide paid annual leave or contribute to parental leave. Once the necessary benefits are established, employers can consider offering additional perks such as home office stipends, wellness allowances, or cryptocurrency-based payments to enhance employee experience.

Bank Charges and Exchange Rates: What to Expect

International payroll often involves sending funds across borders, which can incur fees. For instance, SWIFT transfers, a widely used system for secure global payments, can cost between $25 and $50 USD per transaction. Currency fluctuations also pose a challenge. In many jurisdictions, employees must be paid in local currency. If exchange rates shift unfavourably, your payroll budget may be affected.

Data Protection: Staying Compliant with GDPR

The European Union’s General Data Protection Regulation (GDPR), updated in 2018, sets out stricter requirements for data privacy. This is especially relevant for companies with international workforces. A wider range of individuals may access payroll data, and employers must ensure compliance with data protection laws in each country of operation.

If payroll is outsourced, a third-party provider can access sensitive employee information. It’s essential to have a robust data processing agreement (DPA) in place, a legal contract between the company and payroll provider to ensure data is handled securely, in line with GDPR, and with appropriate legal safeguards in case of a breach.

Supporting Scalable HR in the MENA Region

Cercli supports HR operations that align with the UAE’s commitment to business excellence. It provides a platform tailored for MENA businesses, combining workforce management processes in one platform. Manage your entire team, whether local or distributed across 160+ countries, using a comprehensive solution that supports multi-currency payroll, leave management, induction, and compliance documentation tailored to the unique requirements of the MENA region.

Whether you're managing a growing team of 25 or coordinating 500+ employees across multiple countries, Cercli offers region-specific expertise and processes to help MENA businesses scale sustainably and manage remote teams effectively. Explore an HR platform designed to support how you do business in the Middle East. Book a demonstration today to speak with our team about our global HR system.

Related Reading

• Payroll Outsourcing Companies
• Employer of Record Meaning
• Paying International Contractors
• Remote EOR

Methods to Start Paying Your Remote Employees

For businesses based in the Middle East and North Africa (MENA), Cercli offers a regionally tailored platform to support the management and payment of international contractors. The platform promotes multi-currency payroll, enabling businesses to process payments in over 160 countries and align documentation with local legal requirements.

In addition to contractor payments, Cercli offers tools for leave management, onboarding, and workforce compliance, explicitly designed for the legal and operational context of the MENA region. By consolidating these functions into one platform, Cercli eliminates the need for multiple separate tools, which can be challenging to manage at scale.

Suitable for MENA-based companies seeking a platform that combines contractor payments with wider HR features and compliance oversight.

Set Up a Local Entity

Establishing a legal entity in the country where your remote workers are based is a formal approach to international employment. It enables access to local banking and financial services and helps ensure compliance with employment and tax regulations.

Setting up and maintaining legal entities in each country can be time-consuming and costly. You may need to hire local legal and financial experts and manage country-specific tax filings and reporting. This approach is generally more viable for larger organisations with long-term plans to establish a presence in a particular market.

Partner with a Local Company

Working with a local company in the employee’s home country can streamline the payment process. It can reduce: 

• Administrative work
• Save on transaction fees
• Ensure quicker and more reliable payment delivery

A local partner can also assist with legal and tax compliance, helping you stay current with local employment laws and regulations. This can be especially useful in countries where employment regulations change frequently.

Use an Employer of Record (EOR)

An Employer of Record is a third-party service provider that officially employs the worker on your behalf. While your company oversees day-to-day responsibilities, the EOR manages: 

• Contracts
• Payroll
• Tax filings
• Compliance with local employment laws

This approach removes the need to set up a legal entity in each country and is often used for short-term hires or entering new markets. It offers flexibility while supporting legal protection for both employer and employee.

Pay Workers as Independent Contractors

Classifying remote workers as independent contractors can sometimes simplify payroll, as the individual is responsible for their taxes and benefits. A written agreement should outline payment terms, frequency, and method.

Common methods for paying international contractors include bank transfers, international payment platforms (such as PayPal), and payroll systems such as Cercli. Depending on legal and operational considerations, some companies also explore alternatives such as cryptocurrency.

Related Reading

• Global Payroll Compliance
• Employer of Record Cost
• How to Pay International Contractors
• How to Hire International Employees
• Multi-Country Payroll Outsourcing
• How to Pay International Employees

How to Set Up Payroll for Remote Employees

Choosing the Right Method to Pay Remote Employees

You have two main options for paying remote employees: 

• Managing payroll internally
• Using a third-party payroll provider

The most suitable approach for your business depends on its size, the number of countries where your remote employees are based, and the resources available to your team. Managing payroll internally may be appropriate for companies with staff in a single country or a small team. 

This option provides complete control but requires detailed knowledge of local tax regulations and employment laws. You will need reliable payroll software or a dedicated team to manage: 

• Tax filings
• Employee benefits
• Payments

An external provider is often more practical for businesses with employees across multiple countries. These services manage everything from payroll processing to tax deductions and compliance. They help reduce administrative workload while ensuring accuracy and compliance with local regulations.

Track Time Accurately to Ensure Fair Pay

Time tracking is essential to ensure fair pay and comply with legal requirements, mainly when employees are based in different regions. For hourly workers, time-tracking software supports accurate wage calculations and helps prevent payroll errors or disputes. For salaried staff, it also assists with workload management and helps ensure compliance with local rules on overtime and working hours.

Tools such as Clockify, Toggl and Hubstaff provide options for logging hours through self-reporting or automated tracking.

Process International Payments to Ensure Timely Payroll

Once time has been tracked and payroll data finalised, the next step is to ensure payments reach employees accurately and promptly. 

This includes dealing with:

• Currency conversion
• Payment processing fees
• Local tax and social contribution requirements

A global payroll provider or specialist payment platform can help streamline this process. These systems typically automate cross-border payments, apply local compliance rules, and minimise the risk of delays or errors.

Four Tips for Setting Up Payroll for Remote Employees

Streamlining Payroll for Remote Employees

Setting up payroll for remote employees requires more than simply processing payments. To ensure smooth operations, it is essential to: 

• Integrate different systems
• Maintain compliance with local laws
• Ensure employees are paid accurately and promptly

Here are four practical tips for getting started.

1. Integrate Payroll into One System

If your payroll system operates separately from your accounting or HR tools, this may result in duplicated efforts and an increased risk of errors. Integrating payroll with time tracking, employee compensation, and benefits can improve efficiency and accuracy.

For example, employee compensation requirements may vary by region. Ensuring the right premiums are accounted for is easier if your payroll is integrated with insurance systems. Similarly, if your business offers health or disability insurance, mandatory in some countries, including the UAE, linking payroll with HR tools ensures deductions are calculated correctly and consistently for every pay cycle.

2. Automate Where Possible

Automating key parts of your payroll process can help reduce manual work and avoid mistakes. This includes automating the import of timesheet data, calculating wages, processing deductions, and issuing payments through electronic bank transfers.

Bank transfers are advantageous for remote teams, ensuring employees receive their pay on time, regardless of location. Automation also supports compliance by helping you keep accurate records and apply the correct tax rules across different regions.

3. Keep Payroll Records Organised

Managing payroll records carefully is essential both for operational efficiency and legal compliance. With remote teams, it can be easy to lose track of documentation if records are not well organised.

Most authorities require businesses to retain payroll records for a period that varies by jurisdiction. Using a payroll service or digital system that stores employee data securely in one place makes it easier to access information when needed. It avoids delays in addressing any queries or audits.

4. Stay Informed About Payroll Laws

Payroll regulations can vary significantly depending on the country or region where your employees are based. Areas such as minimum wage, tax reporting, payment deadlines, and overtime rules often differ, and staying up to date is essential to avoid legal and financial risks.

You should appoint someone on your team to monitor legal changes or work with a payroll service provider responsible for maintaining compliance. Ignoring local rules could result in fines, penalties, or delayed employee payments.

Setting up remote payroll is about building a compliant, reliable, and efficient system. By integrating your tools, automating processes, staying organised, and understanding local laws, you can ensure your payroll operations effectively support your team, no matter where they are based.

Related Reading

• Payroll for International Employees
• Best Way to Pay International Contractors
• Hiring International Contractors
• Hiring Remote Employees in Other Countries
• Payroll BPO
• Payroll Solutions
• Outsourced Payroll Services
• Payroll Outsourcing Services

Book a Demonstration to Speak with Our Team about Our Global HR System

Cercli supports HR operations that align with the UAE’s commitment to business excellence. Cercli provides a platform tailored for MENA businesses, combining workforce management processes in one platform. Manage your entire team, whether local or distributed across 160+ countries, with our comprehensive solution that handles multi-currency payroll, leave management, induction, and compliance documentation tailored to the unique requirements of the MENA region.

Whether you're managing a growing team of 25 or coordinating 500+ employees across multiple countries, Cercli offers region-specific expertise and processes to help MENA businesses scale sustainably and manage remote teams effectively. Explore an HR platform designed to support how you do business in the Middle East. Book a demonstration today to speak with our team about our HR platform designed for international teams.

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