How to Pay International Employees: Complete Guide 2025

Wondering how to pay international employees legally and on time? Many US companies and global businesses hit roadblocks with payroll, taxes, and compliance when managing teams overseas. The good news: it doesn’t have to be complicated.

This guide is for businesses already managing international teams, or planning to hire overseas, but struggling to set up a reliable payment process. Whether you’re a startup hiring your first remote engineer, a growing company juggling multiple countries, or an enterprise scaling global payroll, this article is for you.

We’ll walk you through the main ways companies pay international employees, the compliance traps to avoid, and how to build a system that scales. Let’s dive in.

What does it mean to pay international employees?[toc=Paying International Employees]

Paying international employees means compensating international workers who live and work in a foreign country, ensuring payroll meets local labor laws, tax regulations, and benefits compliance. It’s not just about transferring funds; it’s about meeting legal obligations in each jurisdiction.

• Compliance matters: Every country has unique labor laws, tax obligations, and benefits requirements.
• Taxation matters: Employers must handle income tax, social security, and other statutory contributions.
• Payroll partners matter: Solutions like EORs or global payroll providers make this easier by ensuring compliance while streamlining payments.

In simple terms: paying international employees means balancing money movement with compliance, taxes, and worker satisfaction.

How do you classify international workers correctly?[toc=Classification]

With our experience in helping global companies hire and manage employees in India, we’ve seen classification errors create huge compliance and financial risks. Getting this right at the start is critical.

Employee vs. Contractor

Classifying talent as either full-time employees or independent contractors isn’t just semantics, it defines payroll, benefits, tax obligations, and the long-term working relationship under local employment laws.

Here’s how employees differ from contractors:

Misclassification can cost you fines, taxes, and talent. Learn the key differences between employees and contractors in our article on "Independent Contractor vs Employee: Differences Explained"

Local Regulations

Before international hiring, researching local regulations and local tax laws is critical. Each country enforces its own employment laws, tax rules, and benefits requirements through local authorities. Failing to address these issues can lead to compliance penalties, legal disputes, or unhappy employees.

• Labor laws: These set the foundation for employment, covering minimum wages, working hours, overtime pay, and termination conditions. Violating them can trigger fines, lawsuits, or bans on future hiring.
• Employment standards: Countries set rules around statutory leave, probation, parental benefits, and workplace safety. They establish the minimum protections employees are entitled to, and ignoring them damages trust and compliance.
• Tax regulations: Employers must correctly withhold and remit income taxes, social security contributions, and other statutory dues. Mistakes here often lead to back payments, interest charges, or double taxation issues.
• Benefits requirements: Beyond salary, many countries mandate contributions to health insurance, retirement funds, or gratuity. These “hidden obligations” significantly affect total employment cost if not budgeted for upfront.

Want a deeper dive into compliance basics? Check out our article on "What is Compliance and Legal Management".

What are the different methods to pay international employees?[toc=Methods to Pay]

With our experience providing Employer of Record (EOR) solutions for global businesses expanding into India, we’ve seen four main methods companies use to pay international employees. Each comes with unique strengths, limitations, and best-fit scenarios.

1. Using an Employer of Record (EOR)

An Employer of Record (EOR) is a third-party provider that becomes the legal employer of your international staff and takes on payroll, contracts, and local compliance, reducing your compliance risk. They hire, onboard, and pay workers under their local entity while you retain day-to-day management of the employee’s role. This model is especially valuable if you need to hire quickly in a country where you don’t have a business entity.

When it makes sense:

• Startups and mid-size companies expanding into new markets without local infrastructure.
• Companies that prioritize speed and compliance over building a local entity.
• Businesses testing a new geography before committing long term.

Key Pros and Cons:

2. Partnering with a Global Payroll Provider

Global payroll providers integrate payroll across multiple countries into a single system. They don’t become the legal employer (unlike EORs), but they centralize payroll processing, tax filings, and salary disbursements if you already operate through local entities.

When it makes sense:

• Medium to large companies with existing entities in multiple countries.
• Businesses that need consolidated reporting, dashboards, and compliance visibility.
• HR teams struggling to manage different local vendors.

Key Pros and Cons:

Choosing the right payroll model is tricky. Discover the right fit in our article on "Global Payroll Services: 2025 Comparison Guide".

3. Paying International Contractors Directly

For short-term projects or international contractors, many businesses pay contractors or foreign contractors directly through financial institutions like Wise, Payoneer, or PayPal. While cost-effective,  but becomes risky if the contractor behaves like a full-time employee.

When it makes sense:

• Short-term or project-based work where flexibility is key.
• Early-stage startups hiring talent before formalizing employment.
• Companies needing specialized skills without long-term obligations.

Key Pros and Cons:

Direct payments work or short-term projects, but they carry compliance risks. Learn more in our article on "Hiring and Paying International Independent Contractors".

4. Setting Up Your Own Local Entity

This involves incorporating a legal entity such as a subsidiary or branch office in a foreign market. It’s the only way to fully employ overseas employees and handle payroll taxes directly while proving your long-term presence and global presence. You directly employ workers under your entity and manage payroll, taxes, and HR functions. While this provides maximum control, it also comes with heavy legal and administrative requirements.

When it makes sense:

• Large enterprises planning a long-term presence in one or more countries.
• Companies hiring at scale (dozens or hundreds of employees).
• Businesses looking to build local brand credibility and market reputation.

Key Pros and Cons:

How to pay international employees?[toc=How to Pay]

From our work supporting global teams in India, one lesson stands out, paying international employees requires careful planning around compliance, not just processing payments.

Here’s how to pay international employees the correct way:

1. Understand Employment Classification & Local Laws

• Employee vs. Contractor: First, determine whether the worker is an employee or an independent contractor. This decision impacts your tax obligations, benefits, and compliance requirements.
• Local Regulations: Research the labor laws, tax rules, and employment standards in the employee’s country, as regulations vary widely across jurisdictions.

2. Choose a Payment Method

• Employer of Record (EOR): An EOR employs your workers through its local entity, handling payroll, taxes, and compliance so you don’t need to set up your own entity.
• Global Payroll Provider: These services centralize payroll across multiple countries, managing compliance and payments from a single platform.
• Direct Payments / Contractor Agreements: For international contractors, you can pay directly via money transfer services like Wise or Payoneer, supported by a clear contract.
• Set Up a Local Entity: If you’re scaling in a specific country, establishing your own entity gives you maximum control but comes with added complexity and cost.

3. Manage the Payment Process

• Currency Conversion: Decide whether to pay in the employee’s local currency or your home currency, factoring in exchange rates and fees.
• Payroll Systems: Use systems that handle multiple currencies while ensuring local tax withholding and social contributions are processed correctly.
• Payment Schedule: Define a clear payment schedule that complies with local laws and aligns with agreed terms.

4. Ensure Ongoing Compliance

• Stay Updated: Keep track of changing labor laws and tax codes to avoid penalties.
• Protect IP: Include strong intellectual property agreements with your international employees or contractors to safeguard your company’s assets.

By following these steps, you’ll not only pay international employees correctly but also stay compliant, protect your business, and build trust with your global team.

What is the smartest way to start paying international employees today?[toc=Best Approach]

We’ve helped plenty of global founders pay teams in India without going through the hassle of setting up entities, here’s how the main options line up.

Recommendation:

If you’re a startup or mid-sized company expanding into a different country, an Employer of Record (EOR) is by far the smartest, safest, and fastest route. It allows you to

• Hire remote workers or full-time employees in many countries
• Manage international payments
• Achieve cost savings with competitive rates while avoiding non compliance penalties.

How can Wisemonk help you with paying international employees?[toc=How Wisemonk Helps]

Wisemonk is a leading Employer of Record (EOR) in India, helping global companies hire, pay, and manage talent without the hassle of setting up a local entity. We simplify payroll, HR, and compliance so you can focus on growth.

Here’s how we make it easier for you:

• Simplified Payroll in INR: We run payroll in local currency, handle tax deductions, and make sure your employees get paid on time without errors.
• Seamless Benefits Management: From statutory contributions to employee perks, we take care of everything your team needs to stay compliant and supported.
• Fast, Hassle-Free Onboarding: Get your new hires set up and paid within weeks, not months.
• Cost-Effective Growth: Build your team in India without wasting money or time on setting up a local entity.
• Transparent Pricing: Clear, upfront pricing with no hidden fees, whether you’re hiring one employee or scaling a team.

Whether you’re hiring one engineer or setting up a full remote team, we make hiring, paying and managing employees in India simple, compliant, and stress-free.

Let us take care of payroll and compliance, while you focus on building your business. Contact us today to get started.