The rise of remote work has forever changed the employment landscape. As technology shrinks the world, you don't need your staff onsite — or even in the same city, country, or continent.
Companies that embrace this new borderless world gain a competitive advantage. Hiring global employees unlocks access to a vast talent pool, opening unprecedented opportunities for scalability, cost efficiency, and innovation.
Running international teams can be tricky, of course. Compliance hurdles and logistics headaches can conspire to make outsourcing teams difficult. Offshore payroll can be particularly challenging, as mistakes can lead to high fees, slow processing times, currency exchange losses, and even legal risks.
Nearshoring vs. offshoring: What's the difference?
The terms "nearshoring" and "offshoring" both describe hiring international teammates. However, nearshoring refers specifically to recruiting in nearby countries. For companies in the US, nearshoring typically involves hiring workers in Latin America.
By contrast, offshoring is an umbrella term that encompasses recruiting in any foreign country, near or far. While offshoring includes neighboring countries, the term is more often applied to distant countries like China, India, and the Philippines.
The benefits of offshore teams
Why go global with your hiring needs? Building offshore teams comes with compelling benefits:
- Access to a global talent pool. Access a larger pool of talent and find specialists with niche skills that might be scarce or expensive locally.
- Diverse perspectives. Introduce different cultural backgrounds and perspectives to your team.
- Cost efficiency. Access lower labor rates and overhead costs in many popular offshore destinations.
- Continuous productivity. Unlock faster turnaround times by working across time zones.
- Focus on core business activities: Free up time for strategy and core competencies by outsourcing routine tasks to offshore workers.
- Speedy scaling. If you work with an experienced global hiring partner, you can reduce the time and effort involved in finding and onboarding new team members.
Common offshore regions: LatAm, Eastern Europe, Southeast Asia
Traditional offshoring hubs, such as India and China, remain popular. However, up-and-coming regions like Latin America, Eastern Europe, and Southeast Asia offer advantages:
- Latin America. Latin America — including countries like Mexico, Argentina, Colombia and Brazil — has become a prime offshore destination, with a growing tech talent pool, overlapping time zones with North America, and high English fluency rates.
- Eastern Europe. Poland, Romania, and Ukraine are becoming increasingly popular offshore destinations for creative marketing services.
- Southeast Asia. Vietnam, the Philippines, and Indonesia have emerged as IT and customer service powerhouses.
Popular tools and platforms for offshore payments
Paying offshore workers, contractors, and teams can get complicated. Ahead, we discuss common tools and techniques to make smooth, compliant payments across borders.
Global payroll and hiring platforms
Global payroll and hiring platforms are the easiest way to pay and manage offshore teams. This category encompasses dedicated payroll platforms, as well as more comprehensive providers, including Employer of Record (EOR) services. EORs act as the legal employer for workers, handling payroll, taxes, benefits, and compliance.
Popular platforms include:
- Howdy.com. Howdy.com is a standout in the global EOR and payroll partner space, offering a comprehensive suite of services that includes payroll processing, tax filings, benefits management, and compliance across multiple LatAm countries.
- Gusto. Gusto is a payroll tool that can pay workers in 120 different countries. The platform lets you manage your entire payroll, including US and international contractors and full-time employees, in one place.
- Deel. Deel is a payroll and compliance company serving over 150 countries. The platform streamlines payment, providing a single location for paying all international contractors.
- Remote. Remote specializes in global employment services, including recruiting, paying, and managing international teams in 193 countries. The platform offers payroll, benefits, compliance, and HR services.
- Papaya Global. Papaya Global combines payroll, EOR, and contractor payments into one platform. Its services include payroll processing, compliance management, and analytics.
- Rippling. Rippling integrates global HR, IT, and finance tools. The company helps with payroll, employee benefits, compliance, and team management.
Digital payment services
Digital payment services facilitate financial transactions using technology instead of physical currency, such as cash or checks. Examples include:
- Wise. Wise is a financial platform for businesses making cross-border payments. The company offers multi-currency accounts, real-time exchange rates, and integration with payroll systems.
- Payoneer. Payoneer facilitates cross-border payments to over 200 countries and regions. The platform provides tools for managing multi-currency accounts, online payments, and business expenses.
- PayPal. PayPal remains a go-to option for many businesses. Note that PayPal fees can be higher compared to other services and not all countries support business withdrawals.
Traditional banking options
Traditional banking offers a comprehensive range of financial services through physical branches and digital channels. Traditional banking options for paying international workers include:
- Wire transfers. Wire transfers are a secure way to send money internationally, but they are often slower and more expensive compared to other options.
- Multi-currency business accounts. These types of accounts can hold multiple currencies in one account, reducing conversion fees. Multi-currency bank accounts often charge higher fees and lower interest rates.
US currency vs local currency
Most countries require you to pay offshore employees in local currency, not USD. The practice also helps eliminate exchange rate risks and avoids conversion fees.
However, paying workers in their local currency can be complicated because of fluctuations in exchange rates. A global payroll platform can help by automating currency conversions and reducing fees.
Compliance and risk management
Handling data and IP security when working abroad
Country-specific reporting rules
Each country has its own set of rules for tax reporting. Familiarize yourself with local laws to avoid compliance penalties.
In the US, foreign contractors and freelancers need to submit Form W-8BEN to verify their non-US status and help you avoid over-withholding. Similarly, you must report payments to foreign contractors and file 1099 or 1042-S forms.
Backup plans for banking issues or political instability
Unexpected banking issues or political instability can impact payment processing with global teams. Stay updated on the political landscape in the countries you’re working with and always have backup options for banking transactions.
Ensure legal agreements are airtight
To avoid disputes, your legal agreements with global workers should be ironclad. Non-Disclosure Agreements (NDAs) should be established to protect sensitive information. Intellectual property (IP) rights must be clearly defined to prevent ownership conflicts. It’s also critical to outline the scope of work, payment terms, and any termination clauses.
Tips for paying offshore teams efficiently
Best practices for paying a global workforce include:
Define the working relationship
Clarify whether a worker is a contractor or an employee. Misclassification can lead to fees and legal penalties.
As a quick rule of thumb, employees have taxes withheld from their pay. Contractors are responsible for their own taxes.
Understand labor and tax laws in the offshore country
Different countries have unique tax codes and labor laws. Research or consult a local expert to avoid misclassification, fines, or compliance issues.
Respect regional pay expectations and customs
Pay expectations can vary between regions. Meeting local expectations — like standard pay dates, holiday bonuses, or informal norms around compensation — can boost morale and reduce churn.
For example, you are expected to offer a "13th-month salary" in many countries. In much of Latin America, 13th-month pay is mandated under local employment laws.
Align time zones, holidays, and expectations upfront
Aligning work schedules, holidays, and communication expectations from the outset to prevent misunderstandings. Get everyone on the same page to avoid frustration over missed deadlines or misaligned goals.
Conclusion: How to pay international employees
Paying offshore teams involves more than just sending money. It takes compliance, cultural alignment, and reliability. The easiest way to handle it all? Partner with a global hiring partner like Howdy.com.
Howdy makes hiring, managing, and paying top-tier LatAm talent seamless. From compliance to payroll to retention, we’ve got your global team covered. Book a demo to learn more.