Advice on Hiring and Paying Overseas Independent Contractors

how to hire and pay overseas independent contractors - accounting services


If you’re wondering how to hire and pay overseas independent contractors, don’t worry! We’ve got tons of experience with this. Here are some tips for getting started:

First, review your worker’s compensation requirements, if any.

What is worker’s compensation?

Worker’s compensation insurance benefits employees who have been injured on the job. The employer pays for the insurance, covering medical expenses and lost wages up to certain limits. In some states, you may also be required to carry workers’ compensation if you hire independent contractors.

What are my state’s requirements for worker’s compensation?

Worker’s comp requirements vary by state. Some states require that employers carry a specific amount of liability coverage, while others do not specify any amount. If your business is located in one of these states, you may be obligated to provide coverage for independent contractors and employees—but don’t panic! There are ways around this added expense by limiting the type of work an independent contractor does for your company (for example, only having them perform tasks that fall outside of their field). Check with your local department of labor office or insurance agent to find out whether or not your business needs this kind of protection available before hiring anyone.

Research how federal income tax laws apply to foreign workers who are not employees.

how federal income tax laws apply to foreign workers - accounting services

The tax laws vary by country, so it’s essential to research how they will apply to your non-employee workers. In some cases, independent contractors may be subject to self-employment tax or other taxes that don’t apply to employees.

If you need clarification about the state of the law where you are (or your overseas worker is), consider using a third-party reporting and payment system such as PayrollHero for your payroll processing needs.

Use the appropriate tax forms for your independent contractor.

use the appropriate tax forms - accounting services

The Internal Revenue Service (IRS) requires you to report all payments for services performed by independent contractors. You’re responsible for reporting payments made to your contractors on Form 1099-MISC, due January 31.

Consider using a third-party reporting and payment system.

Third-party reporting and payment systems are a good choice for international contractors. However, the same systems can be used for all workers, not just contractors—they can help you save time and money.

In the long run, it’s often cheaper to use a third-party system than hiring an employee or contractor because they take care of all the paperwork involved in making payments and issuing receipts. You pay one monthly fee rather than all the fees associated with hiring someone: payroll taxes, workers’ comp insurance premiums, unemployment insurance payments, and so on.


The IRS and the Department of Labor are working together to ensure tax compliance concerning independent contractors, but this is a complex area of law. Suppose you’re unsure how taxes or other regulations apply to your business situation. In that case, it’s best to consult an attorney or accountant who can advise you on all aspects of hiring foreign nationals.

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