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How to pay international employees in Asia.

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Hiring international employees to support operations in foreign markets has increased due to globalisation and the increased popularity and effectiveness of remote work. Paying international employees can be challenging, involving legal and financial considerations, such as local labour laws, tax laws, currency exchange rates, and payment methods. This article provides an overview of the approaches for paying international employees in Asia.

Key takeaways

  • Companies can pay their international employees in several ways, such as through their own legal entity, through a third-party employer of record (EoR), or directly to independent contractors.
  • Regardless of the selected approach, businesses may face challenges such as currency fluctuations, tax administration requirements, and labour law compliance.

Establishing a local legal entity

If a company plans to hire a substantial number of international employees who are located in the same country, the ideal approach is to establish a legal entity such as a subsidiary, branch, or representative office. This can ensure proper management of payroll, taxes, and compliance obligations.

Additionally, a legal entity is more conducive to the efficient management of employee payroll. Companies can seamlessly implement payroll systems that comply with established accounting standards and tax regulations by creating a formal structure. This ensures employees are compensated fairly and consistently, creating trust and stability within the workforce. Moreover, it streamlines withholding and remitting payroll taxes, reducing the risk of non-compliance and the associated legal consequences.

There is also significant evidence showing that, in many countries, having an established legal entity increases the perceived trustworthiness and prestige of the company.

Below are steps for paying international employees through a subsidiary, branch, or representative office. In some countries, the order of these steps may be different.

  1. The first step is establishing an entity in the country where the international employees are based. This involves registering the company with the local government, obtaining all required permits and licences, and appointing any necessary officers.
  2. Once the entity is set up, it is necessary to open a local bank account to facilitate salary payments in the local currency.
  3. Next is applying for a tax ID and registering the entity with the local tax authorities. The entity will then need to obtain social security numbers for each employee, which will be used to calculate and withhold social security contributions.
  4. Establish a payroll system to calculate the employee’s salaries, withhold taxes, and generate payment slips.
  5. Lastly, make salary payments to the international employees through the local bank account in the local currency. Ensure that payments are made in accordance with the agreed-upon schedule. Employers must calculate and deduct tax and social security from the employee’s salary before transferring it.

Using an EoR provider instead of a legal entity

Employer of Record (EoR) providers are another option for paying international employees. The EoR is a local company that acts as the legal employer of the international workforce and handles HR and labour-compliance functions on behalf of the workers’ actual employer. It is a kind of virtualisation of the employer-employee relationship. This solution offers a streamlined way to manage a global workforce without establishing a local legal entity, all while mitigating legal and administrative complexities. Paying employees through an EoR includes the following steps:

  1. Choose an EoR provider with experience in the country where the international employees are located. The EoR provider must have a thorough understanding of local laws and regulations and be able to manage all compliance requirements.
  2. Once an EoR has been chosen, sign a contract outlining the terms and conditions of the service. The contract should include information about the fees charged by the EoR, the services provided, and each party’s responsibilities.
  3. Once the EoR has become the legal employer, they will manage all compliance requirements, such as tax withholding, social security contributions, and other statutory benefits. The EoR also pays the employees on behalf of the company.

Hiring independent contractors

Employers may also choose to hire independent contractors. This approach provides businesses with flexibility and access to specialised skills without long-term commitment. Additionally, it involves less administrative responsibilities, such as payroll taxes, employee benefits, and insurance.

The steps for hiring and paying workers as independent contractors are:

  1. First, ensure that they meet the legal requirements for being classified as independent contractors. There are several factors to consider, such as the control over work, nature of work, resources, and payment arrangements. If workers control these factors, they are classified as independent contractors.
  2. Since independent contractors do not receive monthly payments, it must be determined whether they will be paid per project or by hour. This depends on factors like work nature, project scope, duration, and the agreement, allowing for a fair and transparent compensation arrangement.
  3. Next is setting a payment schedule and method. Payments can be made through wire transfer, cheque, or other agreed-upon methods.
  4. The employer should issue an invoice to the contractor for each payment made. The invoice should include the contractor’s name, address, and tax identification number (TIN). It should also include the amount paid, the date of payment, and a description of the services rendered.

Advantages and disadvantages of each approach

A number of factors should be taken into consideration before deciding whether to establish a local entity, use an EoR provider, or hire independent contractors. All three strategies have advantages and disadvantages and may not be suitable for every type of company. Therefore, it is important for an employer to determine their goals, operational needs, and budget constraints to select the most fitting approach.

The benefits and drawbacks of establishing a local entity

Establishing a local entity is a strategic approach for large companies seeking to expand their operations in a foreign country and build a substantial workforce. This approach offers a range of advantages, including enhanced control over employees, the ability to tailor operations to local requirements, and ensure compliance to the foreign country’s regulations. These benefits make it a preferred option for enterprises with long-term international goals.

However, it is important to acknowledge that setting up a local entity is challenging. The upfront costs, including legal fees, registration expenses, and real estate costs, can create a significant financial burden, especially for smaller companies. Additionally, ongoing administrative expenses such as compliance reporting, tax filings, and local staffing requirements must be considered in the budget. This approach may not be recommended for companies anticipating only a temporary or short presence in the foreign country as the high initial investment and ongoing operational costs may outweigh the benefits of establishing a local entity.

The benefits and drawbacks of using a EoR provider

Using an EoR provider can be valuable for businesses seeking to simplify international employee management and ensure compliance with local regulations. EoRs assume the legal employer role, allowing companies to focus on their core operations while entrusting employment-related responsibilities to local experts.

While this method offers the above notable advantages, it is essential to note that EoR services come with associated costs that vary based on factors such as the country of operation, number of employees, and services provided. Businesses should assess their fees and overall budget before engaging with an EoR provider. EoR providers are well-suited for both short-term and long-term operations and businesses with a smaller number of international employees.

The benefits and drawbacks of hiring independent contractors

Independent contractors offer flexibility, however, as they manage their work independently, it might not be suitable for roles or tasks that require close supervision. Hiring contractors is a cost-saving option, especially for short-term or project-specific needs. Contractors are often paid on an hourly or project-based rate, allowing for reduced employment costs as businesses normally do not need to provide employee benefits.

Challenges of paying international employees

After choosing the most suitable approach, companies may face a series of challenges that must be taken into account, such as tax, currency exchanges, and labour laws. Whether the company is a multinational corporation expanding its global footprint or a small enterprise with remote international staff, understanding and addressing these challenges is crucial for seamless and compliant international payroll management.

Some of the challenges are:

1. Currency fluctuations

When paying international employees, currency fluctuations are a significant challenge. The exchange rates can be highly volatile and impact salaries and benefits when converted to the local currency. This can result in unpredictable income for employees.

2. Tax compliance

Taxation can vary across different countries and understanding the tax implications of paying international employees is crucial. Businesses must withhold the required tax amount, precisely report income, and comply with the local tax regulations. Failing to comply with the local tax laws can potentially have both legal and financial consequences.

3. Local labour laws

One of the most significant hurdles is navigating the complex landscape of local labour law compliance. Each country has different sets of employment regulations, spanning from minimum wage requirements and working hours to mandatory benefits and termination procedures. It can be difficult to achieve seamless alignment of international payroll with these diverse legal frameworks without a thorough understanding of the labour laws in each country. Companies may also consider partnering with a local corporate services firm to ensure compliance and mitigate potential risks associated with remote work.

4. Time zone differences

Managing employees across different time zones may have communication and coordination challenges, especially when addressing payroll matters. Ensuring timely and accurate payments becomes a logistical hurdle and businesses need systems and strategies to navigate this effectively.


Businesses that operate globally may find it challenging to pay their international employees. It is essential to understand and comply with the legal and financial obligations of the foreign country, whether through an entity, independent contractor, or EoR provider. Businesses can establish a reliable and compliant payment system that supports their international growth and success by carefully weighing their options, getting professional advice, and taking the necessary steps.

How Acclime can help

Do not let the challenges of managing an international workforce in an overseas market restrict your company’s growth. Acclime is a Professional Employer Organisation (PEO), and as part of these capabilities, we offer EoR services in multiple Asia-Pacific jurisdictions. Acclime will handle your international workforce administration effectively and in compliance with local tax rules while ensuring that your people are paid on time. If you need advice about paying your international employees, feel free to contact Acclime.

About Acclime.

Acclime provides businesses with corporate, governance, and advisory services. It operates in 14 countries, employing over 1,400 dedicated professionals. The firm provides a comprehensive range of professional services and business advisory to help businesses navigate complex regulatory environments and achieve their goals at all stages of the business life-cycle.

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