Hiring and Paying Local Individuals in Foreign Countries
Hiring local individuals to work in other countries can be challenging and necessitates an understanding of local laws and regulations as well as norms that often differ significantly from those in the U.S. Further, hiring and paying local individuals for services being rendered in a foreign country may trigger a Presence for Stanford in that country. Hence, even seemingly simple hiring arrangements in a foreign country often requires expert advice specific to the local jurisdiction.
At Stanford, the following options are available considerations for staffing a program / project in a foreign country:
Collaborating with an Established Organization in the Host Country
Working with a local collaborator to hire local staff –– and in some cases, U.S. or foreign nationals –– can be much less complicated than doing so directly. In this arrangement, the person hired is an employee of the local organization, and the administrative activities associated with their employment are the responsibility of the local organization. Collaborating is typically the least-expensive and most-efficient way to engage staff for any extended period of time. (Also, see Optimizing Your Collaboration for additional details and resources.) If this type of arrangement is feasible with your local collaborator, the next step is to have a written agreement with the collaborator to document the nature and scope of the relationship.
Using a Professional Employer Organization (PEO) Provider
A PEO is similar to a temporary staffing agency whereby an entity is authorized to hire employees and fulfill required local employment obligations. The PEO contractually assumes employer responsibilities and risks and provides employment services – including employee benefits, payroll, and workers' compensation; recruiting, risk / safety management; and training and development. This is a good option when a small number of employees is needed in a specific location for a determined period of time. To facilitate this process for faculty / investigators, the University has established relationships with PEO vendors SafeGuard World International and ZeroChaos to arrange for local hires in many foreign countries. Such local hires would be the employees of the PEO vendor and can be hired to Stanford's specifications. Global HR Programs provides additional information and resources on global staffing. Plans to hire overseas should be submitted to Global HR Programs.
Engaging Independent Contractors
Utilizing independent contractors may significantly reduce the administrative efforts associated with payroll and human resources in a foreign country; however, an important consideration is whether the individual is legally able to provide these services in the country under local labor laws which are often much more restrictive than in the U.S. For instance, when considering using a U.S. person to provide services outside of the U.S., it is important to determine if the person has the required permits, registrations, etc. to provide these services in the foreign country. This type of arrangement can be appropriate when a project is short in length and scope and the independent contractor has autonomy in executing their assigned aspects of the project. Independent contractor arrangements usually have payment provisions – such as a fixed rate per project or per hour, payment on a monthly or weekly schedule, or payment based on reported hours worked. Similar to the U.S., most foreign countries presume that a worker is an employee unless they qualify as an independent contractor by meeting certain criteria. The criteria vary from country to country, but the following dimensions tend to be important in making an independent contractor determination:
- control over how, when, and where the work is done;
- a business of doing similar work for other clients (also as a contractor);
- use of own office and other facilities, equipment, and payment of own business expenses;
- pay based solely on services rendered (e.g., no vacation pay); and
- work has specific deliverables and a definite end date.
If an independent contractor is later determined to be an employee, retroactive local liabilities could result in payroll taxes, tax withholding, vacation, severance, and penalties. Some countries require independent contractors to register as businesses and/or collect taxes including a service tax or value-added tax (VAT) from its customers, while others apply certain employment obligations (e.g., statutory vacation or tax withholding) even to those who engage independent contractors. Hence, please contact Global Business Services (GBS) with a statement of work to ascertain if this option is feasible. The Office of General Council (OGC), GBS, and Contract team within Purchasing Services can advise on foreign independent contractor laws and agreements using Stanford's prescribed template for independent contractor agreements.
Hiring Local Personnel
Where none of the previously discussed options for human resource needs are feasible and hiring local personnel is needed, a local payroll may need to be established and managed. It is important to consider local employment laws and taxes, as well as the operational details of managing a foreign payroll, early on in the project planning. In most cases, hiring local personnel is only an option when Stanford has a registered legal presence in the foreign country.
Programs / projects should be aware that compared to the U.S., foreign employment laws frequently make it more difficult to terminate employees and often require severance payments. Payroll taxes and other fringe costs, such as local social taxes, could be significantly more expensive and complex than in the U.S. Further, local employees will typically not receive Stanford benefits, so local benefits packages will need to be developed in consultation with Global HR Programs in order to ensure that a competitive and equitable compensation package which is compliant with local law is provided to the local hire.
To hire local employees, local payroll expertise must be acquired or subcontracted in order to file with the local authorities for payroll tax registration. Hiring personnel in a location also requires sufficient administrative capacity to withhold, remit and report payroll taxes. Where a local hire is needed, OGC can obtain the advice of local legal counsel regarding employment laws. Note that the program will be responsible for the costs associated with the services provided by local legal counsel. Only OGC is permitted to solicit legal advice on behalf of the University. Standard practices with respect to job descriptions and written employment contracts should be followed for overseas employment.
Stanford Personnel Working Abroad
There are instances where a Stanford employee may need to work abroad. See Stanford Personnel Working Abroad.
Carefully assess these options, giving particular consideration to the employment laws, regulations and norms of the local jurisdiction, the planned activities for the hire, and, to the extent possible, anticipate changing staffing needs during the course of the program / project.