Guide to Hiring Remote Workers Abroad as a U.S. Company in 2026

Can U.S. Companies Hire Remote Workers From a Foreign Country?

The short answer is yes, U.S. companies can hire remote workers abroad. But doing so legally and safely depends on following both U.S. rules (when relevant) and the laws of the employee’s country, and adopting a compliant employment model (local entity, Employer-of-Record, or contractor).

When a U.S. company hires someone living abroad (and working from their home country), that person operates under their local country’s employment laws, not necessarily U.S. labor statutes.

Two common approaches:

• Hiring via a local legal entity in the foreign country (e.g. a subsidiary or branch).
• Using an Employer of Record (EOR) or similar global-HR partner, the EOR becomes the “legal employer” while your company retains operational control.

Alternatively: engaging the person as an independent contractor, but this carries higher compliance and classification risk, depending on local law.

What U.S. Regulations Apply, and What Don't

• U.S. immigration-work authorization rules (e.g. visa requirements) generally only matter if the worker will perform work on U.S. soil. If the person stays abroad, no U.S. work-visa is needed.
• U.S. employment laws (wage & hour laws, benefits regulated under U.S. federal/state law, mandatory U.S.-only employment protections) typically do not apply to workers physically located abroad.
• U.S. paperwork obligations (like Form I-9, which verifies U.S. work eligibility) are relevant only for workers in the United States.
• However, your company must still consider where value is created and tax/PE (permanent establishment) exposure: incorrectly structuring foreign employment could generate a taxable presence abroad.

Who Counts As An Employee?

Just like their local counterparts, remote employees have one or more of the following characteristics:

• They work full-time for one company, with no other clients
• The employer provides training and guidance on how the work gets done
• They’re entitled to benefits, leave, and insurance

Teleworkers who don’t match these criteria are most likely independent contractors. But those who do must be treated as employees, albeit with an important difference: they’re subject to labour law and tax regulations in their own countries, not the United States. 

For example, “at-will” employment gives US employers the ability to dismiss workers without notice or warning, provided the reason for dismissal is not unlawful. But most countries take an entirely different approach to severance and termination.

Usually, they require notice periods and warnings prior to termination. This is an important factor for US-based companies to consider when hiring teleworkers outside the US.  

3 Ways to Legally Hire Someone Outside the United States

When hiring talent abroad, U.S. companies must choose a legally compliant structure that aligns with local employment laws and minimizes tax or misclassification risk. In practice, there are only three lawful ways to employ someone who lives and works outside the United States.

1. Hire Through an Employer of Record (EOR)

An Employer of Record is the fastest, safest, and most compliant way to employ someone abroad without establishing a local entity.

How EORs work:

• Playroll (or another EOR provider) becomes the worker’s legal employer in their home country.
• Your company directs their day-to-day work.
• The EOR handles local payroll, contracts, taxes, statutory benefits, social contributions, onboarding, and ongoing compliance.

Why companies choose EORs:

• No need for a local corporation or branch.
• Zero risk of violating foreign employment laws.
• No exposure to misclassification penalties.
• No permanent establishment (PE) triggers related to employment.
• Fast onboarding, often in days.

💡Best for: Companies hiring 1–20 employees in a new country or expanding globally without legal risk.

2. Employ Directly by Setting Up a Local Legal Entity

If you intend to build a long-term presence or hire a larger team in a specific country, forming a local entity may be the right approach.

What this involves:

• Registering a branch, subsidiary, or foreign LLC.
• Appointing a local director (in some jurisdictions).
• Registering with tax authorities.
• Setting up localized payroll systems.
• Managing statutory benefits, contracts, HR policies, and labor compliance internally.

Key compliance requirements:

• Labor laws: You must follow the country’s rules on working hours, overtime, leave, probation, severance, termination rights, and employee protections.
• Payroll & taxes: You must withhold and remit social security, pension, unemployment funds, and other statutory contributions.
• Corporate tax exposure: Employees may establish a permanent establishment if they perform revenue-generating activities.
• Mandatory benefits: Some jurisdictions (e.g., Brazil, France, Italy, Philippines) require 13th-month salary, lunch vouchers, private medical, or government-mandated insurance.

💡 Best for: Companies planning long-term investment and sizable teams in one country.

3. Engage the Worker as an Independent Contractor

This is the simplest operationally, but carries the highest compliance risk and should only be used when the worker clearly meets contractor criteria under their country’s law.

When a contractor relationship may be compliant:

• Worker sets their own hours and methods.
• Worker uses their own tools and equipment.
• Worker serves multiple clients.
• Worker controls their own business operations.
• Deliverables, not ongoing employment, define the relationship.

Risks to manage:

• Misclassification penalties: Many countries (including the UK, Canada, Spain, Mexico, and much of the EU) aggressively enforce employee reclassification.
• Back taxes and benefits: Employers can be held liable for years of unpaid social contributions, vacation pay, holidays, and severance.
• IP ownership: Some jurisdictions do not assign IP automatically to the hiring company unless explicitly agreed.

💡Best for: Short-term, project-based work; not ongoing employment.

What Compliance and Risk Considerations You Must Manage

When hiring abroad, U.S. companies should carefully manage:

• Local labor law compliance: understand mandatory statutory benefits, termination rules, working hours, leave laws, social and payroll tax obligations in the country of hiring.
• Worker classification: misclassifying a worker (employee vs contractor) can lead to fines, tax penalties, back-pay obligations, and other liabilities, especially if local authorities re-classify the relationship.
• Payroll, taxes & social contributions: you must often withhold or remit local taxes/social charges (or use a local payroll provider/EOR); paying someone in USD without addressing local tax laws can create compliance issues.
• Benefits & insurance coverage: U.S.-based benefit plans may not cover overseas workers; health insurance, pension or social security contributions may need local arrangements.
• Permanent establishment (PE) risk: having employees abroad may be deemed by some jurisdictions as establishing a taxable presence, possibly subjecting your company to foreign corporate tax obligations.
• Data privacy, IP, contract enforceability: local law may have different rules for data handling, intellectual property, and enforceability of non-compete clauses.

Managing a Global Team with an Employer of Record

In order to attract and then retain talent, businesses must have a way to pay their employees efficiently. Late or error-ridden payroll is likely to upend a company’s global expansion ambitions. Even more importantly, international payroll needs to comply with local labour laws and tax regimes.

That’s where the complexity we touched on earlier comes into play. 

In most countries, it’s illegal for a foreign company to employ locals without having first set up a legal entity on home soil. That’s a challenge for companies that don’t have deep pockets, or who are trying to employ a small number of foreign nationals in a given country. 

Thankfully, there’s a solution that takes the sting out of hiring abroad. Playroll’s technology-enabled global platform enables companies to expand their teams globally and retain the talent that comprises them. Through a network of subsidiaries around the world, Playroll’s clients get to take the cream of the crop, hiring in over 170 countries, without registering any legal entities. 

Request a demo to learn more about zero-entity expansion beyond the US with Playroll.