Yea, I wouldn't go with a fully fledged payroll company for this. The person working for you should be willing to come in as a contractor and set up the necessary legal and accounting framework for themselves. It's pretty easy to be self employed and able to produce an invoice in most European countries. Mind you, if this is their first time doing it, it'll occupy a significant portion of their mind space and you have to accommodate that. In a way, they're doing you a favour, because this way it's cheaper and easier for you.

From the employee's perspective, this is a pretty terrible idea in many places, including some in the EU (depending on the company's and subsidiaries' jurisdiction, it might be a terrible idea for them too)

If you try this sort of thing in Australia, you violate the Alienation of Personal Services Income Act 2000, and will be in a world of pain. Many other countries (including e.g. many post-2004 EU members) have similar laws against "stealth" employment, enforced with varying degrees of eagerness and effectiveness, as common in that region.

If you're only serving a single client, you're usually not a contractor. If you pretend to be, and if the tax office ever decides to scrutinize what you do, chances are they'll tear you a new one. Insist on having an "employer of record" that does things by the book, and knows local regulations, tax codes, and mandatory insurances.

The thing is, if your customer does not have legal presence in your country, tax office will likely not care as long as you pay your share of income tax and social security. I live in the EU and work as contractor to overseas companies since 2015, never had issues. I live in big city, I know from colleagues who live in smaller towns they are sometimes tested for tax correctness, but never for the form of their relationship to their customer.

In the same time if your customer does have legal presence in your country of residence then that's entirely different situation amd tax office might see it as tax avoidance, though this will depend on country of your residence as laws are implemented differently in different EU member states, and also the legal form of your own company.

If in doubt, hire accountant who specializes in your area.

> If in doubt, hire accountant who specializes in your area.

Indeed. This should be the top answer to OP's question.

Comments like this make me thankful for business in the US. You can hire contractors, or be a contractor, with 0 friction.

Meh, depends entirely on your trade. I'd much prefer to be an IT contractor in the US, and much prefer to be a prostitute in Australia.

And I count myself lucky to live in a country where the people's incentives mostly align with the way I prefer to make a living.

> Insist on having an "employer of record" that does things by the book, and knows local regulations, tax codes, and mandatory insurances.

I just read an article claiming that in Germany employers of record are treated like temp agencies and thus limited to 18 months.

I don't know much about German law specifically, but it's true that some countries of residence are plain incompatible with certain business models, and there might not be legal solutions available.

For example, trying to be a professional soldier in Iceland, or a prostitute in the US, just plain won't work out legally, no matter how complicated the arrangements you make.

In Germany this would be considered "Scheinselbstständigkeit", not sure what the way around that is or if other countries have something similar.

I’ve been told that you either need to have a second customer where you spent X% of time. Or you open up a company with a friend who is in a similar situation, but works for a different company.

As always it's nigh-impossible to fully read a German word so I have to skim through it: "Schei ... se".

I know this word! Yes, it's a shitty situation :)

FWIW, as a EU-based contractor for an American company I can tell you that from my perspective the form of payment legally doesn't matter at all. I receive transfers from a European bank account registered with their EU subsidiary, but it's only because they happened to have one already. We could just use something simple like wise.com instead and I have already done it before.

Employee becomes a contractor - you change the paper to make sure it doesn't fall under 'employment' category and they pay their own taxes according to the country rules, or simply outsource that to any local accountant. I'm pretty sure that if your employee is working for a US company they already know how to handle that. You can also use a service like useme.com or Oyster where they will invoice you on behalf of the employee and then figure out the way to pay the employee.

At my old company, we engaged with a contractor from France. We went to university together and I knew he was well qualified to do the work we needed in OpenCV.

We researched ways to pay him legally, but for a six month contract it turned out to be much easier to simply pay an agency that pays him and does the paperwork.

Essentially it is presumed that most workers are full-time employees, and it is difficult to maintain a contractor due to tax liability and labor laws.

What's the country? I'm in this situation in Poland and I'm running a company (sole proprietorship). I'd say the majority of IT work is done this way here for tax benefits, even within the country. You may be doing the employee a favor this way (their costs can be written off), and you'll make things simple for yourself.

Just contract with them using Deel. It’s like $49 a month for the hiring party and the contractor is responsible for the taxes in their country. Pay them more if you have to in order to offset. Absolutely not worth the cost/headache for you to become an official “employer” in another country.

If you insist on a non-contractor relationship, find a business (Oyster, Remote, maybe Deel do this) to act as the Employer of Record and get ready to pay them a ton to do it.

The only cheap and easy way to do this as an employer is with contractor relationships.

You could use something as a Employer of Record. Companies such as Oyster or Remote.com offer that along with payroll management. Plus, the employee is technically employee and not contractor, since the EoR takes all necessary steps to register your employee as such and pay all necessary taxes and social contributions.

The other way for him would be to setup legal entity so that you could work with him as contractor or Freelancer. In some countries, such as my own (Serbia), freelancers can be payed directly, without the need for them to setup any kind o f entity or register with EoR. You should check if something like that exists for your employee.

B2B with sole proprietorship of that employee.

The contractor route is for sure easier, but the IRS doesn't like "misclassification". So you would have to structure the work differently than you would an employee.

See https://www.irs.gov/businesses/small-businesses-self-employe...

Someone is going to have a tax headache. Either the company (for an "employee"), or the worker (if they're a "consultant"). You can outsource the tax headache to an "employer of record" company in the worker's country, but you can't make it go away.

> Someone is going to have a tax headache

In some EU countries it might be worth the headache since you'd also pay considerably less taxes than if you were an employee

Interesting, everyone says it's easy here. But to the question "why don't US companies hire globally" everyone usually says "too hard, too complicated with tax etc."

I looked into this (within the EU). It was simplest for me to work as a freelancer and charge the company that way. Within the EU it had the advantage that the company didn't need to pay VAT.

Not sure if there is any policy prohibiting it, but you could try Upwork or fiverr. After they join you could hire them as a contractor.

Look up "employer of record"

Wise

Can you explain how Wise helps here? At a glance it looks like it only handles the trivial part (money transfer) and not the tricky parts like employment contracts, regulations, taxes, mandatory insurances (health, unemployment, retirement, etc.)

+1

I'd add it's easier to do B2B than regular employment, that will make your life easier as you will not carry the burden of figuring out taxes- your contractor will know better their circumstances like tax residence.