6 practical challenges overseas remote workers face as independent contractors
Being a remote worker has more challenges than lacking face to face interactions or intercultural barriers.
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Being an overseas remote worker has its challenges. Starting from the lack of social interactions all the way to finding a quiet place to work from home.
What’s less discussed however are the issues overseas remote workers face outside of the working environment. Let’s discuss why it’s important to address them if you want to keep your employees with you for the long term.
1# Building a credit score as a freelancer
Independent contractor agreements can be tax-effective. Your overseas employees act as contractors and therefore you don’t need to worry about employment taxes or other payroll matters.
This arrangement works well until your employee decides it’s time to buy an apartment or lease a car. Unless your freelancer has set up a local company and pays itself a salary (which also means your employee is spending a significant amount of its time on managing taxes and other compliance issues), banks are unlikely to give them a loan.
For example, in Vietnam, the banks will not issue credit cards to customers that don’t have a labor contract.
2# Paying taxes as an independent contractor
Independent contractors are responsible for paying their own taxes and ensure they comply with local laws.
This is a burden that not only takes valuable time away from work but it’s also something that many workers are reluctant to do. As a result, you’ll have fewer employees to choose from since especially the more junior employees in emerging markets value job security over a potential (small) financial benefit of being an independent contractor.
3# Receiving public health insurance as an overseas remote worker
Public health insurance, as limited as it might be in most emerging markets, is a layer of security that’s important to most employees. Especially if they have families.
While we do recommend complementing it with some level of private health insurance, having the employees covered with the public health insurance makes their lives easier and shows your commitment to building a long-term relationship. All-inclusive private health insurance can also come at a substantial cost.
In Vietnam for example, the employees are also eligible for unemployment insurance.
4# Job security as an independent contractor
As an employer, your concern should be that the overseas remote worker wouldn’t leave unannounced, right? It works both ways. A freelancer agreement is often, at least in emerging markets that Emerhub serves, seen as a “soft” agreement. How can my overseas employer enforce it anyway?
This means that your overseas team is likely to leave the job the moment a more stable opportunity arises. Because they don’t feel like the independent contractor agreement is safe for them.
That’s where employment contracts come into play. An employment contract allows you to regulate the notice and termination terms (i.e. notice period and severance pay). This gives both parties the certainty that the contracts are actually enforceable.
5# Lack of HR support from an overseas company
You’ll want your overseas remote workers to spend as much of their time on productive tasks as possible. In a traditional office, the employees get HR support for any matters they might face. Such as payroll slips, questions about taxation, public holidays, annual leave, etc.
While it’s possible to replicate some of that with your remote employees, it has its limits due to different jurisdictions and cultures. For example, your HR manager based in London is unlikely to be able to advise on maternity leave regulations in Pakistan.
A local HR person can also liaise between the employee and yourself on any intercultural matters.
6# Gaps in building a CV
In most Southeast Asian countries like Indonesia or Vietnam, your employees care a lot about building a strong CV. A freelance gig for an overseas company is often seen as less “valuable” compared to employment.
An employment contract comes with formal payment slips, certificate of employment, local references, etc. Those are seen as highly valuable since they allow the employee to apply for better jobs in the future.
How to legally hire overseas remote workers
This was not an all-inclusive list of the challenges of remote work.
The solution for all of those issues is to provide your employees with a legal full-time employment contract. The issue however is that you need a local legal entity for that.
That’s where Emerhub comes in. Emerhub serves as the local employer of record, putting the employees on our payroll while they work for your company.
Unlike an outsourcing agency, you have full control over who you hire and how they work. We will take care of the local payroll and HR matters.
Currently, the employer of record service is available in Indonesia, Vietnam, the Philippines, and Pakistan. Get in touch by filling the form below and our consultants will get back to you with a working day.
Frequently Asked Questions about hiring overseas remote workers
It depends on the way the employee is hired. If they are an independent contractor, you essentially buy a service from another firm and all the local taxes will be reported by your employee. If the employee is hired under the employer of record service, the taxes are handled by the service provider.
As long as they have an employment contract they are eligible for a work permit.
The employer is only able to give you an employment contract if they have a legal entity in the country where you work from. The exception is if you are sent overseas for temporary assignment in which case the answer depends on your exact circumstances.
In most countries, if your employee spends at least half a year in that a country they become a tax resident and must start paying taxes in that country. In some countries, like in the United States, the employee must then report taxes in both countries.
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