Researcher mobility plays an important role in research productivity and knowledge sharing. Many global research activities involve faculty, students, and/or staff working for various periods of time in the country of project operation. Some initiatives may involve transferring an employee abroad or relocating an employee for an extended period of time outside his or her home country. Global projects may also necessitate hiring foreign nationals to work in their home countries in support of the project and/or hiring foreign nationals to work in the U.S. Regardless of the duration of the assignment, work performed overseas and/or the hiring/payment of foreign nationals can present a range of legal, financial, risk management, and logistical considerations that can create complications and add expenses. Poor planning can result in immigration issues, tax penalties, and other avoidable costs.
Hiring abroad
Employment laws in foreign countries can be both vague and complex, depending on the country, and are most often designed to protect the employee, not the employer (unlike in the United States). Extreme care and due diligence are key when hiring local employees outside your home country, and there can be many unexpected costs. For example, an employment contract in the language of the home country may be required, and complying with local social health insurance, disability insurance, pension, taxation, and other regulations must also be considered. Hiring professional legal experts who are well versed in employment laws of the host country is essential when employing host-country residents, or equivalents, abroad. These experts should also work with your institution’s tax office to determine if a legal presence (formal business entity) abroad may be required. There is no “one-size-fits-all” approach.
There are many ways to categorize employment relationships with individuals working in foreign countries.
- Local-hire employees are citizens or permanent residents of the country where the foreign position is based.They can be full- or part-time and benefits eligibility can vary depending on local labor laws.
- Expatriates and third-country nationals are generally hired and paid by the lead institution and are assigned to work in a foreign location. These employees are generally governed by the human resources policies of the “home” country.
- Temporary employees are individuals for a specific and limited period, and can be local or foreign in origin. Benefits are specifically stated in applicable hiring letters and these individuals are generally hired to cover short-term absences, cover special projects, or to cover other vacancies. They differ from consultants and contractors as they do not necessarily provide specialized services and are hired to fill defined staff positions.
- Consultants and independent contractors are individuals utilized by a project on a fee-for-service basis. They are hired for their specialized expertise and have defined deliverables. They may not supervise staff and the terms of their employment should be carefully defined. They are also not eligible for benefits.
Other important considerations include:
- The existing level of activity by University employees already in a given jurisdiction.
- Discuss compliance issues at the proposal stage.
- Hiring legal counsel to determine options for locally compliant employment contracts, the threshold for establishing a local legal presence, benefits compliance issues, tax liability, and overtime regulations.
- Offers to local employees are typically made in local currency. Establish a fixed currency conversion rate or a timetable for doing so.
- A local employment firm may be needed to assist in recruiting, screening, and hiring local individuals.
- Anticipate costs associated with foreign tax compliance, the hiring of legal counsel and/or local recruiting firms, job advertising, benefits compliance, and facilities.
A good summary of this information can be found here, compiled by the University of Washington.
Foreign nationals working in the United States
A foreign national is any individual who is a permanent citizen of any other country than the host nation. Certain types of payments to foreign nationals may be taxable by a home nation, while other payments to the same person are not. Also, payments that are taxable to one foreign national may not be taxable to another because of a tax treaty. It is important for the institution to determine the taxable amount of each type of payment made to a foreign national in order to know whether withholding is required. Poor planning can result in tax penalties, immigration issues, or other avoidable actions.
In the United States, immigration and tax terminology are not the same. Therefore, the classifications between resident and nonresident aliens mean different things when referring to immigration and taxation. Therefore, when foreign nationals are working in the United States on sponsored projects, research diligently how residency and types of payments can affect budgets and your personnel.
The University of Washington has a great section in its International Projects Start-Up Guide on hiring foreign nationals within the United States. You can find the relevant section here.
Resources
- Chart explaining tax identification numbers for foreign nationals in the United States.
- Chart identifying various types of payments that can be issued to foreign nationals by visa type within the United States.
- Nonresident alien comparison charts for tax purposes and by visa type.
- Hiring Abroad Toolkit from the University of Pennsylvania.