This checklist is intended to provide guidance on issues departments should consider when planning for hiring overseas. Because there are foreign tax and legal implications for both the individual and the University, hiring overseas involves significant planning and, usually, a higher cost compared to hiring domestically. Not following rules and regulations when hiring and paying individuals in foreign countries can pose substantial risks to both Princeton and the individuals hired. There has been a recent trend for countries around the world to tighten immigration and employment regulations. It is important that all overseas hiring is conducted to be compliant with foreign and U.S. laws. Each country and hiring situation has unique implications; immigration and employment requirements are constantly changing.
This checklist provides general guidelines for departments to follow during the initial planning phase. It is important to plan ahead and contact the International Appointments Manager for specific questions and guidance as early in the planning phase as possible.
Gather Basic Facts of Individual
- Country and city where work will be performed
- Citizenship, residency, and visa status of the person to be hired
- If the person is not a citizen/resident of the country where work will be performed, additional planning time and higher employment cost are expected and should be considered in the budget.
For detailed information on the hiring time frame and estimated additional cost, email Claire Hu.
- Duration of the project and duty time
- Job responsibilities
- Is the University paying for health insurance and other benefits?
Individuals working overseas might need local or international health insurance to ensure sufficient coverage in the work location and during work travels.
- Is the individual affiliated with any University or organization in the location where work is performed?
An institutional payment (IP) arrangement is usually the least expensive and most efficient way of hiring abroad. The host institution assumes the payroll administration and responsibilities to comply with local laws. This method should be considered whenever possible. If the individual is not affiliated with any organization abroad, using a professional employer organization (PEO) is the next best option.
- Is there something unique about the work that requires this specific person? Can a local staffing agency be used to supply the worker, especially in cases of hiring interpreters, surveyors, drivers, etc.?
Local vendors are familiar with local laws and assume the employment and compliance responsibilities, substantially reducing the University’s risks of noncompliance and costs of researching local laws and regulations. Using a local staffing agency is strongly encouraged whenever possible.
- Can Princeton directly hire someone as an employee or engage an independent contractor directly in this country? Does this person meet the requirement of an independent contractor both in the U.S. and the foreign location?
A person can be hired directly overseas as an independent contractor only when s/he meets the requirement of an independent contractor in BOTH the U.S. AND the foreign location. Compared to using a PEO or IP arrangement, direct hiring of an independent contractor overseas generally poses the highest risk and takes longest to process. The University is directly exposed to foreign employment laws, which are normally quite different from US laws; the Office of General Counsel needs time to review local laws and regulations before we can proceed with a direct hire overseas. To minimize risk and ensure compliance with foreign laws, the University strongly prefers to hire overseas through an IP or PEO arrangement.
Legal and Immigration
- Licensing requirements
Different countries have different licensing requirements for research and teaching. The Office of General Counsel needs time to consult local lawyers to determine if individuals meet local licensing requirements.
- Do we need an employment contract?
If we hire an individual directly as an employee or independent contractor, an employment contract may be needed. Depending on the country and type of hire, the conditions in the employment contracts vary. A contract template commonly used to hire individuals domestically is likely inappropriate for international hiring and will need to be customized according to foreign employment laws.
- Compliance with local employment laws and regulations, including workers’ protection, minimum wage, insurance, termination clause, etc.
- Do we need a Memorandum of Understanding (MOU) or other university-level agreements before hiring this person?
- What are the immigration requirements? What is the appropriate work authorization? Who is responsible for the appropriate visas and work authorization, and how shall they be obtained?
Persons cannot work for the University anywhere without appropriate visas and work authorization. We are observing a common trend of countries around the world tightening their immigration and work authorization requirements. Obtaining work authorization can be quite challenging and time-consuming in certain countries, such as Kenya. Early planning and consulting with the International Appointments Manager is strongly recommended well before hiring.
Travel and Safety
- Is there physical danger involved in the type of work performed overseas?
If so, additional insurance may be needed.
- Is the country on the Department of State Travel Warning list? Is it a dangerous place to travel and work?
- Income and other tax liabilities of the individual in the U.S. and foreign country
Individuals working overseas will likely have tax liabilities in the foreign location and/or in the U.S. Even a non-resident of a foreign country can trigger tax liabilities in that country after staying there for a certain period of time, generally 183 days. Individuals hired overseas often must be put on local payrolls to fulfill personal income and social tax withholding obligations. A PEO or local payroll agency needs to be involved and will charge a fixed fee or a percentage of the individual’s salary.
- Payroll tax costs and withholding obligations of the department in the U.S. and foreign location
If there are payroll taxes and withholding obligations in the host location, a local employment agency or payroll service must be used. The agency will administer the payroll taxes and submit withholdings to the local tax authorities on behalf of the University and will bill us for the tax cost plus fees. There are significant consequences for noncompliance; the University can be fined and subject to reputational damage for noncompliance with foreign payroll and tax laws and regulations.
- Will an income tax treaty and/or social security totalization agreement be applicable between the U.S. and the foreign country?
A tax treaty or totalization agreement alleviates double taxation, and thus reduces hiring costs. The existence of treaties cannot be assumed. Departments need to consult with the International Appointments Manager if this is an area of concern when budgeting for the hire.
- Employee allowances and other additional expenses to consider, especially when sending someone from the U.S. overseas
Examples of typical international assignment allowances include temporary housing, relocation allowance, transportation, etc.
- Budget for the total cost of hiring, not just salary and benefits
Besides salary, departments should also budget for costs of obtaining immigration and work authorization, benefits, local income and social tax obligations (at the individual and/or institutional level), payroll service fees, etc. Make sure to include all the previously mentioned considerations in the budget. If an IP or PEO arrangement is used, the host university benefits billing rates or PEO fees need to be added to the budget.
Other Organizational-Level Risks and Considerations
It is mandatory that all hiring overseas comply with U.S. and foreign laws and regulations. Failure to comply with foreign laws and regulations has serious consequences; it could prohibit the University from conducting future activities in that country, incur potential fines, and damage the reputation of the University. Below are considerations and risks factors to the entire University if international hiring is not done correctly.
- Does the hiring comply with local employment laws and regulations, including workers’ protection, minimum wage, insurance, termination clause, etc.?
Failure to comply with foreign laws and regulations could impose serious financial and reputational damage on Princeton and could prohibit the entire University from conducting future activities in that country.
- Who can be the legal employer? Does Princeton need to register in the country before hiring?
- Does the hiring create any Permanent Establishment or other organizational presence and risk in the foreign location?
Frequent activities in foreign countries might trigger a permanent establishment of Princeton in those countries. If it is deemed that the University presents a permanent establishment in a foreign location, the University will be considered a tax resident entity subject to registration, reporting, and corporate tax requirements of that country. How individuals are hired and paid overseas strongly impacts the possibility of a permanent establishment and requires careful planning.
- The University incurs consulting and attorney fees for reviewing foreign employment laws for compliance and contract drafting, especially when departments hire independent contractors directly overseas
Recommended Steps for Hiring Overseas
- Review this checklist, the International Hiring Guidance Documents, and other related resources online during initial planning.
- Gather the facts and provide an overview to the International Affairs and Operations Manager (Claire Hu) for questions and guidance during the initial planning phase. She will reach out to the Vice Provost for International Affairs and Operations, Office of the General Counsel, Office of the Dean of the Faculty, Finance, Human Resources, or outside consultants for further consultation and guidance.
- Consult and coordinate with the International Affairs and Operations Manager for any questions and issues during the actual hiring and for any ongoing or termination issues.