How to Generate Paystubs for Remote and International Workers
There’s no universal method for creating paystubs for remote and international workers. Varying labor laws, tax obligations, and compliance requirements across different jurisdictions make the process far more complex than domestic payroll. This guide explores the unique challenges employers face and offers strategies for generating accurate, compliant paystubs for a global workforce.
The Core Challenge: Navigating Foreign Compliance Obligations
U.S. companies hiring internationally must adhere to the labor laws and payroll rules of each worker’s country. Unlike domestic remote payroll, this involves:
- Local Tax & Labor Laws: Each country has its own rules for income tax, social security, insurance, and employment classification.
- Company Registration Requirements: If the employer isn’t registered in the foreign country, local laws may impose fines or restrict employment.
- Visa and Residency Rules: Even remote engagements can raise compliance issues if workers are not authorized to work under local immigration laws.
Ensuring accurate and legally compliant paystubs for remote and international workers is one of the many obligations that arise from these cross-border employment arrangements.
Employee -vs- Independent Contractor: A Crucial Distinction
Correct classification determines whether you’re obligated to issue pay stubs, withhold taxes, or offer benefits. This table shows the key differences at a glance:
| Category | Employee (W-2) | Independent Contractor (1099) |
|---|---|---|
| Control | Employer dictates work scope, schedule | Worker operates independently |
| Tax Handling | Employer withholds and remits taxes | Worker handles own taxes |
| Benefits | Eligible for benefits like PTO, insurance | Not eligible for employer benefits |
| Documentation | Receives paystub and W-2 | May use invoices or optional paystubs and receives 1099 |
*Tip: Misclassifying an international employee as a contractor can lead to legal and financial penalties under both U.S. and foreign labor laws.*
How to Generate Paystubs for International Workers
Whether you’re hiring employees or contractors abroad, here’s how to approach pay stub generation:
For Employees Abroad:
– Use an Employer of Record (EOR): Services like Deel, Remote.com, Omnipresent, and Papaya Global handle local compliance, payroll taxes, and issue compliant pay stubs.
– Set Up a Local Entity: Establishing a subsidiary lets you hire directly but comes with significant administrative and tax filing responsibilities.
– Use Global Payroll Software: Platforms like Gusto, ADP GlobalView, or Papaya Global allow centralized management of international payroll and paystub generation.
For Contractors Abroad:
– Paystubs are optional, but issuing them enhances professionalism and helps contractors verify income.
– Contractors can use paystub generators for accurate documentation of work completed.
– Payments can be made via platforms like Wise, Payoneer, PayPal, or bank wire transfers—be sure the method aligns with local reporting standards.
These methods support the generation of accurate, customized paystubs for remote and international workers, whether they are full-time employees or independent contractors.
U.S. Remote Workers: Multi-State Paystub Challenges
International payroll concerns are the focus of this blog, but we would be remiss to leave out problems of managing remote workers in the United States. One such significant issue is tax withholding varying by state. Each state has their own income tax rate, wages law, and reporting obligations that can make payroll processing a good deal more complicated. A few states impose income tax but not others—like Texas or Florida. Therefore, different withholding strategies are necessary for where the employee works. In addition, pay stub requirements are different; some states require a lot of detail, but others give more leeway.
To deal with such complexity, most employers employ payroll providers operating in more than one state, such as Gusto, ADP, or Paychex. Such platforms simplify matters by computing state taxes automatically, generating paystubs that comply with regulations, and handling tax filing for each location. They also assist in ensuring that state disability insurance, paid family leave, or employment taxes in a local area are properly handled.
Legal registration is another crucial element. Some states make it mandatory for companies to be “registered employers” even if they have a single home-based employee living there. Not doing this can result in penalties or fines. Because of this, some companies hire remote employees only from states where they are already registered as employers or where the laws are easy to navigate. This can minimize paperwork and avoid accidental legal problems. While it might restrict the available pool somewhat, it simplifies the handling of payroll laws for companies with a scattered workforce.
Special Case: Nonresident Aliens Working in the U.S.
When a nonresident alien performs work physically in the United States, employers must follow special IRS rules for calculating income tax withholding. These rules differ significantly from those that apply to U.S. residents or fully remote foreign workers.
Who Qualifies as a Nonresident Alien?
A nonresident alien is an individual who is not a U.S. citizen and does not meet either the:
- Green Card Test, or
- Substantial Presence Test (typically based on the number of days present in the U.S.).
IRS Withholding Rules for Nonresident Alien Employees
To remain compliant, employers must apply a special calculation process:
1) Use IRS Notice 1392
- This provides instructions for nonresident aliens to properly complete Form W-4.
- Key differences: They are typically limited to claiming Single filing status and one allowance, even if their actual situation would suggest more.
2) Refer to IRS Publication 15-T
- This outlines how to calculate the additional income that must be added to wages for withholding purposes.
- Two main methods are offered:
- Wage Bracket Method
- Percentage Method
- Tables such as Table 1 or Table 2 in the publication provide specific amounts to add based on filing status and pay frequency.
3) Important Clarification
- The added income is used only for withholding calculation.
- It does not increase:
- The worker’s taxable wages reported on Form W-2
- The employee’s actual income
- FICA or Medicare tax liability
Why Compliance for Nonresident Alien Withholding Matters—and How to Get It Right
Handling payroll for nonresident aliens working in the U.S. isn’t just a box to check—it’s a critical compliance area that can have legal and financial consequences if done incorrectly. Understanding and applying the IRS’s special withholding rules helps protect both the employer and the employee.
Here’s why getting it right matters:
- Accurate Withholding – Using the proper IRS calculation methods ensures that the correct amount of federal income tax is withheld. This helps avoid underpayment issues and shields the business from penalties or back taxes.
- Employee Trust – Although the IRS requires employers to “add” a calculated amount to wages for withholding purposes, this does not affect the employee’s take-home pay or tax liability. Making this clear builds confidence and transparency with international staff.
- Compliance Confidence – Payroll and HR teams can operate with greater confidence when equipped with the right procedures and tools. It allows them to support international hiring without getting bogged down in complex tax code nuances.
To meet these obligations effectively, follow these best practices:
✅ Confirm Tax Residency Status
— Always determine whether a new hire qualifies as a nonresident alien during onboarding. This affects how Form W-4 should be completed and how withholding is calculated.
✅ Distribute the Right IRS Forms
— Provide employees with both Form W-4 and IRS Notice 1392 to ensure the form is filled out according to nonresident-specific instructions.
✅ Use Payroll Tools That Support IRS Nonresident Calculations
— Not all payroll software accommodates these unique IRS rules. Look for platforms or services that allow custom withholding adjustments in line with Publication 15-T.
✅ Maintain Thorough Documentation
— Keep detailed records of each step taken—W-4 forms, calculation methods, and correspondence. This documentation is invaluable in the event of a compliance audit.
Paystubs Are a Compliance Tool—Not Just a Payslip
Paystubs aren’t just about recording earnings—they’re part of a broader legal framework governing remote and international employment. Properly classifying workers, adhering to local and international tax laws, and using the right tools or third-party services can help employers stay compliant and avoid costly mistakes, all while building trust with a global workforce.
At FormPros, we make it easy to generate accurate, professional paystubs for remote and international workers tailored to your specific needs. Our online paystub maker allows you to fill in and download fully customizable paystubs in just minutes—whether you’re paying a domestic remote employee or an international contractor. With built-in calculations for deductions, earnings, and net pay, our platform helps you stay organized and compliant, no matter where your workers are located.
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