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International Benefits and Compensation: A Guide for US Businesses
International compensation is vital for US businesses because it ensures legal compliance, keeps pay competitive with local market norms, maintains equity and trust within global teams, and accounts for hidden employer costs like payroll taxes and benefits that can add 30% to 40% to salaries. In this article, we'll discuss the types of international compensation and how to set them up. We'll also discuss the Wise Business account. The global account that can help your company with all things cross-border.
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Types of Compensation in an International Context
Compensation abroad typically falls into three categories: direct pay, benefits, and non-monetary perks. Each of them plays a distinct role in attracting and retaining talent.
| International Compensation Types | Description |
|---|---|
| Direct Compensation | Base salaries remain the core of pay, but they must be adapted to local markets rather than copied from US scales. A role in Mexico City won’t command the same salary as one in San Francisco. Bonuses and incentives also vary. Japan treats annual bonuses as standard, while other regions tie them closely to performance.1 US startups offering stock options or RSUs need to account for country-specific tax rules. |
| Indirect Compensation | Benefits abroad look very different from US norms. While American employers often focus on healthcare, many countries provide universal coverage, leaving businesses to supplement rather than fully fund it. When it comes to pension obligations, Germany requires statutory contributions, Singapore mandates CPF payments, and France guarantees at least 30 days of vacation. In Brazil, employers must add a “13th month” salary.2,3,4 |
| Non-Monetary Compensation | Perks outside traditional pay can be decisive. Flexible schedules, training budgets, and wellness programs are increasingly valued. Local expectations also shape packages like meal vouchers in Italy or extended parental leave in Scandinavia, for example.5,6 These relatively low-cost benefits often boost satisfaction and retention more than salary alone. |
How to Set Up International Benefits and Compensation
Let’s break the process into clear steps and see exactly what’s necessary for setting up international benefits and compensation, stage by stage.
| Steps to Set Up International Benefits and Compensation | Description of the Steps |
|---|---|
| Step 1: Research Local Laws and Norms | The first step for any US entrepreneur hiring internationally is careful research. Every country sets its own minimum standards for wages, benefits, and employer contributions. What works in the US rarely applies elsewhere. For example, while at-will employment is common here, most countries prohibit it, requiring formal contracts and regulated termination processes.7 |
| Step 2: Define a Compensation Philosophy | Before salaries and benefits are set, companies need to define a global compensation philosophy. This is the guiding principle that determines how employees are paid and rewarded worldwide. Some businesses choose to standardize compensation in US dollars for simplicity, while others pay in local currencies to better support employees. Some lean toward uniform benefits, while others tailor offerings by country. A clear philosophy not only ensures consistency but also builds trust with employees who want to understand how compensation decisions are made. |
| Step 3: Benchmark Against Local Markets | Benchmarking helps American employers understand what competitive pay looks like abroad. Global salary surveys, industry reports, and compensation platforms provide critical data. A role that commands $80,000 in the US may be market-competitive at $40,000 in another region, while certain specialized skills may cost more internationally than domestically. Benchmarking prevents both underpaying and overpaying. |
| Step 4: Choose the Right Hiring and Payment Structure | Once benchmarks are established, employers must decide how to legally employ and pay workers. Large corporations may establish a local entity, which allows them to run payroll directly and administer benefits, but this process can be expensive and time-consuming. For smaller or fast-growing companies, working with an Employer of Record (EOR) is often more efficient.8 The EOR becomes the legal employer on paper, handling compliance, payroll, and benefits while the US company manages day-to-day work. Global payroll platforms are another option, offering centralized administration for multi-country teams. Each structure has trade-offs, but compliance and scalability should guide the choice. |
| Step 5: Budget for Total Employer Costs | Base salary is only one part of the equation. In many countries, employer costs run 30% to 40% above gross pay once social contributions, mandatory benefits and payroll taxes are included. US companies entering new markets must build these obligations into their financial models to avoid unpleasant surprises. |
| Step 6: Communicate Transparently with Employees | Finally, clear communication ensures employees understand their compensation packages. Workers in different regions will compare benefits and salaries, and without context, differences can seem unfair. By explaining why a software engineer in Germany receives a pension contribution while one in the US does not, or why compensation is denominated in local currency, employers can prevent misunderstandings and build long-term loyalty. Transparency is especially important for startups and scale-ups, where global teams often grow quickly. |
You Could Save on International Business Payments with Wise Business
Common Mistakes US Companies Make
One of the most common mistakes is applying American standards abroad. While unlimited PTO may appeal in the US, it can conflict with statutory vacation requirements in Europe. Similarly, offering private healthcare in a country with universal coverage may not add much value.
Another common mistake is ignoring tax implications. Equity awards that motivate US employees can trigger unexpected tax bills abroad, reducing their attractiveness. Currency issues are also overlooked. Paying in US dollars might simplify payroll, but employees in weaker-currency countries may face unpredictable take-home pay as exchange rates shift. Conversely, paying in local currencies exposes the company to FX volatility.
Cultural missteps can also damage the employer’s reputation. In Brazil, the 13th month salary is not optional, while in Japan, bonuses are viewed as a core part of compensation rather than a perk. Companies that fail to recognize these expectations risk losing credibility with employees.
Finally, compensation packages should not be static. Inflation, regulatory changes, and shifting market norms demand regular reviews. A package designed in 2025 may be obsolete by 2027 if not updated.
Final Thoughts
For US entrepreneurs and expats, international benefits and compensation are a strategic tool for global success. A strong compensation program tells employees, wherever they are in the world, that they are valued. For businesses seeking to scale internationally, that message is just as important as the paycheck itself.
FAQs
How Do US Businesses Pay International Employees Legally?
Most use either a local subsidiary or an Employer of Record (EOR) to comply with foreign payroll, tax, and labor laws. Paying contractors directly is possible, but misclassification risks penalties.
Should I Pay in US Dollars or Local Currency?
Both approaches have trade-offs. Local currency avoids FX stress for employees, while USD provides stability for employers. Many US companies adopt compensation zones, grouping regions into pay bands to balance fairness with cost.
How Do Equity and Stock Options Work Internationally?
Equity grants are attractive but may trigger taxation at grant, vest or exercise depending on the country. US startups should seek global equity tax advice to avoid double taxation.
Save Time and Money On Overseas Payments With Wise Business
Wise Business can help you save big time on international payments.
Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. The Wise Business account is designed with international business in mind, and makes it easy to send, hold, and manage business funds in currencies.
Signing up to Wise Business allows access to BatchTransfer which you can use to pay up to 1000 invoices in one go. This is perfect for small businesses that are managing a global team, saving a ton of time and hassle when making payments.
Some key features of Wise Business include:
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Mid-market rate: Get the mid-market exchange rate with no hidden fees on international transfers
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Global Account: Send money to countries and hold multiple currencies, all in one place. You can also get major currency account details for a one-off fee to receive overseas payments like a local
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Access to BatchTransfer: Pay up to 1000 invoices in one click. Save time, money, and stress when you make 1000 payments in one click with BatchTransfer payments. Access to BatchTransfer is free with a Wise Business account
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Auto-conversions: Don't like the current currency exchange rate? Set your desired rate, and Wise sends the transfer the moment the rate is met
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Free invoicing tool: Generate and send professional invoices
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No minimum balance requirements or monthly fees: US-based businesses can open an account for free. Learn more about fees here
Sources:
- Working Conditions in Japan | Vishu
- Statutory Pension Insurance | Destatis
- Employer Obligations | CPF
- 13th Month Bonus in Brazil | Europortage
- Buoni Pasto in Italy: A Practical Employee Benefit | Accounting Bolla
- Parental Benefit | Försäkringskassan
- What Is At-Will Employment? | Thomson Reuters
- What Is an Employer of Record? | Velocity Global
*Please see terms of use and product availability for your region or visit Wise fees and pricing for the most up to date pricing and fee information.
This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.
We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.
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