An offshore hiring guide that stops at sourcing and rates skips the part that changes. Hire someone in Manila rather than Ohio and the US rules you take for granted do not all travel with them.
There is no single answer to which ones do. Wage and hour law turns on where the workplace is, Title VII turns on the employee's citizenship, and social security and Medicare turn on citizenship plus whether the employer is an American employer. Those three lines fall in different places, and whatever the statutes leave uncovered has to be written into a contract instead.
Offshore Hiring Guide: The Four Decisions That Change at the Border
Four decisions carry the difference between hiring in Ohio and hiring in Manila, and one contract has to hold the answers. Each is settled before a start date, and each drives a clause rather than a preference.
- Who employs the person. Whoever stands as the employer where the person lives decides which country's employment law fills the gaps your agreement leaves. That is a different question from who pays the invoice, and it is settled first because everything else in the contract is drafted against the answer.
- Which US protections attach to them. Citizenship, not the location of the desk, decides whether several US employment statutes reach the person at all. The decision that follows is what your agreement has to say, because the handbook you already have may not mean anything where they sit.
- Who owns what they build. Checklists, reconciliation templates, spreadsheet models and written procedures are copyrightable work, and a contractor abroad does not hand you the copyright by sending an invoice. A signed assignment does.
- Which client-file duties stay with your firm. Consent before tax return information travels, and oversight of anyone who touches customer information, stay where they are whoever runs the payroll. The decision is who at your firm owns each of them by name.
Who Employs the Person, and Why That Answer Comes First
Settle the employer question before the job description, because it decides who stands in front of local labor law. There are three routes: register an entity of your own in the country where the person lives, engage a provider that employs them locally and bills you for the service, or contract directly with the individual as a supplier.
US employment tax then tracks a definition rather than a job title, and the definition turns on the employer as much as on the person. Outside the United States, section 3121 reaches service performed by a citizen or resident of the United States as an employee for an American employer, and subsection (h) of the same section defines an American employer to include a corporation organized under the laws of the United States or of any State, a partnership if two-thirds or more of the partners are US residents, and an individual who is a US resident (26 U.S. Code 3121). Which entity signs the employment paperwork therefore changes the answer, not only which country the desk sits in. A non-citizen working in their own country sits outside that definition, and a US citizen who has moved abroad and works for your firm does not, which puts the US payroll question you thought you had avoided back on the table.
If the person invoices you as a supplier instead of joining anyone's payroll, the sourcing rule decides what the payment is before any form does. 26 U.S. Code 862(a)(3) treats compensation for labor or personal services performed without the United States as income from sources without the United States, so work done entirely abroad is foreign source income. The supplier route has a limit worth naming in the same breath. A genuine contract for services is not employment, so the employment statutes in the next section do not reach the person, and the agreement becomes the only place their substance can appear.
Which US Employment Protections Follow the Person
Citizenship, not the location of the desk, is what several of these statutes key on, and the three that matter most to a firm hiring abroad each draw the line somewhere different.
Title VII Follows US Citizens Abroad
Title VII of the Civil Rights Act is the clearest case. Its definition of employee says that with respect to employment in a foreign country, the term includes an individual who is a citizen of the United States (42 U.S. Code 2000e(f)). The exemption that sits beside it says the subchapter does not apply to an employer with respect to the employment of aliens outside any State (42 U.S. Code 2000e-1(a)). Read together, a US citizen you hire to work in Manila is covered and a Philippine national doing the same job is not.
Whether Title VII reaches your firm at all is a separate threshold. An employer is a person engaged in an industry affecting commerce who has fifteen or more employees for each working day in each of twenty or more calendar weeks in the current or preceding calendar year (42 U.S. Code 2000e(b)).
Two Qualifications Sit Beside That Rule
Both qualifications are in the exemption section. Where compliance would cause the employer to violate the law of the foreign country in which the workplace is located, the statute makes the otherwise prohibited action not unlawful under section 2000e-2 or 2000e-3. And where a US employer controls a corporation incorporated abroad, that corporation's prohibited practices are presumed to be the employer's, with control decided on the interrelation of operations, common management, centralized control of labor relations, and common ownership or financial control (42 U.S. Code 2000e-1(b) and (c)). Standing up a subsidiary does not by itself put distance between your firm and how people are treated inside it.
Wage and Hour Law Turns on Where the Work Is Done
Wage and hour law runs the other way and does not ask about citizenship at all. Sections 206, 207, 211 and 212, which carry the minimum wage, overtime, records and child labor rules, do not apply to any employee whose services during the workweek are performed in a workplace within a foreign country (29 U.S. Code 213(f)). The same subsection keeps the states, the District of Columbia and a list of named territories inside the Act.
What That Means for the Agreement
The practical read is a drafting instruction. For a non-citizen working abroad, the protections your firm assumes in its own policies are not the operative rules, so local law and your agreement are what govern the relationship. If you would not accept a practice in your own office, put the standard in the contract and in the provider's obligations, because nothing else imports it.
Who Owns What the Hire Builds
Ownership of work product is worth settling in writing, because an offshore seat that lasts a year leaves artifacts behind. Copyright law offers two routes to owning them, and only one runs automatically.
A work made for hire is a work prepared by an employee within the scope of his or her employment, or a work specially ordered or commissioned that falls inside a closed list of categories, and then only if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire (17 U.S. Code 101). The listed categories run to things like a contribution to a collective work, a translation, a compilation, an instructional text, a test and an atlas. Firm work product does not sit comfortably in that list, and even where it might, the same prong still requires that the work was specially ordered or commissioned and that the parties signed a written agreement calling it a work made for hire. Relying on the status rather than on a signature is the risk.
So for anyone who is not your employee, the route to ownership is a transfer, and transfers carry a form requirement. A transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner's duly authorized agent (17 U.S. Code 204(a)). An email agreeing that the work is yours is not that instrument. A signed assignment that names the categories of work product is.
Which country's copyright law applies to a person working abroad is a further question, and it is one reason the same contract has to name its governing law and the forum for a dispute.
The Client-File Duties Do Not Move With the Payroll
One set of obligations does not change with the employment route at all. Hiring the person directly rather than through a vendor does not remove the rules that attach to the client file itself.
Consent comes first. Where a tax return preparer to whom tax return information is to be disclosed is located outside of the United States, the taxpayer's consent is required prior to any disclosure (eCFR, section 301.7216-3(a)(3)(i)(D)). The trigger is where the recipient sits, not whose payroll they are on.
Security oversight comes second, and which paragraph covers the person depends on the route. Someone outside your firm who is permitted access to customer information through providing services directly to you is a service provider, defined as any person or entity that receives, maintains, processes, or otherwise is permitted access to customer information through its provision of services directly to a financial institution subject to the rule (eCFR, Safeguards Rule definitions at 314.2(r)). That routes them to the provider oversight duties at 314.4(f), which are selection, contract and periodic assessment.
Hire the same person as your own personnel and 314.4(e) is the paragraph that covers them. You must implement policies and procedures to ensure that personnel are able to enact your information security program, including security awareness training updated as necessary to reflect risks identified by the risk assessment (eCFR, Safeguards Rule elements at 314.4(e)). Both paragraphs bind your firm at the same time. The route only decides which one this person falls under, and either way a named duty lands on someone at your firm. There is no version of this where it lands on nobody.
What the Contract Carries, Because No US Statute Does
Once you know which statutes do not reach the person, the contract stops being paperwork and becomes the control itself. Five clauses do most of that work, and each answers a question the law leaves open when the seat sits abroad.
- Governing law and forum. Name the law that governs the agreement and where a dispute is heard, because a term you cannot enforce anywhere is a preference. This is also the clause that decides whose copyright and confidentiality rules you are arguing under.
- Assignment of work product. List the categories of deliverable, then assign them in writing with a signature, rather than relying on a status the statute does not give you. Include the artifacts people forget: templates, macros, checklists, written procedures and anything built to run your workflow.
- Confidentiality that matches the client-file duties. The obligations you owe your clients only reach the person through the contract, so mirror them explicitly instead of citing a policy they never signed. Say what may be stored, where, for how long, and what happens to it at the end.
- Notice, replacement and continuity. Fix the notice period, who covers the seat during it, and what handover looks like in writing, because losing a trained preparer in February is a different event from losing one in September. A named continuity plan is worth more than a headcount promise.
- Access, devices and the network. Set out which systems the person may reach, on whose equipment, over which connection, and how access ends the day the engagement does. Access granted informally is the hardest thing to withdraw cleanly.
When Hiring Offshore Is the Wrong Move
The usual prerequisites still apply and are not the subject here: review capacity to grade the output, work documented well enough to travel, and clients who will consent to disclosure outside the United States. Two more tells belong to the drafting question.
You cannot get a signed assignment. If the person or the provider will not sign a written transfer of work product, you are buying work whose output you may not own, and no invoice fixes that.
You cannot name a forum you would actually use. A governing law clause pointing at a court nobody in your firm would ever file in is a clause you have already decided not to enforce, which quietly makes every other term in the agreement advisory.
Start With the Contract You Can Defend
Offshore hiring looks like a sourcing problem and behaves like a drafting one. The statutes you rely on at home reach the person unevenly, some by citizenship and some not at all, so the agreement carries what the law does not. Write it before you interview, not after somebody has already started.
Then keep the first engagement small enough to be wrong about. One seat, one work type you can specify, one named reviewer, and a written scope you would be comfortable enforcing in the forum you just chose.
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