If you are like me, having been through numerous interviews over Skype, lengthy waiting periods, visa troubles, and bureaucratic process to gain work status in another country, you probably had shouted with joy to the person who delivered your first job offer overseas, ‘Yes! Yes! I’ll do whatever you ask me to do!’ the same way that I almost did. At this moment of triumphant, however, I would like to offer a few things for you to think about before showing up to work, in addition to the standard salary, housing, or relocation package. The things I would like to talk about may not even cross your mind for your entire tenure at one job, but they may have lingering consequences for your financial future.

#1: Understand your legal employment status

This is important because it affects how the host country labor law and tax law applies to you. Depending on your status, you may be allowed to receive compensation, but no employee protection is offered to you if you have disputes. There may be a minimum wage or legal working hours that you are not aware of. You might need to pay higher taxes because you are considered a foreigner. You may or may not be covered under the public health system. If you are taking projects as a contractor instead of being an employee, you may need to obtain tax filing status on your own.

If you work with an organization with a HR department, it will be the first place to start. Otherwise you may need to contact the host country Labor Department to understand your rights and obligations. This will give you an idea how your personal finance is impacted by this job more than the immediate monetary compensation you receive.

#2: Know your retirement contribution

In the US, an employer pays for half of your social security tax, and sometimes additional 401 (k) or pension contributions. Other countries have different schemes of safeguarding their citizen’s retirement, but you may not be able to enjoy your contribution to those systems when you retire, either because you are no longer in that country or because you never became a citizen. Before accepting the retirement plan, assess the likelihood that you will be able to benefit from it, and look for alternative ways that you can be compensated for retirement contribution if you are sure you cannot benefit from the system in the future. (Even if you can, it might take you more effort than it’s worth to move that money to where you are if you never accumulated enough capital there.)

For start, several countries have international social security agreements with the U.S. If your work in another country is limited to a few years, you may choose to contribute to the US social security system instead of your temporary host country’s pension system. If you intend to retire in the US, this program can be quite beneficial and provides continuity, especially for those of us who spend a few short years in many different countries.

On the other hand, your new employer may have its own retirement contribution to a corporate or individual account. If you are fairly certain the work arrangement is for the short-term, you may want to negotiate to have such contribution paid out to you as part of your salary or pay a lump sum when you depart from the country, so you don’t have small amounts of retirement savings sitting around in several countries. It’s not always possible depending on the host country’s law, but it’s good to bring it up with your potential employer, and understand the transferability of those accounts. (For example, several countries provide tax benefits when you transfer UK pension savings, though not to the US.) Some employers may prefer increasing your wage than opening you a retirement account (legally.) Of course, you will need to plan for retirement savings yourself instead of spending all of it!

#3: File your taxes locally and in the US

If you do your due diligence in #1, you should have found out if you are reported as an employee and have taxes deducted and contributions made, or if you are being paid ‘on the side’ because your employer doesn’t want to pay extra taxes for the social benefits you are entitled to in that country. As rewarding as the job can be, you want to do everything legally. Therefore, even before the tax season starts, learn more about how to file taxes locally and that you are able to do it with all the information you receive. (Certain countries have signed bilateral income treaty with the US, which dictates what types of income are taxed at your residential country and at what rates. You may want to work with a local tax professional on this.)

And remember, even if you have filed taxes in another country and you never returned to the US in the tax year, you are still liable to ‘file’ tax returns because the US government taxes citizens on their ‘global’ income. The good news is that you may not have to pay more taxes. There are two ways to lower your tax burden back home: either you meet the requirements for filing for foreign earned income exclusion, or you can get foreign tax credit for the tax you pay overseas

#4: Consider your risks

Some companies offer life, disability, and health insurance for free or a small cost, while some countries mandate obligatory insurance for all the workers in the country in the form of taxes. Yet many other companies or countries do not offer any protection on these common risks. Investigate if the host country government or your potential employer offers these benefits and the cost to opt in. You can look into how you can use local insurance companies to mitigate these risks, since most of the insurance companies in the US do not issue policies for people who are already living overseas full-time, where they have difficulty assessing the risks. Even if you don’t have any insurance options, you need to be aware that these risks exist, and consider ramping up your emergency savings.

#5: Sign a work agreement

Signing a work agreement may not be the norm in some countries, but it’s a good way to help you understand all the employment terms and have everything in writing in case you need it for future reference or even as evidence in legal matters. Even if your employer does not offer a standard contract, you should inquire whether they can provide some kind of formal offer in writing, and include any company benefit policy documents in attachment. In its bare bone, you should have an agreement that at least spells out the beginning and end date, compensation, and terms for termination of employment. If your employer declines to provide such an agreement, draft a one page agreement yourself and request a signature, or send it through email asking for recognition of receipt as acceptance of terms.

Have you encountered any overseas employment problems with financial repercussions that you wish you had known before? Share with me.


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