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Payments to Foreign National Employees Working Outside the U.S.

In the event a University of Illinois System unit employs a non-U.S. individual to perform activities outside of the U.S., specific steps are required to complete the hiring process. Potential legal and liability issues regarding taxation that may arise under the laws of the foreign country in relation to employment services must be addressed prior to hiring. The designation of a foreign source income employee (FSI) may be applied only to foreign nationals who are nonresident aliens of the U.S. (individuals who are not U.S. citizens, permanent residents (PR), or resident aliens (RA) for tax purposes) performing employment activities outside of the U.S.

Foreign source income employees may only be set up with monthly or lump sum appointments.

Requirements to Change Source of Income When an Employee Leaves the U.S.

This process should be initiated and completed in accordance with the deadlines indicated on the Payroll Schedules.

Unit Steps

  1. Please reference Policy 1.5 Conducting Business Outside the State of Illinois for guidance prior to the start of any work activities.
  2. If the employee does not already have a social security number (SSN), the unit must obtain a Temporary Control Number (TCN) for the employee
  3. The unit initiates a Payments to Employees Working Outside the U.S. form, attesting that the employee is performing services outside the U.S. and answering questions regarding whether earnings will be FSI for nonresident aliens.
  4. The employee receives email directing them to complete a Payments to Employees Working Outside the U.S. form.
    • If the earnings are FSI, the employee must attach completed and signed Form W-8BEN.
    • If a wire transfer is required, the employee completes the foreign bank account information.
  5. Once the unit receives a confirmation email that the Payments to Employees Working Outside the U.S. form is complete, perform the following steps in the HR Front End (HRFE) application:
    • For appointments paid for service, contact HR to disable the I-9 link to continue the routing of the HRFE transaction.
    • Enter memo: “Please change the earn code to FSI. University Payroll & Benefits has W-8BEN on file and Payments to Employees Working Outside the US Form is complete.”
    • Once all onboarding/hiring steps are completed, route the HRFE transaction.

University Payroll & Benefits and/or Cash Management may need to return the Payments to Employees Working Outside the US form back to the employee or hiring unit for missing or incomplete information.

Requirements to Change Source of Income When an Employee Enters the U.S.

Once a unit knows that an employee with FSI earnings will be entering the U.S. to perform services, the following steps must be completed.

Failure to complete these steps in a timely manner will result in a withholding liability that is not collected from an employee’s pay. If University Payroll & Benefits is unable to collect the full tax due from an employee’s future paycheck, the amount will be grossed up to accommodate the taxes and charged to the employing unit.

This process should be initiated and completed in accordance with the deadlines indicated on the UPB Payroll Schedules.

Unit Steps

  1. Initiate the Payments to Employees Working Outside the U.S. form, attesting that the employee is now physically present and performing all services within the U.S.
  2. Select “Change to previously submitted request” and in the “Please describe what is being changed” field clearly indicate the employee will be performing services within the U.S. as of MM/DD/YYYY and that their earnings will no longer be FSI.
  3. The employee receives email directing them to complete the Payments to Employees Working Outside the U.S. form.
  4. If the employee was previously receiving a wire transfer for their pay and wishes to terminate this method of payment, they must select the “No” option under “Wire Transfer needed to a non-US bank?”
  5. Once the unit receives confirmation email that the Payments to Employees Working Outside the U.S. form is complete, perform the following HR Front End Steps:
    1. Contact HR for instructions on how to fill out the form I-9.
    2. Update the employee job record using HR Front End - Employee Record Change transaction. Earn code changes are handled by HR staff only, therefore, please enter a transaction memo to change earn code from "FSI" to "RGE" and dates when employee will be in the U.S.
  6. If the employee is here for part of a pay period, the unit should confirm job changes have been updated for the payroll calculation.
    1. If the job has not been updated, use Payroll Adjustment Request Interface System (PARIS) to create a Current Pay Adjustment (CPA) to correct the pay.
    2. If the job has not been updated, and the CPA is not processed on time, contact UPB promptly to report the earnings error.

University Payroll & Benefits and/or Cash Management may need to return the Payments to Employees Working Outside the U.S. form back to the employee or hiring unit for missing or incomplete information.

Employee's Steps

  1. Apply for an SSN.
  2. Immediately schedule a Tax Status Review with UPB for the purpose of updating your record.

Related Policy

Related Links

Related Forms