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.

FSI employees may only be set up with monthly or lump sum appointments.

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

 

Unit Steps:

1. Please reference Policy & Procedures 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 an SSN, the unit must obtain a TCN for the employee:
   • UI Students: Contact i-Card Office
   • Non-Students:
     • UIUC & UIS: Email University Payroll & Benefits (UPB) at fninquiry@uillinois.edu to request a TCN
     • UIC: Contact OIS to request a TCN at 312-996-3121 or ois@uic.edu
3. Unit initiates Payments to Employees Working Outside the U.S. form:
   • Attestation that the employee is performing services outside the United States.
   • Unit must answer question regarding whether earnings will be FSI for nonresident aliens
4. Employee receives email directing them to complete Payments to Employees Working Outside the U.S. form:
   • If earnings are FSI, employee must attach completed & signed Form W-8BEN
   • If wire transfer is required, employee completes foreign bank account information
5. Once unit receives confirmation email that Payments to Employees Working Outside the U.S. form is complete, perform the following HR Front End Steps:
   • 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 HRFE transaction.

NOTE: 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 (FSI to Other) 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 UPB 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 University Payroll & Benefits Payroll Schedules.

Unit Steps:

1. Initiate Payments to Employees Working Outside the U.S. form:

• Attestation that the employee is now physically present and performing all services within the United States.
• 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.

2. Employee receives email directing them to complete Payments to Employees Working Outside the U.S. form:

• If the employee was previously receiving a wire transfer for pay and wishes to terminate this method of payment, they must select the “No” option under “Wire Transfer needed to a non-US bank?”

3. Once unit receives confirmation email that Payments to Employees Working Outside the U.S. form is complete, perform the following HR Front End Steps:

a. Contact HR for instructions on how to fill out the form I-9.

b. 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.

4. If employee is here for part of a pay period, unit should confirm job changes have been updated for the payroll calc.

a. If the job has not been updated, use PARIS to create a Current Pay Adjustment (CPA) to correct the pay.

b. If the job has not been updated, and the CPA is not processed on time, contact UPB promptly to report the earnings error.

NOTE: 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.

Employees Steps:

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

About These Pages

This web site is the result of a joint effort to create an understanding of processes, requirements, and policies related to payments to Foreign Nationals. It has been made possible through the collaboration of the Office of Business and Financial Services, Office of University Counsel, Office of International Services at Chicago, Office of International Faculty and Staff Affairs at Urbana, Office of International Student Affairs at Urbana, Office of International Affairs at Springfield, Office of Human Resources, the Offices of the Provost at all campuses, and representatives of units from all campuses.

Last Updated: May 4, 2020