As a US-based online business, I have several employees living in the Philippines (citizens of Philippines). Are the wages I pay them considered to them to be US source income? Am I required to withhold tax at 30% for them? Am I required to file Form 1042 and Form 1042-S, and are they required to file any forms (such as W-4 or Form 8233)?

From what I can tell, the reporting is very simple if the workers are classified as foreign contractors, but much more complicated if they are considered employees.

Additional info:
-They perform all work in the Philippines, and have never come to the US.
-They are being paid less than $10,000 USD annually (the tax treaty between US and PH states that income derived from services in the other country is only taxable if it is above $10,000).
-They perform customer service for my clients. My clients are from across the world, but the majority of them are in the US.