In today’s world, where remote and distributed work is already a reality, more and more CEOs, COOs, HR Managers and People Ops leaders find themselves dealing with a whole new set of tasks and challenges that come with an international workforce.
Learning the ropes of managing an international workforce is worth it because of global employment's value to your business. Opening up to cross-border employment helps attract and retain talent, democratises access to well-paid jobs, fosters the well-being of employees who would like to have the freedom to choose where they do their best work and creates more diverse organisations better fit for a diverse world of buyers.
While the challenges that each company faces with global employment will differ, one thing stays true for all - to make global employment scalable and sustainable, any newly minted internationally remote company will have to put compliance first.
At the end of September, we held a webinar where we spelt out what that means and how to solve some of the most pressing challenges of global employment. Watch a recording of the entire webinar or read below.
Companies must comply with the employment and tax laws of the countries where their workers are based. Even if they have employment agreements - or commercial agreements with independent contractors - in their jurisdiction, that piece of paper will not absolve them of their responsibilities in the worker's legal jurisdiction.
Every worker in the world is entitled to the legal protections of the country in which they are based. So, if a company has a worker in Norway, they must comply with Norweigan employment law and ensure that that worker’s payroll is processed in a way that’s compliant with the Norweigan tax system.
There are differences in labour laws and tax regimes. For example, employers in Denmark pay 1.25% of the gross salary in employer taxes. In the UK, people are entitled to 39 weeks of maternity leave. In Estonia, workers are entitled to statutory overtime pay.
While there are generally four ways of employing people across borders, not all are legal or sensible, especially when looking at all the above-mentioned employment matters. Here is an overview of each way, outlining the potential cons.
What it is: While the person may be in a different jurisdiction, they are employed and payrolled directly by the company’s HQ entity.
Cons: This may appear attractive, but it generally isn't legal in the long term.
HQ payroll won't be possible if the person is not a tax resident in the HQ country.
What it is: People are locally registered as sole traders or limited liability company owners and invoice for their work. There is no direct employment relationship.
Cons: In most countries, this is not a compliant or legal way to engage full-time workers who work solely for your company. There will be challenges in attracting and retaining talent.
What it is: The company sets up as a fully-compliant local employer. This often involves setting up a local entity and local tax registration.
Cons: Expensive, time-consuming, high-level of complexity. Unknowns around how obligations and costs will evolve over time. There will be a need to stay on top of changes in regulations.
What it is: Employment is handled by a platform that specialises in employing people on behalf of customer companies.
Cons: For some countries, the ongoing costs may be higher than direct employment. Some education is needed to help workers understand this relationship.
While an Employer of Record is the best option for international employment, not every existing global platform is created equal, and it’s important to know how to choose the right one for you. Employment is a long-haul business that extends further than the initial setup of employment agreements, tax registration and employee onboarding. The true work begins after that. When evaluating various Employer of Record providers, a good start is to ask the following questions.
This is a fairly straightforward one. What’s important to understand is whether the Employer of Record wholly owns the infrastructure in the country or they work with a third-party provider. You will want to work with someone who is the direct local employer because that is the fastest and most effective way to offer employment services to you and stay on top of constantly evolving local regulations and tax regimes.
This stems directly from the previous question. Each country has a set of rules and regulations, which includes the specific local employment model that the Employer of Record will use. For example, not every country allows unlimited employment through an employer-of-record model. Some examples include:
In each of these cases, beyond the specified time, the worker needs to be employed directly through a local entity owned by the employing company. And then there are countries such as Spain where there is no legal model to employ your workers on your behalf past six months.
Questioning the Employer of Record on the country specifics like that is essential.
Typically, an Employer of Record would charge a flat fee for their service (regardless of the salary they are handling) or a set percentage of the compensation. The cost may be consistent across all countries or differ from territory to territory. These fees would be charged either every month or billed once annually. The price they quote may depend on a specific commitment on your part (timeframe, number of workers, etc.).
Find out if any additional charges will apply. This could be anything from charging for onboarding or offboarding employees, additional activation fees for new countries or monthly transaction fees. It’s always worth being crystal clear on what it is that you’ll be paying.
Boundless was started to solve all these challenges. We began as an Employer of Record and are now becoming a fully-fledged Operating System for global teams. Boundless combines an intuitive employment platform with deep local market and operational expertise to efficiently manage compliance & HR ops for your people, wherever they are.
Boundless wholly owns corporate and employment infrastructure in 24 countries (and counting). This means we take care of employee payroll, taxes, core and Flexi benefits, contracts, and onboarding on behalf of customers, and stay on top of ever-changing local employment regulations, to assure 100% compliance 100% of the time.
