By Globalization Partners
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As your company expands globally, you’ll benefit from bringing international employees on board. Hiring global employees offers many advantages for your business, including keen insights into the local culture and useful in-country business connections.
Your company will need to meet several criteria before employing international workers abroad, and the requirements can often be complex. That’s why we’ve created this guide to help you learn more about how to hire international employees.
Subsidiaries vs. EOR partnerships
Before your company can hire employees in a new country, it needs to establish an entity to do business or partner with a team that offers practical legal alternatives.
Some businesses set up a subsidiary — an in-country entity owned or controlled by the larger parent company. However, setting up a subsidiary can be a prohibitively convoluted and time-consuming process. It requires doing reams of paperwork, jumping legal hurdles, and checking off bureaucratic requirements. Choosing this route often means your company must wait weeks, even months, before it can begin operating in the new country.
Working with an Employer of Record (EOR) offers an appealing alternative. When your business partners with an EOR, you work with a team that has extensive experience in recruiting employees in the country where you’ve chosen to expand. You can begin hiring within days, and you’ll have the support of experts who can handle the legal and tax requirements for hiring international workers for you.
The legal setup requirements we focus on below are generally necessary if your company chooses to establish a subsidiary in another country. Working with an EOR, on the other hand, relieves a company from the burden of many of these requirements.
10 requirements for hiring international employees
Here are a few of the requirements you’ll need to meet as you hire for your international expansion.
1. A corporate structure
If your company sets up a subsidiary in a new country, it will often need to incorporate as a specific type of business and follow the applicable rules. For instance, many companies incorporate as limited liability companies. This option presents a traditional, broadly familiar structure, especially for an agency hiring international workers for the U.S. or countries that use similar business models. In this structure, the founders invest share capital, but keep their finances separate from the company’s financial structure.
Other options might include incorporating as a small stock company, an entrepreneurial limited liability company, a branch office, or a joint venture. These options vary by country, so you will need to research the local options and choose the best fit for your business objectives.
In most countries, your company must register with the appropriate authorities before it can begin doing business. For instance, in Peru, you need to register your company’s name with the Peruvian Public Registry and then obtain a Certificate of Registration. In Germany, you need to incorporate with a notary and then file registration paperwork with the trade register, the tax office, and any relevant local trade bodies. Other countries are likely to have similar requirements as well as unique stipulations — Spain, for instance, requires anti-money-laundering and anti-terrorism declarations along with the registration paperwork.
To register a business, you will likely need to present official documents like these:
- Certification of your company’s name from the public register
- A written description of proposed company activities
- Registered office addresses
- List of stakeholder and director names
- Articles of association
- Bank account information
- Proof of capital payment in the required amount
The list of requirements will vary by location, so your company should check with the relevant authorities in your new country to learn more about your registration obligations.
3. Contract insights
One of the most common legal requirements for global hiring involves writing formal contracts. Many countries do not have at-will employment, so your business will likely need to familiarize itself with contract structures and requirements in the country in which you plan to expand.
For instance, in Germany, the law requires you to develop a locally compliant employment contract for each employee. The contract should specify the following information:
- Termination requirements
Your new country may also require you to write the contract in the local language and specify salary and benefit information in the local currency. In Egypt, for example, the contract must be copied in triplicate and written in Arabic, and it should contain compensation amounts in Egyptian pounds. These requirements protect your new employees and help them understand the critical details contained in their employment contracts.
4. Familiarity with termination and severance requirements
Without at-will employment, companies cannot terminate employees whenever they wish to. While employing international workers abroad, you will need to maintain detailed knowledge of termination and severance requirements so you can make staffing changes as needed without violating the law.
Many companies require employers to have reasonable grounds for terminating an employee. In Peru, an employer must show objective grounds or cause for termination with documentation. Companies must also allow the employee at least five days to craft a written defense and up to 30 days if the employee has the option to resign or demonstrate performance improvements.
An employer that terminates an employee without the proper grounds might be subject to financial penalties. In some cases, the employer might have the option to pay additional compensation to terminate the employee legally.
Many countries also require employers to provide extended notice periods before terminating employees. The lengths of these mandatory notice periods often vary with the employee’s position or time at the company.
For instance, in France, after an employee’s probationary period, the notice period generally ranges from one to three months, with three months being particularly common for managers protected under Collective Bargaining Agreements (CBAs). In Australia, employees who have worked for a company for less than a year are entitled to one week’s notice. One to three years of service earns employees two weeks’ notice, three to five years of service earns them three weeks’ notice, and more than five years of service entitles employees to four weeks’ notice.
5. Knowledge of typical pay, bonuses, and benefits
Before you begin hiring, you’ll also need a comprehensive knowledge of typical wages and benefits for the positions you plan to fill.
Knowing the minimum wage in your new country is an excellent place to start. Even if you primarily employ salaried employees, you may also hire some lower-wage employees, and you don’t want to shortchange them or run afoul of the law by paying less in compensation than they are entitled to receive.
In many countries, employers customarily provide their employees with 13th-month bonuses. Some offer 14th-month or even 15th-month bonuses every year, so you’ll need to check with your new country to determine the norms. Germany, for instance, does not mandate such bonuses, though the law in the Philippines requires 13th-month bonuses, and many employers choose to give 14th-month bonuses in December.
Employee benefits vary from country to country. In many countries, employers must provide paid sick leave, maternity and paternity leave, paid holidays, and paid vacation. In Israel, for example, employees should receive 10 to 23 paid vacation days per year plus varying amounts of paid sick leave, depending on the employer’s industry. They also receive seven to 14 weeks of maternity leave or eight days of paternity leave.
In some cases, you may need to provide health insurance, though employees in certain countries receive their health insurance from a national program, which your company will likely pay into. Even if a national health service exists, your company may wish to offer supplementary insurance to ensure comprehensive health coverage for your employees.
6. Understanding of standard working conditions and CBA requirements
Before you hire in a new country, you’ll need to familiarize yourself with standard aspects of business, such as working hours, overtime, and paid leave policies. In the Netherlands, for instance, standard working hours are 40 hours per week, but may run to 48 hours per week. Employment law caps working hours at 60 hours per week and 12 hours per shift.
In some countries, certain industries have CBAs that regulate working hours and conditions more stringently than the government does. Be sure to check whether your industry has CBA requirements and how they will affect your workplace policies.
7. Familiarity with required payroll withholdings and contributions
In many countries, your company will need to contribute a percentage of each employee’s salary to various social security funds, such as these:
- Retirement pensions
- Healthcare programs
- Workers’ compensation funds
- Unemployment funds
- Disability benefits
Contributions vary significantly by country. For instance, in Indonesia, payroll contributions into the social security healthcare programs constitute about 5 percent of earnings, and the employer and employee split the contributions equally. In France, however, employer contributions to social security can run up to 45 percent of the employee’s salary.
8. Legal and human resources personnel
Once you’ve taken care of the required documentation and learned what you need to provide for your new employees, you can begin the recruiting and hiring processes. As you proceed, you may find that you need capable human resources personnel to navigate the ins and outs of attracting and managing new workers.
If you work with an EOR, your dedicated team can do much of the human resources work for you. These experts will handle screening candidates, managing payroll, and onboarding new employees.
As you build your international team, you will also need dedicated, experienced legal experts to help you navigate local employment laws, taxes, and other requirements. Without experts to assist you, you can easily violate the law and run the risk of fines and other penalties.
Your company will likely need to contribute significant percentages of its payroll to social programs and services. These might be retirement, social security, and healthcare contributions, or they might be more expanded contributions — for instance, toward housing and childcare costs. A capable legal team can help you streamline and expedite this process.
Your company may not be well versed in the legal ins and outs of your new country’s requirements. However, a team of experienced professionals can navigate the nuances and complexities of the law easily. Legal experts can also apprise you of regulatory requirements and keep your company from inadvertently violating labor statutes.
Here, too, an EOR team is invaluable. A good EOR team understands the details of a country’s payroll tax requirements, for instance, to ensure you remain compliant as you hire new employees.
9. A way to attract qualified candidates
You’ll also need proven strategies for recruitment in your new country. The job advertisement strategies that reach a broad audience in your home country might prove less effective in your new one. Job seekers in your new country might be more accustomed to learning about open positions through their social connections, by searching specific websites, or by going to job fairs or conventions. You’ll want to work closely with your local contacts to determine which advertising and recruitment strategies are likely to yield the most qualified applicants.
Just as your company is looking for new hires with the right blend of talent, leadership, hard work, and local insight to help your business grow in its new location, your applicants are also looking to see whether your company is the right fit for their values, career goals, and work culture preferences. Working closely with EOR experts enables you to make your workplace more attractive to local employees while still meeting your business needs.
10. A streamlined onboarding process
Once you’ve found the right people, you need to make them legal employees and get them started in their new positions. You’ll need trustworthy methods for activities like these:
- Collecting and processing the necessary legal information
- Adding the employees to your payroll
- Determining the required withholdings
- Setting up the necessary benefits
- Orienting the new employees to your company culture
- Training the new employees on their new job responsibilities
Working with a capable EOR is invaluable here — these processes are an EOR team’s specialty. When you partner with an EOR, your team will likely have a comprehensive software solution your business can use to automate and expedite these tasks, so you can start building strong working relationships with your new employees right away.
Build your international teams with Globalization Partners
As you acquire and manage international talent, let Globalization Partners smooth your path toward cohesive teams and purposeful business operations.
Setting up payroll, calculating withholdings, and ensuring regulatory compliance during the hiring and onboarding processes can divert your focus from more essential business matters. As a global EOR, Globalization Partners takes on these responsibilities so you can concentrate on building your team and enhancing your core business practices.