By Globalization PartnersJuly 2020
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So, you want to expand your business? Hiring international workers can have many benefits for your business, including the ability to diversify and increase revenue and boost the overall performance of your team.
Now that you are ready to take the next step, it’s time to get to know your international hiring options. The good news: there’s more than one way to approach hiring international workers – you simply must know which of these four common paths is best for your business.
Get to know your options for hiring international workers
Creating your business entity in the country where you’d like to hire is the most straightforward way to approach hiring internationally.
Setting up your own branch or subsidiary can have many benefits in the long-term, such as owning access to new markets, gaining in-country knowledge throughout the process, and having complete, end-to-end control of all business operations.
However, while it might make logistical sense, executing entity setup is time-consuming, costly, and complicated. First, you’ll have to choose between setting up a branch office or a subsidiary. And no matter what, your organization needs the expertise to navigate local labor laws and tax requirements, maintain compliance, and manage risk. Finally, entity setup takes time – six to 12 months in some countries.
Also, if your business plans don’t pan out in the region, or you must terminate your international team, winding down the entity requires more money and time.
A contractor works for you but also has a portfolio of their clients, and you and your company are just one of those clients. Contractors usually work on a short-term basis for less than six months. If you are looking for an international professional to work with you for one specific project, a contractor could be a good fit.
However, there are drawbacks to this option.
If you’re planning to hire a contractor, it’s essential to learn how the term “contractor” is defined under the local law, as misclassification of this status could lead to hefty penalties and tax withholding charges.
Also, contractors might want to claim ownership of any intellectual property that they develop while working with you. This could be detrimental to your company in the long-term. If you’re looking to grant unrestricted access to your organization’s intellectual property, working with an employee is your best option.
Payroll-Only Registration (POR)
This option, available in some European countries, allows foreign employers with no entity in-country to make a specialized “payroll only” registration with in-country tax and social security authorities so that they can issue a local payroll. POR offers the benefit of hiring and paying employees without the need to set up an entity.
However, this option only allows you to employ three non-revenue generating employees. For companies looking to scale sales operations and hire larger headcounts, it may not be the best long-term choice.
Also, you’ll still have to manage the setup in-house, which could be taxing on your internal resources.
Employer of Record (EOR)
An Employer of Record (also called a global PEO) takes on all the employer responsibilities of hiring international workers.
Your business identifies the candidate, and the Employer of Record hires them to their local entity in-country, handling all payroll, taxes, benefits, then assigns the employee back to your company.
The professional will work for you, and the Employer of Record handles all compliance matters and takes on all the risk.
The benefits to this international hiring option are clear – your business can hire the top candidate of your choice within days, offering them a competitive benefits package, and providing them with a complete HR infrastructure, all while saving you time and money.
What’s the Next Step?
It’s essential to have a strategy in place before expanding your team internationally. Knowing your business goals will help you determine which of these options for hiring international workers are a good fit for your organization.
Ready to learn more about how to choose the right Employer of Record? Check out our eBook “20 Questions to Ask Before Choosing a Global PEO”.
Globalization Partners enables companies to quickly and easily expand into more than 187 countries without the hassle of setting up local branch offices or subsidiaries. You identify the talent, and we employ your team member via our in-country payroll. This enables you to quickly and easily hire around the globe, and lifts the burden of figuring out HR, tax and legal matters from your shoulders to ours.
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