Remote recruitment overseas: what do employers need to know?by
Now that employees can ‘work anywhere’, it opens up recruitment possibilities for organisations to attract the best talent from around the world – but what are the logistics of hiring people who don’t live in the same country as your organisation? Here, we’ll look at how companies can go about creating a hiring strategy to suit this new approach.
Recruitment is opening and up and finding its feet in ways we didn’t imagine before. Now, candidates and employees can be based anywhere in the world, which is leading to a candidate-driven market for many, with employers finding ways to adapt. This is likely to be new territory for HR professionals as they are tasked to make sure everything runs smoothly.
The benefit of remote recruitment for employers is that they can find the best people to suit their requirements.
In fact, data from Omnipresent shows that 56% of firms in the UK, US, Canada, Australia and Germany have now hired, or plan to hire, remotely and internationally in the future. Another 21% are considering hiring remotely and internationally when the time is right.
We’re also seeing a retention issue brewing. Employees who perhaps moved to London or Paris, for example, for a particular role initially have since realised that they are able to do their jobs at their original home – or anywhere else in the world – as long as they have the right technology. Employees who change their mind about returning to the office are creating complexities for employers, not least when recruiting for certain roles, and this can be incredibly difficult and time-consuming.
The ability to employ talent overseas is understandably complicated. Employers need to comply with local employment laws, payroll and benefits procedures – all while onboarding employees remotely and ensuring they conform to local customs and industry best practices. It’s perhaps no surprise that research shows, when hiring internationally, 47% of organisations are concerned about employment laws and 29% are concerned about potential HR overheads. Four steps to international hiring success
There are four ways employers can hire people in different countries.
1. Set up a new business entity
To operate legally in a new country, businesses can set up a local entity in the new location. In many countries, hiring an employee without first setting up a local presence is illegal, while in others there are extensive limits on hiring without that legal presence.
There are implications of setting up a business entity in terms of compliance and avoiding risks around tax and social contributions, corporate permanent establishment risk, financial disclosure agreements as well as local employment regulations.
Remember too that when setting up and managing a local entity, the process varies regarding the time and money needed. While in some instances it can take just a few weeks, in others can take over six months to complete. The cost can also differ due to professional fees and initial share capital requirement, with prices ranging anywhere from £10 to £50k.
2. Hire individuals using a contractor status
Many employers consider hiring individuals abroad as contractors to avoid complexities. There are perceived benefits, but things to be aware of too.
In particular, contractor statuses and relationships are defined differently between countries according to local laws, customs and culture. Therefore, employing someone as a contractor in one country may not be legal in another, whereas employment status, on the other hand, is far more clear-cut across the world.
For example, contractor status is often determined based on a range of criteria and can change depending on a number of factors. This could be whether a person is subordinate or dependent on a company for paid work, whether the remuneration for a job is a person’s only source of income, how integrated a person is within a company or how crucial an employee’s role is to the routine running of the company. Consider the UK, where IR35 rules are changing but not set in stone yet. Being on top of local changes that can impact legalities is essential.
Consider too that ‘permanent establishment risk’ (which is generally triggered when organisations complete revenue-generating activities, making them liable to paying corporate taxes) is still not avoided when hiring contractors.
3. Use a professional employer organisation (PEO)
To help manage tasks such as payroll, taxes or benefits for individuals employed abroad, professional employer organisations (PEO) are available.
PEOs are often locally based and can therefore help with local regulations and bureaucratic processes. In particular, they can manage payroll processes by paying salaries, as well as income tax and social security contributions to the relevant authorities. They can also ensure employees are getting the benefits they’re legally entitled to.
PEOs can provide lower HR costs. The fee agreed with a PEO covers HR services, making scaling-up internationally in a new location more cost-effective.
PEOs do not take legal responsibility for employees, however. When using this service, organisations may still have to set up a legal entity, and PEOs generally do not set up compliant employment contracts. While some PEOs can advise on these things, organisations must be careful to read the fine print and be clear about where their responsibilities start and end before signing.
4. Use an employer of record (EOR)
For support employing individuals abroad but without the administration of setting up a local business entity or complying with local payroll, benefits and employment regulations, organisations can gain support from an employer of record.
An EOR employs individuals on behalf of their clients via a service agreement, so that on paper, they are the employer. While the EOR’s client retains control over the day-to-day working relationship with the employee, the EOR retains legal liability for the individual and is responsible for following local employment laws and practices. This means they manage local compensation procedures, holidays, benefits and welfare, severance and termination and payroll tax.
EORs may also have experts in employment law, HR and payroll/compensation as well as global benchmarking to help employers better understand particular advantages or complexities of hiring in certain locations. They can also help create strategies to support business growth.
Approach your hiring needs strategically
Ultimately, however an employer hires talent abroad, as long as local procedures and best practices are followed, there is no single strategy that’s the best fit for every situation. It’s important to seek guidance on local job markets, employment laws and employment-related costs – the key is having the information to help adjust a strategy.
The benefit of remote recruitment for employers is that they can find the best people to suit their requirements, so putting time into developing a remote strategy that caters for business logistics and peoples’ needs is essential.
Interested in this topic? Read Workforce planning: how to create a more agile recruitment and talent strategy.