As businesses grow, they typically experience increases in revenue, overhead, and/or physical presence. A normal business owner will look at standard solutions for the problems that come with some of these increases. A savvy business owner will also look for solutions that are a little more innovative. While it’s not the first thing that comes to mind for most entrepreneurs, businesses can benefit from looking internationally to support growth.
So why don’t more business owners consider international options for expansion and hiring? Some may think their company isn’t big enough to benefit. Others might disregard the option because they assume it will be a tedious and time-consuming process. Thankfully, modern technology and third-party assistance can make international growth not only possible, but a relative breeze for businesses of any size.
How an EOR Can Help You Hire International Employees
Looking overseas for employees can be a fantastic way to alleviate staffing problems, which are rife in today’s tight labor market. You can find individuals to fill roles where you are experiencing a shortage of local applicants. Looking abroad can also be helpful if your business is in a smaller community where highly skilled candidates might be overpriced or unavailable.
If you’re considering hiring employees from a country where you don’t have a physical presence, though, you technically can’t. “Wait, so I can’t have employees work for me unless I actually set up an overseas entity?” you might ask. Not so fast. This is where a third-party service provider called an employer of record (EOR) comes into play.
An EOR operates by setting up legal presences in numerous countries around the world so you don’t have to. Once you find a suitable candidate, the EOR then hires the employee on your behalf. So while the employee performs work for you, their legal employer is the EOR.
Working with an EOR is the easy way to satisfy international hiring regulations, but it also provides advantages from administrative and liability perspectives. The EOR will perform the work of administering payroll and benefits to your international employees. They, rather than you, are also responsible for any fines and penalties related to administrative missteps.
Hiring international employees through an EOR is a fantastic way to expand your talent pool without the cost and legal hassles of setting up a physical presence elsewhere. If you eventually hire large numbers of workers from a specific country, you can open your own local entity later, likely with the help of the EOR that got you started in the area. Before you drop thousands of dollars and months of your time to open an entity in a new country, test the process without the commitment by using an EOR.
When You Don’t Need an EOR
If you do decide to open up a location in another country, you are not required to retain EOR services. This doesn’t mean you need to navigate international employer regulations without assistance, however. You have the option of working with a professional employer organization (PEO). A PEO can help you with employee onboarding, payroll and benefits administration, and the filing of necessary paperwork.
If you are using a PEO rather than an EOR, you are still the legal employer of all your employees. This means that you bear the responsibility for penalties and fines associated with improper administration of payroll and benefits. This makes it especially important to hire a reputable PEO that has a good track record with international administration. They can sometimes guide you through error resolution, but you are the one who actually pays out if needed.
Another international hiring situation where you aren’t required to retain an EOR is when you are taking on contractors rather than employees. You can hire contractors from any country without maintaining a legal presence there, so that is another option. Many EORs also offer international contractor management services, so if you have a mix of employees and contractors, an EOR is still a good solution.
One thing to note is that each country has its own specific rules for contractor classification. You cannot hire a worker as a contractor just because it’s more convenient for you.
Most classification criteria tend to be related to the degree of independence the worker has from the business they contract with. Does the business require the worker to be available for set hours, or do they manage their own time? Does the business pay for any of the worker’s supplies, benefits, continuing education, or training? Does the worker only work for the one business, or do they contract with multiple companies?
The more separation a worker has from the company they work for, the more likely they are to qualify as a contractor rather than an employee. This can be beneficial for you since contractor regulations are less likely to require paying benefits, certain employer taxes, or salary minimums.
Employer taxes alone can incur huge costs. For example, hiring a Swedish employee will cost you not only the employee’s salary, but also 31.42% in social security tax. Most countries do not require these additional taxes for contractors.
The downside of limiting your search to contractors is that you might be missing out on better or more qualified workers. Depending on the field, the best candidates might be only looking for employee status to earn a certain salary and benefits. Before making a decision, assess your situation and make sure you don’t handicap your success by being overly cost conscious.
Look Abroad to Grow Your Business
It’s easy to talk yourself out of trying something outside your comfort zone, especially when the future of your business is at stake. You might be tempted to dismiss international expansion or global hiring because it sounds like a logistical nightmare.
Before you do so, however, consider where you want to take your business from a success standpoint. Expanding or hiring internationally might be the answer you’re looking for — and easier to implement than you ever imagined. You could also consider launching an app for your business, be it Android or iOS, learn more at https://www.voypost.com/blog/ios-development-vs-android-development
Interesting Related Article: “How to Start an International Business: 7 Tips“