If you're a budding business seeking to expand out into the global market, it's more likely than not that you're considering hiring international employees. As someone who oversees an international team, it can sometimes seem a little daunting when your recruiters return with candidates that you don't have the experience to hire or don't necessarily have the right fit for the role on offer. Then there's also the legality issue that companies tend to face when they want to utilise the benefits of globalisation.
However, thanks to the rapid expansion of globalisation efforts alongside that of the internet, it's now easier than ever to gain access to the global marketplace and even easier to hire overseas employees for your company. And although it can be a little daunting when looking for the right candidate, there's no reason why you can't hire a great international employee. This article will go through the various ways you can start hiring international employees, any legal issues that are attached to them, how much they cost, plus the advantages and disadvantages of each one.
Firstly, international recruitment is becoming more and more popular because of the increased availability of the internet. The internet is a great way of connecting with international candidates, but it's important not to forget the benefits of having someone within your company who can understand the global marketplace. Otherwise, you may find yourself recruiting staff who do not have the skills you need to service your clients across both your domestic and international markets. However, with online recruitment, it's easier than ever to find the right candidate but equally easy to be turned down – so it's all a matter of finding the right person to fit the role.
So, how exactly does a company go about hiring international employees? Freelancing, contracting, working through a PEO, or going through an EOR are the four methods on how to hire international employees. Let's get into further depth about each of these options:
Freelancers are independent contractors who often have the skills and experience to provide a company with the services they seek and can be hired by any company looking to outsource work or free up internal employees. However, as freelancers are self-employed, they often charge more per hour as they are not on their client's payroll and will have to manage their own taxes and benefits. Freelancers tend to only be hired on a single-project basis and therefore can't be considered an "employee".
Thanks to the internet, hiring freelancers has become easier than ever, and, thanks to the pandemic, that freelance talent pool has only grown in recent years. There are many websites out there that act as "freelancer marketplaces" and help streamline the process between freelancer and client – these include Upwork, Fiverr and Freelancer.com. Businesses can post their project needs onto these sites, and the freelancer communities on these platforms will send proposals as to why they're suitable for the job. Some of these websites even have a bidding system, where freelancers use credit in order to boost their proposal and make it more likely to be seen.
Employing a freelancer is a convenient approach to acquiring only the talents and skill sets that are necessary for a certain job, rather than anything else. This then eliminates the requirement for businesses to go through the complete onboarding process in order to identify a suitable applicant who will then become an employee of the business, which will then subject the business to liability under the applicable local labour and tax laws. Freelancers are considered self-employed. Therefore, it is their responsibility to pay their own taxes and to protect themselves legally.
Independent contractors, usually referred to as simply "contractors", are skilled professionals who provide their specific skillsets to a business for a pre-determined period of time. This could be for the entirety of a particular project or for a predetermined period of time, most commonly a predetermined number of hours, days, or months. Any firm that wants to convert their SharePoint into an online platform or add an e-commerce capability to their retail website can employ a contractor to help them with these projects. The contractor is available for hire by any company that needs a certain skillset for a single project.
Contractors can choose to do business either as sole proprietorships or as limited liability firms to better suit their business needs. They typically find their own customers and are able to work according to their own schedules, quite similar to freelancers. However, a corporation known as an umbrella company may also recruit independent contractors. This eliminates the need for the contractors to find their own customers, as the umbrella company may supply the contractors with customers directly. Although the firm will pay the full amount of the contractor's compensation, including any necessary taxes, the contractor will not be considered an employee of the company.
Finding the right contractor for your business can be tricky as it normally requires a lot of networking. But, there are online tools that can help you find the right fit for your project too. Utilising websites like LinkedIn or Indeed by posting job adverts can help with the search process – just remember to use the appropriate tags for those job postings. Compared to being an employee, contractors have control over what work they do as well as when and how to do it. They are only legally obliged to perform the work outlined in their service agreement and only for the stated duration, unlike employees who must do whatever their employer tells them to do.
Professional Employer Organizations, or PEOs for short, are a sub-segment of the HR world that deal exclusively with helping small- and medium-sized companies navigate their organisations' human resources needs. They perform a wide range of tasks on behalf of the company they work with - such as payroll, benefits administration and anything else related to employment law. The "employee" and "employer" relationship is not interrupted by the PEO in any way; it merely shifts responsibility and administration of those aspects onto them, although companies who engage with a PEO will co-employ the staff since the PEO technically "leases" employees to the company.
A PEO can, for a fee, assist you in greatly lowering your hiring costs and free you from the administrative burdens that come with being an employer by taking on HR responsibilities. The entire cost of their services is variable and might change based on the size of your company, the nature of your business, and the agreement you make with them. The larger the company, the higher the in-line expenditures will be with a PEO organisation; nonetheless, this type of organisation might be helpful when recruiting staff from other countries.
Engaging the services of a PEO might not be as difficult as you might think; all it takes is a quick search on Google to bring up a comprehensive directory of PEO businesses from which you can make your selection. Evaluating these potential PEOs is the key to finding one that is a good fit for your business, not only in terms of meeting all of your HR management requirements but also in terms of ensuring that they have a culture that is compatible with that of your organisation. Because the PEO functions as a kind of business partner, it is of utmost importance to make certain that you are able to collaborate with them without clashing over the principles that guide your organisation.
Employers of Record, or EORs, are third-party organisations that function as the corporation's employment relationship. They exist solely to provide employers with labour and to take on all the HR management responsibilities on behalf of the company that it engages with, much like PEOs. This includes services such as payroll, benefits administration and anything else related to employment law. They exist outside of the company's own legal jurisdiction, saving them from paying for the employment-related costs associated with hiring and managing staff or employees – a cost saving which is usually much more than what a PEO could offer you.
When using an EOR, businesses are not required to enter into co-employment agreements like they are when working with PEOs. Although the corporation is responsible for all of the employee's day-to-day responsibilities, the EOR is considered to be the employee's legal employer for purposes of compliance with the applicable local employment laws. Utilizing an EOR does not incur any additional expenses; rather, they handle all of the organisational and legal concerns that are connected to employment on your behalf, provided that you pay them a fee in exchange for their services.
The use of a worldwide EOR service enables businesses to easily, legally, and effectively engage with talent on a global scale. This makes the process of employing international personnel simpler and more reliable in comparison to the use of alternative techniques. However, in the same way that it is vital to vet a number of organisations before working with a PEO, it is important to vet a number of EOR companies before working with one that is not only a good fit for your needs but also one that you are glad to work with on a regular basis.
No matter which path your business chooses to take in the process of hiring international employees, there are positive and negative aspects to consider for each method. This is true of virtually every aspect of running a business (and of life in general!). It is of the utmost importance to carefully consider the benefits and drawbacks of every possible method of hiring candidates before settling on the one that will serve your company in the best way moving forward.
Let's have a look at some of the advantages and disadvantages of recruiting workers from other countries using the various approaches that have been discussed earlier:
Employing independent contractors is by far the most common strategy for businesses to make use of the global talent market in order to accomplish the objectives of their projects. Finding a freelancer with the precise set of talents that your organisation needs for a project is now much simpler than it has ever been before, thanks to the proliferation of freelancing marketplace websites. When recruiting workers from other countries, there are a number of advantages and disadvantages to using freelancers:
Businesses can reduce the need to hire full-time employees and save money by utilising freelancers instead - even if they're not from the same country as your business. The financial savings can be very high, especially if a business is looking to hire international employees from countries like India or the Philippines – who also tend to keep their rates low as they face lower costs of living. Since these workers are contractors rather than permanent employees, there is no threat of having to pay them benefits such as healthcare, sickness or holiday pay.
When compared to full-time employees, freelancers don't always have the same amount of investment in the company that permanent workers do. They either work on a project-by-project basis or just provide a skill that does not require them to be linked to the firm for the long term. Either way, they are not considered permanent employees of the organisation. Because they are not legally employed by the organisation, it would be impossible to supervise how and when they perform the task they were employed to do. This would make it difficult to enforce any rules, as it would be difficult to monitor how they perform the job.
Hiring international employees through the use of the freelancing market is an excellent method to interact with skilled individuals from all over the world, significantly broadening the applicant pool from which you may choose. You can hire people from all over the world and not have to worry about the administrative responsibilities that come along with full-time employees if you use freelancer marketplace websites to find the exact skillset you need for your project or business. This is an efficient way to find the exact skillset you need for your project or business.
If you hire freelancers, there is a possibility that they will not have the same level of investment in your company as they do on their own, which could make them and the work they produce rather unreliable. This is a supplementary issue to the lack of supervision, which was discussed not too long ago. It might be challenging to determine which from a pool of freelance candidates will actually create high-quality work and which will not. Even though there are unquestionably some excellent freelancers available, there have also been innumerable complaints of freelancers who create work of low quality, which may put the entire project in jeopardy.
Companies that wish to hire overseas employees have a lot of leeway when it comes to locating the proper talent, but they must first thoroughly weigh the benefits and drawbacks of each option before making their choice. The same considerations should be made when searching for a contractor to work with during the process of hiring international employees. Before committing to working with a contractor, here are a few advantages and downsides to think about:
When compared to other options, hiring contractors will result in increased flexibility as well as greater opportunities for bargaining. On a project-by-project basis, independent contractors are brought on board, and in exchange for their work, they receive both remunerations in the form of a fee and a written contract that outlines the various terms and conditions of their employment. Employing workers from other countries on a contractual basis not only eliminates the risk of incurring additional costs and legal complications associated with terminating employment but also ensures that businesses whose workloads are prone to fluctuations only engage the services of qualified individuals when the situation calls for it.
There is quite a fine line that separates contractors and employees – and if you get it wrong, there is a high risk that your business could be fined and even face other serious legal issues. It's extremely important to look at the details of the contract and assess whether the contractor is, in fact, an employee or not. Typically a contractor receives a fixed fee instead of wages, meaning one could be working on multiple projects at the same time without accruing additional liability for loss of wages due to unpaid sick leave. Most labour laws require independent contractors to engage with more than one company so as not to become financially dependent on a single company, lest they be considered an employee instead.
When compared to using a regular employee on a full-time basis, engaging independent contractors may prove to be more cost effective for businesses in certain circumstances. Contracting the services of workers from other countries allows for significant cost savings, allowing money to be allocated solely where it is required. Contractors typically receive payment for their services based on an hourly rate or a flat rate, and because they are independent workers, the company does not need to bear the burden of the costs of benefits or taxes, when applicable. Contractors are paid based on either an hourly rate or a flat rate. Because it is simpler to keep a consistent workforce that won't be a source of disruption to operations, this can also help firms save a significant amount of money.
Contractors have a lot less control over the day-to-day activities they are responsible for because they are self-employed and are only giving the company they work for their services, unlike a company's full-time employees. However, they make their own decisions regarding how they should approach the task that they were contracted for because they work independently on their own and typically with multiple clients. Since they enjoy autonomy over their workload, they decide how best to tackle the task that they were contracted for. Because of this, there is a greater likelihood of misunderstandings occurring since the contractor may be unable to comprehend the instructions that have been provided to them, which may result in delays in the execution of the project.
Using a PEO is a great way to take on both full- and part-time employees without having to deal with administrative hassles. While this certainly sounds amazing on paper, there is still a list of pros and cons attached when hiring overseas employees through a PEO.
If you work with a PEO when searching for employees to hire in other countries, you will have access to a knowledgeable HR team that will collaborate with you to locate individuals that are the most suitable fit for the requirements of your business. PEOs are appealing to small and medium-sized businesses because they enable such businesses to have access to human resources functions, such as hiring, onboarding, and training, that they otherwise might not be able to pay. Especially for more compact businesses, this could be a benefit in the ongoing struggle to attract and keep qualified employees.
Companies that want to expand into the global market will still need to establish local entities within the countries they want to expand to in order to maintain legal compliance within the countries of operation if they use a PEO. Since a PEO can be seen as a firm that outsources its HR services and co-employs employees with the company that engages with them, this means that companies who want to expand into the global market will still need to establish PEOs. The necessity of establishing a local corporation would therefore hold down the company's efforts to develop globally, which could eventually lead to the company not being able to expand as swiftly as it had intended.
The outsourcing of payroll processing and tax compliance is another important reason why many businesses choose to work with a PEO. When a company begins to operate on a worldwide scale, managing its own payrolls may become a challenging and time-consuming endeavour. This is especially true in situations when numerous and convoluted tax regulations are involved. Therefore, whenever the company expands into a new country, rather than hiring and training new human resources staff, they can work with a reputable professional employer organisation (PEO) to handle those tasks for them. This frees up the company's resources so that they can focus on what they do best.
Employing the services of a PEO in order to search for highly skilled workers in other countries can be an expensive endeavour for firms. Not only are businesses required to shoulder the financial burden of creating local corporations wherever they intend to expand their operations, but as the company grows, they also face the prospect of incurring increasingly expensive expenses from their PEO. Why? Because professional employer organisations (PEOs) often charge either a percentage of payroll (given that they are co-employers), a flat price per person hired or pay check given, or a flat rate every pay period – the value of which will only go upwards as the number of employees increases.
Working with an EOR is another fantastic option for businesses that are looking to recruit staff overseas. EORs are often persons who currently work full-time in the host nation and have the connections and expertise necessary to recruit the most qualified applicants for businesses. They are also typically native speakers of the host country's language. However, similar to the other methods of employing overseas staff, hiring through an EOR is accompanied by a list of benefits as well as drawbacks; however, this list may not be as negative as you may initially believe it to be.
The most significant difference between a PEO and an EOR is that using an EOR will enable you to hire employees in other countries without the requirement to set up a local organisation or enter into a co-employment arrangement, but using a PEO will need both of these things done. Companies are able to more rapidly develop their enterprises overseas and more quickly acquire the local skills they need to get the job done as a result of the fact that working with a credible EOR will reduce the necessity for the establishment of local corporations.
Since an EOR functions as the legal employer for the workforce of a company, you may have peace of mind knowing that the services it provides are in complete compliance with all of the regulations that are in effect in the host nation. Companies that engage with an EOR can be certain that they are complying with all local laws because not only do they have access to highly skilled local talent, but they are also fully compliant with all local laws in that host country. This enables those companies to be certain that they are complying with all local laws. When you work with a reliable EOR service, you won't have to worry about whether or not your business is adhering to the local labour rules to the letter because EORs will take care of that for you.
In spite of the fact that you may be concerned that paying for an EOR service will cost you hundreds or even thousands of dollars, the reality is that this is not the case. When employing people from other countries, it is more cost-effective to work with an EOR because overhead expenses are cut significantly, and there is no need to set up a local organisation, which eliminates the associated costs of doing so. It was mentioned previously that the overhead costs could be fairly significant when it comes to employing international employees through a PEO; however, it should be noted that hiring freelancers or contractors would cost less than hiring international employees through a PEO. The cost of working with an EOR takes into account the taxes that are incurred as a result of paying employees who are located in different countries and who perform their work remotely. EOR services will also be responsible for paying any fines that are incurred as a result of wrongly submitted tax returns or other documentation in each nation – which can be as high as tens of thousands of dollars.
Although engaging with an EOR means that all employee day-to-day tasks are entirely at the hands of the employer, it might seem like there is a lack of influence when it comes to the onboarding process. Companies will always have the choice of who they want on their team, but there may sometimes feel like a lack of control over employees. Since an EOR is tasked with all the HR responsibilities EORs are in charge of employee onboarding, therefore, setting the onboarding timeline. This is why when picking your desired EOR, it is best practice to establish how long the onboarding period can be in the country you wish to hire from.
International recruiting is a complicated process that can be highly profitable for small- to medium-sized businesses if they know what kind of candidates they are looking for and how to approach the process. There are a few ways a company can approach hiring international employees, each with its own pros and cons that should be considered at great lengths before moving forward with the process.
When looking to hire overseas employees, it's incredibly important to secure the best quality workforce possible and ensure that the company is compliant with local labour and tax laws, all while keeping costs as low as possible. That's why engaging with a reputable EOR will greatly benefit your company's globalisation efforts by handling all HR responsibilities for you – including legal onboarding, payroll and tax compliance – which, in turn, allows you to concentrate on what you do best.