Hiring employees to work for your organization in parts of the world where you don’t have an in-country entity is risky behavior – if you’re not prepared. There are several reasons to hire globally – whether you’re exploring expansion into a new market, hiring talent that isn’t available where you have an entity, or to support a specific venture or project. Often the need for flexibility may outweigh the desire to take the time and expense to set up an entity in-country.
The acceptance and normalcy of the “gig” economy, coupled with technology sophistication allows workers and organizations to work seamlessly from anywhere in the world. However, the ability to remain compliant to the employment laws (of all 195 countries) governing where you want to hire may not be quite as flexible.
There are a few good reasons to ensure you’re not running afoul of the local laws and regulations. But when companies fail to recognize the risks involved, not only the company, but often the employee pays the price. Here are some ways to avoid risking employment non-compliance
Before you hire in a country where you haven’t hired in before, set up an in-country entity and register with the local authorities. By setting up a legal entity before you hire, you will be given a local taxpayer ID and have done the work to set up in-country payroll. This requires planning as it is an investment with considerable up-front expenses, time, and resource investment. If you’re testing a new market or setting up for a temporary project or program, be sure to work in the added resources to your plan.
2. Hire an independent contractor.
This solution will work for a specific type of worker, the classification of an independent contractor has specific guardrails around the type of work and how much responsibility the worker can carry. If your employee is going to have set schedules or responsibilities for work outside of specifically project-based work, you run the risk of being out of compliance. Otherwise, it may be an option; check with the country in which you plan to hire.
3. Employ a third-party to act as employer of record.
An international employer of record service can provide in-country resources to employ the worker – they manage the employment contracts, taxes, benefits costs, etc. and you manage the work and direction of the employee. With the right employer of record, all your HR and payroll needs are taken care of for you.
Gambling with employment law in hopes that you are in compliance or that if you’re not, you won’t be caught can greatly impact your organization. Truthfully, if you’re looking at quickly moving in-country, you likely have little experience with the local employment and tax laws that will impact how you hire. If your hiring method misses a step, your project or expansion begins to cost more money, take longer to ramp up, and ultimately can set a strategic plan back.