It’s no secret that Australian employers are struggling to find local workers
to fit their needs. With rising costs and a decreased supply of available
talent, many Australian companies are being forced to look to global markets
to find the talent they need.
Workforce expansion is a natural component of a company’s growth and success,
and for many, that means looking abroad to achieve the best results. In the
U.S., for example, many companies outsource technology positions to other
countries as a result of local talent shortages. It makes sense for
Australian companies to leverage the available supply of workers from
countries like India, Costa Rica, the Philippines for the decreased hiring
costs alone.
The challenge for many Australian companies is figuring out how to approach
the global hiring process. In this article, we’ll guide you through the
following:
- Understanding the Australian Talent Shortage
- How are Companies in Australia Hiring Foreign Workers?
- Why Most Companies Partner with an EOR
Just because Australia is currently experiencing talent shortages, doesn’t
mean your business needs to slow its operations. Whatever your business needs
are, there’s a global workforce ready and willing to fill in the gaps.
Understanding the Australian Talent Shortage
Why is Australia hiring foreign workers? Talent shortages are happening all
over the world, especially in fields related to technology. So, it’s no
surprise that Australian companies are also struggling to find skilled workers
to fill those positions. The rising competition and costs are forcing
businesses to consider global hiring as a solution.
Data from the Australian Bureau of Statistics (ABS) shows there are currently more than 425,000
job vacancies. However, despite the high demand, unemployment sits at a mere
3.9%. Such a low number is obviously great news for individuals and the
economy, but it doesn’t help fill those vacancies in your business. Here are a
few reasons why Australia is being hit so hard by the global talent shortage:
Skills Shortages
Qualified employees are getting harder to come by in the Australian workforce.
Over 31% of businesses say they’re struggling to find suitable workers for open positions, according to
ABS data. One reason they point to is the fact that many applicants don’t have
the required skills to fill the needs of the role. Additionally, there appears
to be a lack of applicants overall.
It’s important to note that these shortages are impacting every industry in
the Australian market. As a result, the lack of available workforce has
disrupted production, which can impact the resilience of supply chains and the
ability for companies to expand. Unfortunately, finding skilled workers will
likely continue to be a challenge for years to come.
Impacted Industries
Although most businesses are feeling the hiring strain, five sectors have been hit
harder than others, including hospitality and tourism, trades, healthcare,
manufacturing, and technology. For companies in Australia, hiring foreign
workers is a realistic solution for these struggling industries.
However, these industries have very different challenges. For example, the
hospitality and tourism, manufacturing and trades sectors are experiencing
staffing shortages mostly caused by the pandemic. Whereas technology,
healthcare and some specialized trade roles have vacancies due to a limited
talent pool. Work in Australia is in fact available, but finding people to
fill the vacant roles is highly competitive.
Cost of Local Workers
Although wages haven’t increased dramatically in recent months, the National
Australia Bank (NAB) predicts this will change in the
near future. Unfortunately, with 46% of businesses already experiencing
increased operational costs, it will be difficult to raise wages as well.
Some of these companies cite the high energy and freight costs, in addition to
the low Aussie dollar impacting imports. But inflation and other economic
factors are also contributing to the hiring challenges. In short, it’s not
hard for Australians to find a job. The hiring burden certainly rests with
employers. Instead of competing for limited talent at higher costs, many
companies are looking to the global landscape for their hiring solution.
How are Companies in Australia Hiring Foreign Workers?
When it comes to companies in Australia hiring foreign workers, there are only
three methods for companies to choose from: establishing a legal entity,
hiring foreign contractors, and partnering with an Employer of Record (EOR)
provider. In the remainder of this article, we’ll guide you through the
processes involved with each of these options. We’ll also discuss some of the
advantages and challenges you should be aware of when evaluating which of
these three methods might be right for your business.
1. Establish a Legal Entity
Operating in another country, regardless of whether you hire full- or part-
time employees, requires an established legal entity. But it’s important to
remember that every country has its own set of regulations and requirements
for incorporation – and failure to comply could result in costly fines and
legal penalties.
India, for example, has a 12-step process for setting up a legal entity, which includes:
- 1. Apply for Director Identification Number (DIN)
- 2. Obtain a Digital Signature Certificate (DSC)
- 3. Check and Reserve Company Name
- 4. Verify Compliance with the Memorandum and Articles of Association
- 5. File Incorporation Application
- 6. File the Certificate to Commerce Operations
- 7. Make a Company Seal
- 8. Create a Permanent Account Number (PAN)
- 9. Register with the Employees’ Provident Fund Organization
- 10. Ensure VAT Registration
- 11. Register for Medical Insurance
- 12. Complete Other Local Registrations
As you can imagine, this can quickly become a time-consuming and cumbersome
project. In fact, most incorporation services take anywhere from 6-12 months
to complete, depending on how complex the country’s incorporation requirements
are. It’s also a very costly endeavor for a business. Between government fees,
legal counsel, and other outsource support, these costs can quickly add up.
If, however, your business has the resources to accomplish its own
incorporation, there can be many benefits to establishing your own legal
entity. For instance, this route gives you full control over all the
operations of your business. However, you will be responsible and held liable
for payroll, HR, accounting and other administrative requirements, in addition
to managing an employee’s tasks. Whereas partnering with an EOR would
eliminate much of the assumed risks.
This option is good for businesses that want to make a long-term commitment
and investment into a specific country. Typically, this means the company is
familiar with the available workforce of that nation and is confident in
building a team there.
2. Hire Foreign Contractors
The only option that doesn’t require establishing some type of legal entity is
hiring international contractors. However, it’s important to know that by
leveraging overseas workers in this manner, you forfeit control over the
management process. Contractors have full control over their own schedules and
timelines and are less accountable to your deadlines.
Additionally, some businesses think that by hiring contractors, they don’t
need to worry about compliance. Wrong. Even with independent contractors, laws
are in place to protect these workers. In most countries, the laws governing
international contractors include the following criteria:
- The contractor can work for many companies at the same time
- The contractor gets to control and manage their working status and schedule
- These contractors are typically required to work for shorter periods of time with any single company, or else risk being classified as an employee
It’s critical to abide by these general guidelines, as well as research any
other specific regulations for the country of operation. Even simple mistakes
can lead to expensive and time-consuming challenges. If you misclassify a
worker, it can result in costly fines, tax penalties or even lawsuits.
3. Employer of Record (EOR)
Due to the risks associated with contractors and setting up your own entity,
many companies in Australia hiring foreign workers opt to partner with an
Employer of Record (EOR) provider.
An EOR is an organization that assumes the legal responsibility for
international employees. They help decrease hiring complexities by managing
HR, payroll, accounting and other administrative tasks. This ensures your
business stays compliant during your workforce expansion. Some EOR functions
include:
- Hiring full- or part-time employees
- Offering healthcare benefits
- Running accurate and compliant payroll
- Creating employment contracts
- Accounting and taxes
EOR services allow businesses to hire employees in countries without
establishing their own legal entity. While the EOR manages the administrative
burden, your company has full control over the day-to-day assignments of a
skilled worker.
Why Australian Companies Prefer to Use an EOR
Every company has different needs and challenges. Where establishing a legal
entity might work for some, most would prefer the peace of mind that comes
from partnering with an EOR. For companies still on the fence, there are three
main benefits to consider when leveraging an Employer of Record.
1. Fast Hiring
Do you have months (or even years) to wait for a legal entity to be
established? Are you confident in finding a qualified and dependable
international contractor? These are real challenges employers face with
international hiring.
As you partner with an EOR, you can leverage an existing network of legal
entities across the world. This means you can recruit and hire highly skilled
candidates within weeks. There’s no need for your operations to slow due to a
lack of your own entity or the decreasing availability of Australian workers.
2. Compliance
Whenever a company operates in another country, there are risks involved. With
countries constantly updating and changing employment laws, it can be
difficult to stay compliant on your own. EORs eliminate the burden of managing
legal and tax requirements so you can focus on other growth initiatives.
While the administrative burden and liability rests mostly with the EOR, your
business has full control over the day-to-day work of the international
employee. With a structure like this in place, you have complete peace of mind
for your global operations.
3. Cost
Companies in Australia hiring foreign workers may seem strange at first. After
all, wouldn’t it be cheaper to just wait for the talent shortages to end?
Unfortunately, with the current skills gap, it could be many years before we
see an increase of qualified workers in the Australian market.
Additionally, an EOR allows companies to test new markets without heavily
investing in their own legal entity. They can ensure the market and workforce
is viable with an EOR, then eventually transition to their own legal entity if
it’s successful. Overall, this process saves companies time and money in the
long run.
Work with Safeguard Global
With the reality of labor shortages in Australia, it’s important to position
yourself to attract, retain and compete for skilled workers around the world.
As you continue to grow, you’ll need the tools and resources to manage your
international expansion.
EOR by Safeguard Global can help you easily recruit, hire and manage global employees. We handle all the red tape and legal complexities so you can focus on scaling your business effectively. Connect with a global solutions advisor today to learn how EOR can help your company successfully navigate the Australian workforce shortages.
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