For companies entering new global markets, this hiring approach can alleviate hiring and labor law complexity
When a U.S. company begins evaluating overseas expansion, hiring might not be the first priority—especially if it’s trying to figure out its financing, building, logistics or technology needs.
But because the right talent can play a crucial role in an organization’s expansion success, how it goes about adding workers—especially when there are unfamiliar local employment laws and customs—shouldn’t be overlooked.
Fortunately, there is an employment option that frees companies from the burden of HR and payroll complexities and allows them to focus on the other strategic considerations of expansion. It’s called international employee leasing.
What is international employee leasing?
International employee leasing is an informal term for a hiring approach that allows organizations to secure labor in other countries by contracting with third-party companies. Although term has taken hold among U.S.-based companies familiar with leasing stateside employees through professional employer organizations (PEOs), the “employee leasing” terminology is not widely used outside the U.S. In fact, employee leasing is considered illegal in many European countries, including France and Switzerland.
A more accurate name for this hiring approach is the global employer of record, which is commonly accepted—and legal—in Europe and around the world. Employer of record providers hire workers on behalf of a client company, taking on the legal responsibility of payroll, benefits and compliance with local employment and tax regulations. As part of the contract, the client company is only responsible for managing the employees’ day-to-day contributions and performance.
The familiarity of PEOs among U.S.-based organizations is often why some employer of record providers refer to themselves as global or international PEOs. However, it’s an important distinction that “international employee leasing” is not the same as the co-employment arrangements that PEOs in the U.S. provide because there is not a shared legal responsibility—it lies solely with the employer of record.
When to consider international employee leasing
Leasing international employees offers plenty of upsides to companies entering new global markets. Here’s when to consider an employer of record as part of your international expansion:
When you need speed and flexibility. Contracting with an employer of record can be completed in as little as a couple of weeks. For a company just starting out with expansion, there’s not a need to take on the often extensive timeframes required for establishing the legal entity in order to hire employees internally. Because an employer of record already has in-country entities, it can hire workers on the client company’s behalf in a fraction of the time. An employer of record with service in various countries also gives companies greater flexibility in hiring, allowing them to test new global markets as the need arises.
When you’re unsure about employment compliance. By adding workers through an employer of record, a company is secure in the knowledge that the worker is in full compliance with local labor laws. As part of its offering, an employer of record should have local expertise required to understand and comply with all HR, payroll and tax regulations in the foreign countries it serves. In addition to legal compliance, the employer of record ensures contracts meet cultural and other local employment customs.
When you’re seeking lower-cost options. By contracting with an employer of record, a company is likely to save money via lower administration costs. Because the employer of record handles all the HR and payroll, the company doesn’t have to take on additional in-country HR and payroll expertise to support these new global workers. Additionally, using a third party to add workers frees a company from costly undertaking of establishing an entity to hire employees directly.
When attracting great talent is a priority. With the ability to hire international employees through a third party, a company can seek out talent virtually anywhere in the world (or anywhere an employer of record offers service). An employer of record can enable a company to promote a remote-first culture and flexible work environment, giving the company an advantage to attracting and retaining the best talent available.
What to look for when choosing a partner
For companies looking to lease international employees as part of their global expansion, it’s important to keep a few things in mind as they evaluate providers.
Pricing terms. How does the partner price its services, and what’s included in the cost of an employee contract? Make sure you understand any and all fees, and whether the cost of the agreement includes local tax payment and other requirements. Additionally, it’s important to understand whether the employment provider pays employees in the local currency and how that may affect your company’s cost.
Direct in-country expertise. What is the partner’s status in the country you’re seeking to employ in? Make sure you understand whether the provider has a direct entity with in-country staff or is relying on a local partner to carry out services. How it operates in a country, including how long it has offered services there, is a good indicator of the provider’s level of expertise in all matters of HR, payroll and employment tax compliance.
Customer service. Beyond providing legal employment to your international workers, what kind of service can you expect from your partner? It’s important to understand whether you—and your in-country workers—have a direct point of contact when there any questions about local employment. Additionally, find out what SLAs—if any—are included in your employment contracts.
International employee leasing can play an important role in helping your organization meet its global growth goals. Learn more about how our first-to-market employer of record solution, Global Employment Outsourcing (GEO), can help your company hire quickly and compliantly around the world by speaking to a global solutions advisor. Contact us today.