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:
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.
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:
Apply for Director Identification Number (DIN)
Obtain a Digital Signature Certificate (DSC)
Check and Reserve Company Name
Verify Compliance with the Memorandum and Articles of Association
File Incorporation Application
File the Certificate to Commerce Operations
Make a Company Seal
Create a Permanent Account Number (PAN)
Register with the Employees’ Provident Fund Organization
Ensure VAT Registration
Register for Medical Insurance
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.
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.
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.
GEO 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 GEO can help your company successfully navigate the Australian workforce shortages.