When the COVID-19 pandemic hit the world, almost every organization had to adopt and adapt to remote working. The shift so far has been successful for most. Earlier, many organizations were reluctant to hire a remote employee. It could be because hiring and managing remote talent adds to the workload of the HR team. While it might be true that international hiring and management of payroll, taxes and other regulations involved in it can be difficult, as employees and employers reside in different locations, it also has advantages that outweigh the troubles.
Working remotely can make the employees feel more in control, and they can be more productive as they are allowed to work from the place of their choice. The organizations also get access to a bigger pool of talent if they decide to hire the employees irrespective of their location.
To make remote working feasible for current employees who want to move to another country or to hire people who reside in another country, employers need to make some operational changes.
Let’s discuss the challenges involved and the ways to adopt remote working in any organization.
Challenges of employees working in another country for longer-term
Things would get a bit more challenging if you wish to continue hiring people who are based in a different country or want to move for a long term or permanently. In these cases, things like employment contracts, taxes, and payroll would be affected, and the organization needs to adapt its operations accordingly.
International employment is tricky in many ways as it needs a deep understanding of the local laws, regulations, and compliances.
For instance, if an organization decides to let their existing employees work from another country or if they want to hire employees from countries where they do not have a legal entity setup. In such cases, they can adopt the options suggested below:
1. Utilize the Employer of Record (EoR) model:
The easiest way to keep employing people from other countries is to avail services of an Employer of Record (EOR). This way, you can seamlessly recruit people from any country that the EOR covers.
The EOR can employ on your behalf and help you effortlessly build remote teams.
The Employer of Record breaks down the management of employment contracts, payroll, taxes, liaising with local authorities, HR compliances, advising on local compliance and regulations, etc. So, the EORs ease up the process of employing talent from different countries.
Utilizing the services of professional employer organizations as EOR will lower the costs and ensure that you can legally employ people in any country almost immediately.
The pricing of an Employer of Record is also feasible in comparison to the time and money you would need to spend on any other way to hire and manage a remote team.
2. Become a local employer
A company can set up a local subsidiary in the country its employees reside. This is the easiest route for the employees as they don't have to take care of any legalities. But setting up a local office can be a time-consuming and expensive task for the employer.
Setting up a local legal entity usually involves the following steps:
Further, setting up a subsidiary in another country can take anywhere between 2 to 18 months. It consumes a lot of company resources. And with the public offices not working in full capacity currently due to the pandemic, it may take more than 18 months to complete the setup in some countries.
Workers can realize this solution entirely by using their resources or by using some intermediaries that can help them find and connect with the local service providers. The introduction of the intermediaries in this process may save some time and resources, but the process is still lengthy and costly. Inevitably, it is not feasible to become a local employer in every country if you have a presence in many countries or if the number of employees is small or scattered in different states of a nation.
3. Let them work as freelancers or contractors
The most common strategy used by many organizations to work with people in different jurisdictions in the past is to make them work as independent consultants or contractors.
This solution makes things easy for the organization but the remote employees have to deal with the registration, taxes, and compliances as a corporate entity in the country of their residence.
This solution is usable in a few cases but not suitable as a long-term practice as it adds much burden on the employees. In a few jurisdictions, the Governments discourage these practices.
Hiring remote teams? Things to keep in mind
The process of remote hiring and managing a virtual team effectively starts with choosing the right strategy for allowing your employees to shift to other countries and for hiring people from different countries.
Additionally, you need to ensure that your employees don’t feel duped in the process and nobody lands up in any legal trouble. Here are a few things you should keep in mind:
- Make sure that your employee's net salary remains unaffected by the difference in the tax structure of different countries
- Assist your employees in fulfilling the visa, work permit, and other requirements
- Assist your employees in navigating through the employee tax implications
- Document the changes in employment status if the employee is moving from one country to another, or any other relevant updates
When it comes to employing people internationally or allowing your existing employee to work from a different country, it is better to make sure that you understand and comply with all legal requirements before making the first move.
While other solutions are there, it is more reasonable, legitimate, and effective to avail EOR (Employer of Record) services.