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Expanding abroad: 3 Main hiring solutions

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Your company is growing by leaps and bounds. You’ve got the management infrastructure in place to continue expanding. Your next frontier is over the border. You’re ready to tackle at least one new market, and you even have a vision of how you are going to do it.

More companies are going global these days, partially because there have never been so many options available for entering foreign markets at varying degrees of risk and commitment. Advances in technology have created global opportunities to hire, manage, and pay workers across the world and remain in legal compliance with local laws.

But before you launch your expansion strategy, you need to give serious consideration for what sort of presence is right for your company. How much time and staff are you prepared to commit to the new venture? What level of risk are you prepared to take in terms of liability? What sort of activity do you plan to pursue?

How you answer those questions will give you some direction for choosing the employment option that can help you achieve you goals most efficiently.

Here are the three main types of employment options to consider when planning to conquer a market overseas:

  1. Employer of record services

If your goal is a small or gradual entry into a foreign market to test the waters or build from the ground up, you may want to consider an international Employer of Record service. This service is ideal for companies that are looking to hire just a few employees, at least initially. The commitment is too small to justify the costs of opening and maintaining a full foreign entity.

The Employer of Record (EOR) handles payroll, benefits, and ensures legal compliance for the worker.  The EOR, sometimes referred to as a Professional Employer Organization (PEO) may take on those responsibilities on its own or work with an established local vender who assumes the responsibilities. Either way, you direct the worker in the day to day operations and the worker functions as a regular employee in every way. That means the EOR withholds taxes from the paycheck, and you provide the required vacation time, worker’s compensation, and other standard benchmarks according to the local requirements.

In addition to saving you the money you would have to spend opening and maintaining a legal entity, Employer of Record services also allow you the quickest entry into new market. Depending on the country and the EOR, it is possible to onboard a worker in as little as 48-72 hours. In comparison, an entity will usually take months to open, and sometimes can take up to a year before the operations can begin.

With an EOR, the liability risk rests with the legal employer. That makes EOR is a low-risk, low-cost solution to building a global workforce, especially for a small or medium size business, that could bring a great deal of gain.

  1. Hiring contract workers

Technology is transforming the modern workplace, and nowhere is that more apparent than in the area of contract workers. Workers can ply their trade anywhere in the world in many fields and they prefer to stay as flexible as possible by working as independents. This phenomenon is often referred to as the “gig economy” and it is made up of contract workers.

There are many advantages to hiring contract workers, including the fact that they, as independents, are responsible for paying their own taxes. That makes payroll much easier because the employer does not have to withhold taxes from the paycheck. Contract workers also don’t receive the benefits regular employees receive, such as paid vacation, or the same employment protection from the government. The liability risk resides with the workers because they are actual employees.

The disadvantage of hiring contract workers is that you do not get to direct the worker in how tasks are completed, only the final results. You can also expect a high turnover rate as contractors are always on the lookout for a better gig. In addition, governments have tightened the qualifications of a contract worker and begun to levy heavy fines on companies that misclassify employees as contract workers.

  1. Opening a legal entity abroad

Traditionally, companies that sought to expand abroad went through the long and sometimes challenging process of registering a company with their host government. That provides the legal basis for hiring employees, handling their payroll, and complying with all tax considerations. It provides a layer of legal protection for the company as a full subsidiary of the parent company in the host country.

Opening an entity is the most expensive option on the list, and it takes the longest to begin operations. In addition, a full foreign entity is costly to maintain and difficult to close once it’s open. It also assumes all legal liability.

But if your company has a long-term strategy for the overseas expansion that calls for a presence of at least five years and a substantial number of employees – possibly as many as 20, depending on the country – and plans to engage in full commerce and contracts, opening an entity may be the best option for you.

On the other hand, of you are planning a small-scale expansion or just want to test the waters abroad, you should give other options serious consideration. You may be able to achieve your primary goals without the expense, delays, and legal commitments.

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