The competitive advantages of global hiring are compelling for fast-growth companies, from opening new talent pools to paving the way for large-scale international expansion, gaining cultural perspectives and infusing new ideas into decision-making.
Companies with a diverse workforce tend to perform stronger, are more innovative and enjoy higher employee engagement rates.
However, the path to global hiring is lined with potential pitfalls, especially in terms of compliance, intellectual property, tax liability and HR management.
In order to circumvent these challenges and unlock the competitive advantages of global hiring, companies must consider the route they take when venturing into talent pools abroad.
What are the options for global hiring?
When it comes to global hiring, companies have traditionally turned to three main options. However, these ‘legacy’ hiring models come with their own challenges and risks such as bureaucratic delays, tax liabilities, compliance hurdles and operational inconveniences that can become major problems down the line.
- Employer-sponsored visas: There are delays, processes and restrictions that can get in the way of employer-sponsored visas. Sometimes this option is not even a possibility for hiring in the near future. For example, the United States Citizenship and Immigration Services (USCIS) announced in mid-2022 that the country had already reached caps for the H-1B lottery through the end of 2023.
- Setting up a company abroad: This is usually an arduous process and then the company bears the risks and responsibilities of operating and managing a workforce in-country. Business incorporation can also take longer than six months in some countries, according to data from the World Bank, and the process entails hefty startup costs.
- Engaging independent contractors/freelancers: When it comes to engaging independent contractors (ICs) and freelancers, companies expose themselves to permanent establishment risks and misclassification fees, fines and legal ramifications.
Enter the Employer of Record (EOR) hiring model
The good news is that, for some companies, hiring through an Employer of Record (EOR) is a solution that allows them to tap into foreign talent quickly and compliantly.
An Employer of Record (EOR) is a business organization with legal entities already established in the target countries in which a company (the EOR’s client) wishes to hire talent.
The EOR legally employs that talent on behalf of the hiring company (client), rather than the client directly employing the worker. In doing so, the EOR assumes the legal liabilities of operating a local business as well as the responsibilities of administering payroll and managing local employees in the country.
In order to be successful, an effective EOR brings specialized knowledge in local HR regulations, statutory requirements, customary benefits, culture and hiring practices.
When the right expertise is there, the EOR can perform the necessary due diligence to ensure international employees are welcomed locally, onboarded efficiently and well-cared for throughout a worker’s entire employment tenure.
Why consider an EOR?
A company can circumvent the arduous business incorporation process by partnering with an EOR – and workers can be hired almost immediately. In many cases, the onboarding can happen in less than 24 hours.
Transparency is also an important factor in the EOR hiring model. The company, as the client of the EOR, pays one predetermined amount to the EOR, rather than paying out the usual capital requirements piecemeal (setting up a local bank account, infrastructure costs, office overhead, registration fees, hiring local consultants, etc.).
The EOR hiring model essentially removes global market entry barriers. It empowers companies to tap into new talent pools around the world with flexibility and ease.
At the same time, the worker (called a ‘client worker’) is managed by the client company and carries out day-to-day responsibilities – just like any other member of the team. Notably, the EOR hiring model presents client workers with many benefits as well, including regulatory compliance, tax protection, supplemental benefits and local support in their timezone and preferred language.
Comparing options in global hiring
Mitigates compliance risks
|Reduces intellectual property theft||Mitigates international tax liability||
Fast hiring and seamless HR management
|Setting up a company abroad||❌||✔️||❌||❌|
|Engaging independent contractors||❌||❌||❌||❌|
|Hiring through an Employer of Record (EOR)||✔️||✔️||✔️||✔️|
Can the EOR hiring model help you dive into new talent pools? Don’t sink when you can swim. Check out our ‘Pathways to International Success’ guidebook and contact us to learn more about navigating the international expansion and hiring lifecycle.