Companies are realizing the advantages of hiring workers internationally, but it can be difficult to hire, pay, and manage workers in countries without a local legal entity. Working with an employer of record is the easiest way for companies to leverage a global workforce while minimizing the risks of expansion. What does working with an employer of record actually mean, though?

What is the definition of an employer of record?

An employer of record, or EOR, is a company that helps you employ workers in other countries by acting as the local employer on your behalf. Typically, your EOR will handle human resources administrative work as well, including local payroll, benefits administration, and tax compliance. With a reliable EOR partner, you can quickly and safely hire and pay workers globally without going through the expensive and difficult process of opening your own legal entities in multiple countries.

See also: Learn more about Remote employer of record services

What are the benefits of using an employer of record?

There are many benefits to using an employer of record. These benefits save money, mitigate risks, and simplify HR. An EOR can be a powerful partner for businesses with distributed teams.

No need to set up a local legal entity to employ global workers.

Comprehensive understanding of local statutory benefits

Five key steps to using an employer of record to hire international employees

There are a lot of EOR providers out there, so choose the one that aligns best with your needs and budget. Practice due diligence and investigate a variety of EOR providers, their offerings, and their price points.

No one tells the truth quite like a customer. Seek reviews and feedback from existing customers of the EOR you want to use. In particular, value feedback from reviewers with needs similar to those of your own business, as your experience with the EOR will likely be similar.

See also: How Swell saves time with stress-free international hiring

3. Consider the experience of your employees.

Since the EOR will handle your employees’ payroll, benefits, and other HR tasks, you will want to work with a partner you not only trust to get it right, but also a partner who treats your team with respect. These interactions include onboarding, getting paid, and dealing with tax season.

See also: What is it like for your employees when you choose Remote?

Make sure you are paying workers appropriately given the local market and their role in your company. A good EOR can guide you in determining the right salary for your employees in regions where you may not have much experience.

See also: How to calculate compensation for remote employees

Your intellectual property is the lifeblood of your business. Without protections for your IP, you could end up fighting costly legal battles in foreign courts with laws you may not know. Avoid the hassle by making sure you work with an EOR that provides the maximum protection for your intellectual property and invention rights.

See also: Intellectual property and invention rights for companies with remote workers

What are the responsibilities of an employer of record?

EORs handle human resources activities, payroll, tax and legal issues, compliance, and benefits for your employees in other countries. Those responsibilities can vary from company to company, as can the ways in which your EOR may handle these duties on your behalf. The most common responsibilities of an employer of record include the following:

Paying your employees in local currencies

Making contributions to government programs (like social security)

Maintaining compliance with evolving local labor laws

For more information on the functions of an employer of record, see our guide to understanding what an employer of record can do.

Global payroll is a complex process that varies from country to country. If you are looking to pay workers in other countries, follow these steps:

Identify the person you wish to hire (or the existing employee who will be relocating).

Determine whether your new worker will be a contractor or an employee.

Select a global payroll provider, also known as an employer of record, or EOR.

Confirm the worker’s salary and benefits package.

Provide the worker’s information to your provider to set up payroll.

Work with your global payroll provider to create an employment agreement.

Sign the employment agreement with your employee.

Setting up global payroll may seem like a daunting task, but with the right partner, global payroll can be as easy as clicking a button.

See also: Remote’s Global Payroll Management Guide

What are the different types of employer of record service providers?

There are two main types of EOR service providers: owned-entity and partner-dependent. 

As the name suggests, partner-dependent EOR service providers do not provide their services directly to you. Instead, they resell the services of local third parties in countries where they operate — either in all countries or only in certain countries. This structure allows the EOR to charge more money, but it comes at the cost of less control. Partner-dependent EORs do not have final say over their own fees, which means your monthly bills can be unpredictable, or the experience provided to your employees, which means problems can take several days to solve. Avoid partner-dependent EORs at all costs.

Owned-entity EOR service providers do not rely on third parties. Instead, they fully own their local legal entities, which means they can exercise full control over their own billing and the experience of your employees. Whichever EOR you choose, make sure the EOR owns its own entity in the countries where your employees will be working. Remote only operates in countries where we fully own and operate our own local legal entities to save you money, provide a great experience for your employees, and guarantee maximum protections for your intellectual property.

See also: The difference between owned-entity and partner-dependent EORs

What's the difference between an EOR and a PEO?

A professional employer organization (PEO) is fundamentally different from an EOR, although some people use these terms interchangeably to refer to global payroll providers. From the outside, they can look very similar. After all, both handle HR tasks including, global payroll, benefits, withholding, and reporting.

However, these are a few key differences:

You must have a local legal entity in a country in order to use a PEO.

Working with a PEO means entering into a co-employment arrangement; working with an EOR does not.

With a PEO, the final responsibility of compliance with local labor laws falls to you.

A PEO may be cheaper than an EOR if you already have a local legal entity.

If you do not have a local legal entity, it is usually more affordable to work with an EOR.

See also: The differences between an EOR and a PEO

When should you use an employer of record?

There are several situations when it may make sense to work with an employer of record:

When you don’t want to establish a legal local entity in a country where you wish to employ workers. Establishing a legal local entity is both expensive and time consuming. It can take months or longer and cost upwards of $100,000. Unless that makes financial sense for your business, an EOR is a simple, cost-effective solution to hire international workers quickly and easily. You can have employees ready to work within days for a simple flat fee per worker.

When you need to employ international workers and the work they do cannot be classified as contract work. Although it’s possible to use international contractors, not all jobs can be classified as contract work. Misclassifying employees as contractors opens you up to serious consequences such as fines and penalties. In these cases, an EOR is a great choice.

When an existing employee relocates. As remote work becomes more commonplace, employees are less tied to one physical location. Workers today can move freely around the world without giving up their jobs. An EOR is a quick and easy way to retain employees who choose to relocate without having to open entire new legal entities in multiple countries. With an EOR, you can even employ digital nomads moving from country to country.

When you have concerns about worker classification. More and more countries are cracking down on employee misclassification. Employers must be careful and ethical about properly classifying employees. However, definitions and enforcement vary from country to country. A reliable EOR partner will have local expertise to help you classify employees and contractors properly, thereby reducing your misclassification risk.

When you need to protect your IP globally. Working with international employees and contractors can expose your intellectual property to novel risks if you are not careful. Owned-entity EORs offer superior IP protection, which can give you peace of mind as you expand your global team.

When you lack expertise in tax and employment law in a given market. Hiring an employee in a new country means understanding how taxes work in that country, as well as complying with a whole new set of employment laws. Given how complicated these laws can be, it’s unrealistic to expect to navigate all of them without outside help. An EOR understands these laws on your behalf and can help you navigate new employment markets with ease.

What is included in an employer of record agreement?

An employer of record agreement includes several components:

Assignment of the worker’s legal employment to the EOR

Transfer of intellectual property created by the worker from the EOR to your business

Any required social contributions to the country’s government, like social security

Some employers of record may ask you to sign an exclusivity clause, locking you into a contract with a single provider for multiple years. These exclusivity clauses could significantly harm your business if your chosen provider does not meet expectations, as they would prevent you from switching to a new provider. Remote never includes exclusivity clauses or long-term commitments in its employer of record agreements, giving you the freedom to make the right choice for your business.

Does an employer of record manage payroll?

Yes, an employer of record manages payroll for your international employees. Your EOR handles everything related to payroll for your employees, including deducting taxes and mandatory social contributions, as well as contributions for benefits like private health insurance. In addition to payroll, EORs also manage benefits, local tax filing, and compliance.

How much does an employer of record cost?

Most EORs use either a flat fee or a variable pricing model.

A flat fee model charges a single fee per employee, usually on a monthly or annual basis. Paying annually is typically more cost effective, while paying monthly offers greater flexibility.

Flat fee pricing for EORs has several advantages. For example, you can employ as many people as you want at any salary, and your bill will never change based on how much you pay your employees or what benefits you choose to offer. This is the preferred option for most companies.

Remote offers low flat-rate pricing in every country where we operate. We are committed to transparency, which means we never charge you hidden fees or percentages. To learn more, see our guide to the Remote Fair Price Guarantee.

A variable pricing model charges a percentage of your employee’s salary. Under this model, the amount you pay depends on how much your worker earns. If you have low-paid employees, this solution might be cheaper than a flat pricing model. However, as your employees earn more, your EOR expense increases. This model discourages wage increases, which can make your company less competitive for top talent in the area.

In addition, variable pricing means your fees are subject to change based on the whims of your EOR provider. In general, this model is less predictable and less desirable than a flat pricing model.

What are the alternatives to using an employer of record?

If you don’t want to use an employer of record to hire international workers, you have two choices. You can either work with contractors instead of employees, or you can establish your own local legal entity.

If you don’t have a local legal entity and do not wish to use an EOR, you can still hire global contractors. However, you cannot simply begin referring to your employees as “contractors.” Doing so would expose your business to a host of misclassification problems. If you respect the independence of the contractor, however, working with global contractors can be a great way to grow your business or handle time-sensitive tasks without onboarding a new employee.

An employer of record, or EOR, is a company that helps you employ workers in other countries by acting as the local employer on your behalf. Learn more about EORs in this helpful guide from Remote.

What is an Employer of Record (EOR)?

We created Remote to eliminate the frustrations and hidden costs associated with employing people in other countries. I am pleased to say that we have recently taken another step in our continued commitment toward transparency and fairness in our pricing.

Remote customers are no longer required to pay a deposit to use our global employment services. This new policy — in addition to our existing policies of zero hidden fees, zero commitments, and zero surprise bills — makes it easier than ever for companies to employ and pay their international teams.

As one of the original team members at GitLab, I saw firsthand how frustrating extra fees and deposits can be in scaling a global team. When you want to hire the best people in the world, you should not have to worry about extra costs. By removing deposits, we are eliminating another barrier between businesses and the people they wish to employ.

Our Fair Price Guarantee is straightforward. You pay one flat rate to employ someone, and we don’t add anything on top of that flat rate. You always know what your bill will be. We also never require long-term commitments or exclusivity agreements.

Here’s what the Fair Price Guarantee looks like in action:

Flat, transparent pricing. You pay us a monthly service fee to manage payroll, benefits, taxes, equity, and compliance for your international team members. And that’s all. You know exactly what your bill will be each month, and you know exactly what you’re paying for: the most reliable global employment solution in the business.

No hidden fees or deposits. Our flat-rate pricing means you can set salaries for your international employees without worrying about extra costs. For example, some providers charge you more for employees with higher salaries. Remote does not. Whether you employ a software engineer, a marketing designer, or your own CEO through Remote, we never charge extra fees — and no deposits, either! You can sign up and start onboarding employees and contractors in minutes.

No minimum commitments. You never know what the future holds, which is why Remote requires no minimum commitments. Pay one contractor for one month or 100 employees for 100 years: the choice is yours, and there is never a fee for canceling early. We offer monthly and annual pricing to help you choose the plan that’s right for your business.

No exclusivity agreements. We want you to love working with Remote, and we believe you will. That’s why we never require exclusivity agreements for our customers. While we hope you will work with us for as long as you have international employees, we will not force you into staying with fine print. We are committed to you and your team, and our pricing and contracts reflect that commitment.

The price you see on our pricing page is the price you pay for our services. You will never see an extra “employment fee” or “salary percentage fee” or “this country has complicated laws” fee. We take care of the hard stuff for one flat customer-friendly price, so you can focus on growing your team.

Oh, and if you have contractors, we offer contractor management and payment services in more than 100 currencies — for free.

Remote’s unique model of global employment is what allows us to guarantee consistent flat-rate billing for our customers, a promise no other company can make. Our fully owned infrastructure ensures Remote will never pass on third-party costs or markups to our customers.

We own our own entities in every country where we offer employer of record services. If we don’t own our own entity, we don’t operate in that country yet. That means we never rely on third parties to employ workers on your behalf, because doing so could create a bad experience for your employees and unpredictably high costs for you.

Refusing to rely on third parties means we are not available in every country in the world yet, but we believe it’s better to take the time to get it right. You can always see where we’re available and where we’re going next in our Country Explorer.

Employ your global team with Remote today

We want to make it easy for companies of all sizes to employ and pay global teams. With our Fair Price Guarantee, Remote provides the reliability and peace of mind you need to grow with confidence.

Get started today to begin onboarding your first employee in minutes. Have questions? Contact us and we will help answer all your questions on how to employ workers in other countries. With our flat-rate pricing and commitment to excellence in everything we do, it’s never been easier — or more affordable — to grow your global team with Remote.

Introducing the new Remote Fair Price Guarantee. You pay one flat rate to employ someone, and we don’t add anything on top of that flat rate. You always know what your bill will be. We also never require long-term commitments or exclusivity agreements.

Remote's Fair Price Guarantee means no fees, deposits, or surprises

The workforce has evolved before our eyes. Over the past year, we saw more workers going remote and more collaboration happening online, changing not just work but hiring forever. 

It’s no wonder that the world’s top companies now recognize global hiring as a business advantage and opportunity, allowing them to gain insights into new markets and greater diversity in ideas. Additionally, international hiring helps solve challenges around finding the right talent and retaining talent among the growing number of workers who wish to relocate. But it’s not without risks and complexity, which have long created barriers to entry for recruitment teams who want to hire across borders.

So, what is a hiring manager to do? In many hiring scenarios, the most straightforward approach is working with an employer of record, or EOR.

Most recruiters have experienced the pain of finding the perfect candidate for a role, only to turn them down because of the country where they reside. Employers of record provide the solution to this problem. 

An employer of record is simply an entity through which you can legally (and efficiently!) employ your dream hires, regardless of where they live. The EOR acts as the worker’s employer on paper, but effectively, your hire will work for your business just like anyone else on your team. 

Your EOR will typically manage hiring, compliance, payroll, benefits, and more for your foreign employees, thereby eliminating much of the cost and complication from the process of global hiring. 

To learn more about what an employer of record does, see our previous article.

The reality is that most companies don’t have the resources or expertise needed to make global hiring work, and mistakes can come with considerable risks. 

Sean Page, a talent branding and hiring expert who has worked for some of the world’s top startups, agrees. “[Global hiring] is a resource-intensive process…It can take a minimum of six months to plan thoughtfully, get a vendor who has the knowledge to set up an entity in that particular country, and then get the IT, finance, people, talent, and legal teams all in alignment…In my previous roles, we normally wouldn’t even set up an entity until we knew that there were going to be multiple role openings in that particular country or region.”

For companies with the resources, opening an entity may not be the best use of their time or money. Partnering with an EOR that already has established entities in the countries where they want to hire is often faster and more cost effective. For example, Remote is an employer of record with business entities in dozens of countries, and services start as low as $299 per hire. 

Reducing cost and complications of global hiring are advantages of EORs, but far from the only ones. Hiring managers also need to be mindful of the risks of misclassifying workers or running astray of labor laws in the foreign countries. 

See also: The consequences of misclassifying employees as contractors

Christy Zajack, a talent acquisition expert who has hired employees for companies like American Airlines, Hilton, and Pfizer, explains that, “Labor laws are often very confusing, different in actual practice [than in writing], or ill-defined until there are court decisions.” Laws around work hours, overtime, terminations, domicile, workplace, payroll, and taxes are just a few of the things Christy says employers must consider before hiring in another country.

Fortunately, by working with an EOR, businesses can tap into the expertise of employment lawyers and business experts whose entire focus is getting global hiring right. This means that internal talent specialists can focus on doing what they do best, like attracting and retaining the right talent on their teams. Not struggling to keep up with changing laws in multiple countries. 

What makes an employer of record different?

Many recruitment teams have experience working with staffing agencies, payroll companies, and professional employer organizations (PEOs). But these providers are not the same as employers of record. It is vital to understand the differences when deciding on a solution for global hiring.

What is the difference between an EOR and a staffing agency? 

Staffing agencies focus on matching businesses with talent, usually to help with their temporary or medium-term hiring needs. They offer up their talent network, review resumes, initiate contact between candidates and hiring managers, and collect feedback from both sides. However, unlike an EOR, they cannot actually hire an employee on behalf of a client’s business.

On the other hand, an employer of record manages everything involved with hiring a candidate, up to and including managing the employment contract. Employer of record services include payroll, taxes, benefits, compliance, and much more, making EORs a very different offering than a traditional staffing agency.

What is the difference between an EOR and a payroll company?

Payroll companies offer software services to automate the processing of their client’s payroll obligations and accounting for year-end taxes. Some also provide limited HR services but are not equipped to hire employees on behalf of their clients in countries worldwide. 

The extent of an EOR’s services goes far beyond what a payroll company can offer for businesses that want to hire internationally. While a payroll company provides mostly financial services, an employer of record handles everything related to compliance, payroll, and benefits management in the countries where your employees work.

What is the difference between an EOR and a PEO?

A PEO, or professional employer organization, is essentially an outsourced HR department that handles things like payroll and benefits on behalf of their clients’ businesses. On the surface, this might seem quite similar to the services provided by an EOR, but there are significant differences.

A PEO requires your company to own a local legal entity in the country where you want to hire. In addition, a PEO requires your business to enter into a co-employment arrangement, in which both you and your PEO employ the worker at the same time.

You can read more about the differences between a PEO and an EOR in our previous article!

Use an EOR to stay safe when hiring internationally

If you’re interested in making your first global hires, an EOR is the safest and easiest solution. Whether you want to hire for fully remote roles, hybrid teams, or globally distributed offices, EORs will serve as your partner to protect your business throughout the hiring process as well as the lifespan of your employment agreements.

Avoid misclassification and other mistakes with local labor laws

Understanding local labor laws is perhaps the most daunting aspect for any HR or hiring manager considering their first international hire. This is why some companies go the route of hiring their workers as independent contractors instead of employees — a mistake that, unfortunately, can be costly.

Suppose benefits-eligible employees are found to be misclassified as independent contractors. In that case, it can cost the business thousands in back payments on employee taxes and social security benefits, in addition to the gross amount already paid to their workers. There may also be fines, interest, or other penalties depending on the specific situation and the misclassified worker’s country of residence. 

Working through an EOR is an easy and cost-effective way for businesses to switch misclassified workers over to legitimate employees and avoid these penalties.

See also: When should you convert a contractor to an employee?

In addition to the risk of misclassification, staying abreast of changes in local labor laws in foreign countries falls well outside the scope of most talent and HR roles. Instead, when laws change in the countries where you have employees, your EOR notifies you swiftly and makes changes on your behalf, protecting your business and letting you rest easy.

Statutory and supplementary benefit packages are another essential thing to consider when deciding to hire internationally. It is important that what you offer your employees is compliant with local laws. 

To secure the best talent, you need to be competitive with the packages you offer. This requires you to understand the expectations of workers in those regions, which may include supplementary benefits. This is where an employer of record can help, tailoring benefits packages to match what is customary in the country where you wish to hire. 

Unfortunately, the reality of hiring workers anywhere is that you will sometimes have to deal with terminations. When the employee in question is in another country, the requirements change — and the consequences of mistakes become more severe. 

Every country has its own laws around termination. Failure to comply can result in expensive international legal disputes. Hiring in the United States is based on “at-will employment,” for example, meaning an employee can be terminated at any time. But terminating employees in countries like the Czech Republic, for example, requires a two-month notice period.

An employer of record will understand the protocols for termination from the beginning of your new employee relationship, which is essential when drafting employment agreements with clauses for notice periods and severance. Your EOR can also help manage issues like safeguarding sensitive company data and intellectual property after termination.

Risks around intellectual property ownership are crucial for companies to consider when hiring an employee in another country. Laws regarding intellectual property rights are complicated enough in one country. Add multiple to the mix, and questions of ownership quickly arise. 

See also: Intellectual property and invention rights for remote teams

Employers of record either work with local legal experts or hire their own to handle IP transfers. At Remote, every company is protected by Remote IP Guard, an ironclad IP protection service that guarantees the maximum retention of your intellectual property rights when you employ internationally. Companies approaching major financial events, such as IPOs or acquisitions, must be especially vigilant about their IP.

Centralized management of international hires

When working with an employer of record like Remote, all necessary documentation for your hires is centralized in one place. This makes it easy to manage and review employee information at a glance. Your EOR will also ensure your recordkeeping is in line with local requirements, including maintaining documentation for terminated employees. The ease of managing and keeping records is just one additional benefit to consider when considering the value of an EOR. 

How to Select the Right Employer of Record For You

If you have decided that an employer of record is the best approach for your international hiring needs, the next step is deciding on the right EOR to meet those needs. 

The right employer of record will offer global HR solutions, salary simulations, onboarding, payroll approvals, benefits, local taxes, and more — all managed in one place. 

But this is just the beginning of what a good EOR can provide to their clients. Security, which encompasses data protection and compliance, is also essential, as is IP protection.

You should also understand the way your EOR handles your business behind the scenes. Your employees deserve a great experience with your company, no matter where they live and work. A good EOR will prioritize the experience of your employees to ensure they feel like full, valued members of your team.

Why working with an EOR with owned entities is crucial 

One of the most crucial things to understand when evaluating different employers of record is whether they own legal entities in the countries where they operate or whether they rely on a network of third-party partners. 

Imagine you have a request for your employer of record. A partner-dependent EOR will have to go down a chain of vendors to get the correct information and execute on it. This could take days to complete, and any miscommunications between the various parties will create complications. This also makes EOR services more expensive: since there are so many intermediaries involved, everyone wants a cut of the money.

Alternatively, an owned-entity EOR has established legal business entities in the countries where you want to hire. They can control the entire hiring process and manage your global employees, which means less friction, lower cost, and a superior experience for you and your team. 

Learn more about owned-entity versus partner-dependent employers of record in our helpful on-page guide.

Questions to ask an EOR before signing the contract

Before signing on with your employer of record, there are a few questions you should be sure to ask:

Do you own an entity in this country, or are you dependent on third parties? Be cautious: some EORs own entities in some places and not in others, creating a chaotic experience for your employees (and unreliable pricing for you).

Do you handle IP transfers and protection? Ask hard questions about how the EOR handles IP transfers. The best ones know exactly how the laws of the country will affect your IP and what you need to do to retain your rights.

Are you sharing our data with any third parties? Again, EORs dependent on third parties have long lists of partners. Many of those partners have partners of their own, creating a web of companies with access to your sensitive data.

Is all documentation and information centralized in one software hub? Your EOR handles the hard legal work on the back end, but your user experience is also critical. Try out the software to see whether you can manage everything you need in one place.

Getting answers to these questions will help you make the right decision on which partner to trust for your international hiring needs.

The best employer of record for your global team

You now know when to use an employer of record and how to find the best EOR for your business needs. So what comes next?

Remote can help you hire, pay, and onboard your global hires in just a few clicks while keeping your company compliant every step of the way. We don’t just manage the paperwork, though. Remote fully owns legal entities in every country where we operate, so you know you and your team will always receive the best experience. As you grow your global team, Remote will be there to help every step of the way.

Get started today and begin onboarding your first employee in minutes!

If your company wants to hire workers in another country, you probably need an employer of record. But how do you choose the right one? And what does an employer of record actually do? This guide provides all the answers you need.

When Should you Use an Employer of Record, and Which One Should you Choose?

When should you use an employer of record, and which one should you choose?

The remote workforce is a permanent part of the way we work and the way we will work.

The pandemic forced the issue, sending a huge percentage of the workforce home to work remotely for most of 2020 and part of 2021, but the remote movement was coming all the same. Organizations have now seen that not only is a remote workforce possible, but it’s a benefit. Disconnecting employment from geography cracks the world wide open for companies looking to avail themselves of worldwide talent.

According to Gartner, 74% of companies are planning for a permanent shift to some degree of remote work. This number is backed up by data from McKinsey, which finds that about 20-25% of the workforces in countries with advanced economies could work from home three to five days a week. That’s at least 400% more remote work than existed before the pandemic. Remote’s own research supports these findings and shows that 81% of workers would move to a new region, state, or country if they could do so without sacrificing their careers.

Last year, for example, German conglomerate Siemens permanently moved to a flexible work arrangement, allowing its thousands of employees to work remotely.

“We’ve always had mobile working at Siemens, but now we’re taking it a step further,” said Roland Busch, Deputy CEO and Labor Director of Siemens AG, in a statement. ”These changes will also be associated with a different leadership style, one that focuses on outcomes rather than on time spent at the office.”

The idea that results are more important than time spent at a specific desk in a particular  building is one of the benefits of remote work. Rather than managing the time workers spend at their desks, supervisors can instead manage the outputs, trusting employees to get the work done on their own. 

Freedom from offices means freedom from offices everywhere, though. Hiring a remote team gives organizations the ability to reach across the globe and handpick the best talent for their open positions. When the office doesn’t exist, why limit your talent pool to local candidates alone?

Traditionally, companies were limited by geography when it came to filling open positions. 

Organizations had to hire people who lived near their facilities or else hope their jobs were enticing enough to convince great candidates to move. From 2019 into 2020, 3.4 million people moved in the U.S. alone to be close to a new job, according to the U.S. Census Bureau.

Hiring remotely expands your talent pool from your immediate area to, well, every area. No matter where the best candidates live, they can now work for you. 

The old approach was limiting in more than one way — restricting recruitment to local candidates only meant your opportunities for diversity were likewise limited. Remote work, on the other hand, is intentionally inclusive, allowing organizations to recruit diverse candidates proactively from around the world. 

Consider Tealbook, a supplier data platform, which more than doubled its staff by hiring remotely in 2020 and 2021. Tealbook wanted to hire for diversity, one of its core values, said founder and CEO Stephany Lapierre, and remote hiring allowed the organization to do so.

“For example, we want a diverse community, but research and development teams often skew male. So, when we have equal candidates, we pause and think about whether this is an opportunity to offer the position to a woman,” said Lapierre, writing for Chief Learning Officer Magazine. “Our R&D team is now 40% female, which is rare for a technology company.”

Remote work also allows for more equitable work environments for employees who might have a tough time getting into an office. Workers with disabilities have long faced struggles with traditional workplaces, and have fought for accommodations that allow them to work from home. Remote-first workplaces are an important step in making well-paying work more accessible to those who might be excluded by the limitations of an office. This includes parents and caretakers who often worry about taking time off for family obligations. 

Small wonder that remote and flexible work arrangements have long been seen as a perk by employees. Back in 2017, in pre-pandemic times, 88% of employees considered flexible work time the most important benefit, and 80% said working from home was the most important benefit a job could offer, something that would affect their decision to take or leave a job offer.

Hiring remotely provides and immediate and obvious boost to employee satisfaction and retention. Even the most positive transitions come with their fair share of challenges, though.

Considerations when hiring remote workers 

Hiring remotely can be easy, but transitioning to a workplace that welcomes remote workers takes some effort. International borders still matter quite a bit when you’re handling payroll in more than one country, trying to abide by multiple sets of employment laws, and dealing with taxes. 

Each of the following aspects of hiring international employees can add layers of complexity — especially if this is your first remote hiring experience. 

Payroll can be a headache in the simplest of circumstances, especially for small businesses with limited accounting resources. When you hire internationally in new places, trying to handle payroll yourself without running afoul of local laws can be a legal hazard.

Unless you plan to open an entity abroad, outsourcing your international payroll management to an employer of record (like Remote!) is the smart play.

Should you pay a remote worker the same rate you would pay a local one? What is fair in their country? What is the cost of living there? What benefits do they expect? What is considered to be competitive pay? While you do have a few options when calculating compensation for remote employees, finding your own balance can still be tricky. 

What about the taxes you pay for doing business in a country? “Permanent establishment” is a tax term for businesses that have an ongoing presence in a country. Permanent establishment applies to your country, you might be subject to corporate taxes abroad. You might also have to meet other standards of compliance that other international companies do not. Read Remote’s guide to permanent establishment for more information.

There are significant dangers to misclassifying your employees as contractors, so don’t try it. You could be subject to fines, penalties, and business bans under various local laws, as well as legal disputes with your employees.

Be cautious when defining job roles. What exactly will your employees do? What is their relationship to your company? Do you already have contractors in other countries? You may need to consider converting some contractors to employees (another potentially tricky situation).

Traditional office setups make intellectual property rights a bit more straightforward, if only because offices only exist in one country at a time. International hires complicate that somewhat.

Remote employees don’t always work in a company building, on company equipment, or on company time. Losing your IP rights because you’re not aware of international law can cause several problems, such as legal battles, reputation loss, and more. Read our guide on intellectual property rights for remote teams for more information.

Managing where remote employees pay taxes

If you’re based in one country and your team is located all over the world, how do you figure out income taxes? Do they pay taxes where they live? Where you’re based?

The good news is that taxes for remote workers are not much more complicated than those for traditional office workers. The bad news is that most educational resources on taxation cater to people in traditional environments. It’s important to know where remote workers pay taxes so you, and they, can remain compliant.

Fortunately, all of the above issues — intimidating though they might seem — are manageable. What you need is an expert partner who specializes in local employment law, and can guide you through recruitment, managing risk, and scaling effectively.

In many ways, the hiring process for remote, international employees is much the same as the hiring process for traditional, on-premise workers. That said, throughout the hiring and onboarding process, you will need to focus on how the job will be done remotely. 

The job posting. You need a clear job description and a solid understanding of how that job will be done remotely, as well as what tools and qualities potential job candidates will need to do the job. Before you start the process, be aware of where your job posting will be seen and what benefits and pay are expected by the people who will see it. 

The interview. Know ahead of time how you will be conducting your interview and what technology you’ll be using. At this point, most people are well versed in standard videoconferencing technology, but it’s important to choose a technology that can be easily accessed by all parties. 

Communication. Good communication is critical to remote teams, and that starts right at the beginning. Be clear about your expectations of applicants, talk to them and their references about their past experience, and understand that qualifications often change from country to country. Be clear about what the expectations of the job are, how you plan to work with your remote team, and what you’ll require of them. Your candidates may feel they’re taking a risk by taking a job with a remote and international employer, so make sure you’ve done your homework and can answer their questions. If you don’t have the answer for something, be honest about it and get back to them as soon as possible once you have an answer. 

Onboarding. When you’re working across time zones and borders, it’s important that everyone is on the same page when it comes to onboarding. This has to do with having a solid training program in place and with the legal paperwork that comes along with hiring an employee. This step is where you’ll likely need help. 

Here’s the truth: Unless your organization is a multinational corporation with an established legal entity in every country in the world, you’re going to need some help from an employer of record to handle payroll, taxes, and legal paperwork by yourself. It’s very easy to run afoul of international payroll requirements and tax obligations if you’re not an expert, and penalties can be stiff. 

Hiring remotely expands your talent pool from your immediate area to, well, every area. No matter where the best candidates live, they can now work for you. This article will show you how.

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