If you employ workers in another country, you may have heard about “permanent establishment” or “permanent establishment risk.” What is permanent establishment, though, and why should businesses with distributed teams care?

Permanent establishment is a tax term for businesses that have an ongoing presence in a country. It’s the same thing as “substance requirement.” In both cases, the question is: are there indicators that your company is established enough in this country to be subject to taxes?

Companies generally try to avoid permanent establishment in countries where they have employees, as permanent establishment obligates the company in question to pay corporate taxes in the country and meet other standards of compliance.

Permanent establishment works a little differently in different places. Each country has its own criteria to determine whether a business is classified correctly. That said, most countries follow a similar set of guidelines to determine a company’s status.

Does the company have a fixed place of business in the country? In this case, a fixed address does not necessarily mean a physical address. Certain registrations can qualify as a fixed place of business, as can other business operations, even if the company does not have an office. In the age of remote work, understanding the rules on fixed places of business can be challenging.

Does anyone regularly conduct business as an agent of the company in the country? In other words, is there someone in the country who exercises decision-making power on behalf of the company? This does not only refer to executives who handle things like partnerships or investments. Salespeople who close deals and sign contracts can also trigger permanent establishment.

How much control does the company exercise over its workers in the country? This is where things can get tricky. Companies not only need to be aware of the classification of their contractors, but also of the relationships they have with their employees. Working with an employer of record insulates companies from some of this risk, but businesses should speak with in-country global employment partners to understand their protections against permanent establishment risk.

How does the company generate revenue in the country? When a business generates revenue in a country, the country usually wants a share of that revenue. Tax treaties determine where companies are obligated to pay taxes, but permanent establishment can change those rules. If employees in the country directly contribute to the company’s ongoing revenue, those activities could create permanent establishment.

How long has the company been doing business in the country? Permanent establishment is usually not triggered by a representative occasionally traveling to a country to close a deal. However, that does not mean companies can freely conduct business abroad simply because their employees are travelers and not residents. The longer the company does business in the country, the greater the permanent establishment risk becomes and the more closely authorities will audit the organization.

Does the company make strategic decisions from within the country? For example, does the board regularly meet in the country? Senior leaders convening could be an indicator of permanent establishment. When hiring c-level executives and board members through an employer of record, locations of board meetings should be top of mind.

Virtual permanent establishment is the same as permanent establishment. The “virtual” part of the name simply refers to the way in which the company establishes its presence in the country.

See also: Where do remote employees pay taxes?

Establishing a fixed place of business, even if a representative of the company has never physically been to the country, is one of the reasons permanent establishment can be so complex. This is another area in which the laws of different countries will treat the situation in different ways. However, do not assume that virtual permanent establishment risk is easier to avoid. Countries are becoming more vigilant about enforcement of permanent establishment laws in the remote work era.

What does co-employment have to do with permanent establishment?

Co-employment and permanent establishment are not the same. Co-employment refers to a situation in which two employers are simultaneously responsible for the same employee. Fortunately, co-employment is not a factor in determining permanent establishment risk.

Working with an employer of record does not directly affect permanent establishment risk, nor does an employer of record relationship necessarily lead to co-employment. As most companies using an employer of record do not have an office in the country, they have some distance from permanent establishment for that reason alone.

Be extremely cautious about employers of record who attempt to circumvent the rules of permanent establishment. If your business is caught operating deliberately out of compliance, you could be subject to substantial fines and penalties, which could even include a ban on doing business in the country. For example, if an employer of record offers to employ your workers in a different country than the one in which they will actually work, you could put your company at great risk.

You can avoid permanent establishment risk while still operating under the rules. Working within the system to remain compliant is always preferable to breaking the law and hoping to avoid detection.

What happens to companies under permanent establishment?

Primarily, a company under permanent establishment is required to pay corporate taxes in the country where permanent establishment was created. Other factors may come into play, such as new regulations for companies operating in the country, but permanent establishment is primarily an issue of taxation.

Businesses should be cautious to avoid being taxed twice on the same income in two different countries. In some cases, once permanent establishment is created, it can be difficult to avoid paying double. This is why it is essential to understand and plan for permanent establishment risk from the beginning. When permanent establishment is unavoidable, clear transfer pricing arrangements can help determine which revenue streams are generated in the country.

Businesses with employees in multiple countries must be extra cautious. All countries manage their own permanent establishment criteria and leverage their own taxes, so a company with poor management of permanent establishment risk could end up creating permanent establishment in multiple countries.

What should companies do to avoid permanent establishment risk?

The safest way to avoid permanent establishment is to work with a global employment solution that can help you understand the specific laws of the country in question. There is no one-size-fits-all solution to permanent establishment risk.

Permanent establishment assessments are continuously evolving. These assessments are factual, not subjective. Local authorities can update their criteria at any time, so companies cannot implement a one-time fix.

It is always safer to work with a partner with an owned local legal entity in the country instead of a partner who relies on third parties. Employers of record and other global employment solutions providers without owned entities must outsource services to other businesses, and those businesses may not have the expertise or experience necessary to navigate permanent establishment risk. Even if multiple partners can make it more difficult for authorities to determine permanent establishment risk on the surface, it is much easier to remain compliant with a single point of contact and expertise.

See also: Owned-entity vs. partner-dependent global employment

Most importantly, companies should always understand the tax treaties that are in place between their home country and the country where they wish to do business. The best way to stay compliant with tax treaties is either to retain your own in-country legal representation or to work with a global employment solution with an entity in that country.

Employ workers in other countries without permanent establishment

With dozens of local entities in countries around the world and a commitment to the highest standards of compliance, Remote is your go-to resource for all your global employment needs. We are the experts on permanent establishment in countries around the world and can help your business make the smartest financial decisions as you grow your global team.

Contact us today to learn more about Remote’s employer of record, payroll and benefits, and contractor management solutions. If you’re ready to get started, you can sign up and start employing through the Remote platform right away.

Permanent establishment: What companies with remote workers should know

[Webinar Recording] Relocation for International Employees

How do you legally employ workers when they move from one country to another?

Three of Remote’s top experts in global employment have shared their wisdom in a one-hour online event. In this seminar, you will learn about:

Travel, short-term relocation, and long-term relocation

How employee actions affect companies unintentionally

Gaps in employment law for remote workers

In addition, this recording includes an extensive Q&A session highlighting more issues companies should consider as employees relocate.

If you have specific questions about relocation for your team, we are always happy to help. Fill out the form on this page or send us an email at hello@remote.com to get started.

On-demand video now available! In this one-hour online event, three of Remote's top global employment experts share their knowledge on relocation for international employees.

In the United States, federal taxes apply to workers no matter where they live. State taxes, however, can vary — especially for workers who live and work in different states. This guide provides information on how state tax reciprocity agreements work and which states currently have agreements in place.

What is a state tax reciprocity agreement?

For states with reciprocity agreements, workers only pay taxes in the state where they live, not the state where they perform the work. As an example, a person who lives in Arizona but works in California would not have to pay state taxes in California, because the two states have a tax reciprocity agreement.

Employees only have to file a tax return in the state where they will be taxed. They do not have to file nonresident tax returns in states where they work, even to mark their income as exempt. The only time an employee is required to file a state income tax return in another state is when that state does not have a reciprocity agreement. Employees should, however, provide their employers with the appropriate tax form to avoid state taxes being inappropriately withheld.

For employers, state tax reciprocity agreements make withholding simple. The company only needs to withhold state and local taxes in the state where the employee lives.

Workers who work in states without reciprocity agreements do not have to pay all the taxes for both states. Federal law in the United States prohibits multiple states from charging state tax on the same income. However, people who work in states without reciprocity agreements are required to file state income tax returns in both (or multiple) states.

The following states have state tax reciprocity agreements with at least one other state:

Arizona has state tax reciprocity agreements with California, Indiana, Oregon, and Virginia.

Illinois has state tax reciprocity agreements with Iowa, Kentucky, Michigan, and Wisconsin.

Indiana has state tax reciprocity agreements with Kentucky, Michigan, Ohio, Pennsylvania, and Wisconsin.

Iowa has a state tax reciprocity agreement with one state: Illinois.

Kentucky has state tax reciprocity agreements with Illinois, Indiana, Michigan, Ohio, Virginia, West Virginia, and Wisconsin. However, Virginia and Ohio’s agreements are conditional. Virginia residents are only eligible for the reciprocity agreement if they commute to Kentucky for all regular workdays. Ohio residents only qualify if they do not own 20% or more equity in an S corporation.

Maryland has state tax reciprocity agreements with Pennsylvania, Virginia, West Virginia, and Washington, D.C.

Michigan has state tax reciprocity agreements with Illinois, Indiana, Kentucky, Minnesota, Ohio, and Wisconsin.

Minnesota has state tax reciprocity agreements with Michigan and North Dakota.

Montana has a state tax reciprocity agreement with one state: North Dakota.

New Jersey has a state tax reciprocity agreement with one state: Pennsylvania.

North Dakota has state tax reciprocity agreements with Minnesota and Montana.

Ohio has state tax reciprocity agreements with Indiana, Kentucky, Michigan, Maryland, Pennsylvania, and West Virginia.

Pennsylvania has state tax reciprocity agreements with Indiana, Maryland, New Jersey, Ohio, Virginia, and West Virginia.

Virginia has state tax reciprocity agreements with Kentucky, Maryland, Pennsylvania, Washington, D.C., and West Virginia.

Washington, D.C. has state tax reciprocity agreements with Maryland and Virginia.

West Virginia has state tax reciprocity agreements with Kentucky, Maryland, Ohio, Pennsylvania, and Virginia.

Wisconsin has state tax reciprocity agreements with Illinois, Indiana, Kentucky, and Michigan.

Nine states do not have state taxes. Employees who work in those states but live in another state do not need to file any documentation for working outside their home state, but they do need to file and pay state taxes in the state where they live. The states with no state income taxes are: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

Companies with employees who work in states with reciprocity agreements should make sure their employees submit the proper form for their state, as provided in the last section. Companies are required to withhold state taxes for each employee, so it’s important to to withhold the right amount. This is also true for international employers of workers in the United States.

States without reciprocity agreements may still have options for employers and their workers, including income tax credits. Be sure to evaluate your tax situation carefully to ensure both company and employee pay the right amount.

State Tax Reciprocity Agreements in the United States

You already know Remote offers the best global employment solutions for businesses. But what are those solutions like for your employees?

Rest easy. We treat your employees like we treat our own: with care, attentiveness, and respect. Think of Remote as an extension of your own company: a part of your HR department, distributed across multiple countries. Because we own entities in every country where we offer employment services, we can provide the highest level of service to your workers directly through our in-country resources.

In short, being employed through Remote is no different than being employed directly. Your people are your people, from start to finish, while we take care of the hard stuff.

How does the employee enrollment process work?

We take out all the complications of global employment. Our streamlined process makes it easy to onboard your employees on our platform.

Your employee sets up a profile with Remote. Our automated onboarding process guides your employee through the process in minutes.

Remote confirms your employee’s identity. Our experts confirm your employee’s identity using the provided documents.

A dedicated HR onboarding specialist contacts your employee. A member of our team contacts your employee to answer their questions and ensure they receive a positive experience from the start.

We handle the paperwork. Your employee and their dedicated representative complete the necessary paperwork to comply with the laws of their country. 

Benefits enrollment begins. We enroll your employee in all the benefits programs you have chosen to offer.

Remote handles payroll so you can get back to business. Remote enrolls your employee in our in-country payroll solution. You and your team can begin working together right away, while we take care of all ongoing payroll, benefits, taxes, and compliance needs.

Simple, clean, and fast: Remote has all the local knowledge and expertise to onboard your employees quickly and in full compliance with their country’s unique set of labor laws. Your team members will be delighted by how easy it is to get started with Remote — and that means a great first impression of life at your company.

After the onboarding process, Remote continues to ensure your team members feel like full and respected members of your team. There are no second-class citizens with Remote. We treat your employees with the highest levels of care and respect, no matter where they live, because your people deserve the best.

Remote provides employees with a host of benefits, both statutory and supplemental, in addition to several important features and services.

When we enroll your employees in their benefits, we don’t pass the responsibility along to someone else. We continue to ensure they receive the full benefits they are entitled to, such as healthcare, insurance, retirement savings, paid leave, and more. We also take care of unemployment insurance, disability, and supplemental benefits you may want to offer.

Our dedicated team provides the highest class of service in every country where we operate. That means your employees receive a superior experience, both by the standards of their country and by your standards as a people-first organization.

Remote does not outsource management of your employees for any reason, ever. Your employee’s dedicated HR specialist will continue to support them if they have any questions. Think of us as part of your own global HR department. Your employees can contact us any time, and we will help them with the same speed and care you would offer them yourself.

Our software is built to the highest standards of usability and accessibility. Just as we provide businesses with the best tools for global team management, we also provide employees with all the resources they need. On Remote’s platform, employees can view their payslips, upload and manage invoices, access documentation, and everything else they need, all in one place.

We recognize the importance of keeping data secure, both for businesses and for the people who work for them. That’s why we guarantee the maximum levels of protection for employee data. Our robust global infrastructure and exceptional standards for internal security keep the data of your employees safe at every step.

Accessible documentation for payroll and taxes

Not everyone is an expert in global taxes. Fortunately, we are. That’s why we are able to provide your employees with accessible documentation on their payroll and taxes through Remote. We make it easy for employees to get the information they need without combing through piles of documents. And, if they ever need help, their dedicated HR specialist is only a moment away.

What is it like to work as an employee through Remote? It’s the same as working directly with your company, with the added benefit of the most dependable payroll provider, the best benefits management team, and the most knowledgeable HR experts on the planet on your side. We care about people at Remote, and we design every part of our platform and services to ensure your people receive the experience they deserve.

What is it like for your employees when you use Remote?

When you employ international workers, you typically pay your team in one of two ways: as contractors or as full-time employees. Misclassify someone as a contractor who should be an employee, and your company could face stiff fines and penalties.

This conversation has grown increasingly important as gig economy company have challenged the boundaries of who is or is not a contractor. The UK supreme court unanimously dismissed an appeal from Uber this week, cementing its drivers' rights to benefits such as paid time off and a guaranteed minimum wage.

How you classify your workers depends on a variety of factors. In our guide on converting contractors to employees, we outline the basics of when you may benefit from changing a worker’s classification. Before you make the switch, though, you must understand the risks to make a more informed decision.

Read on to learn more about the dangers of misclassifying employees as contractors.

Governments around the world levy several different types of fines against companies that misclassify workers. These fines can range from slaps on the wrist for one-time errors to massive punitive penalties for chronic offenders.

In the U.S., for example, the IRS can levy a variety of fines for misclassification. Fines start at $50 per unfiled W-2, tack on 1.5% of the wages paid, then throw in unpaid FICA taxes for both employer and employee. Companies found to have deliberately misrepresented employment statuses face even harsher penalties.

And that’s just the IRS. State governments can and do issue their own fines for misclassifying workers.

Beyond U.S. borders, things get even messier. Australia, for example, can charge companies $66,600 per violation. Some countries require employers to provide payment not only for back taxes but also for statutory benefits. Governments may also force companies to account for unpaid leave and other social contributions, further increasing the lump-sum penalty.

Even after you pay the fines and make misclassified contractors whole for unpaid benefits, you may not be through with government penalties.

Punitive measures for misclassification are not limited to finances. In some cases, misclassification could lead to a stop work order for your business in that state or country — or even a ban on doing business there entirely. In 2020, New Jersey instituted a law allowing the state to enforce stop work orders for any violations of labor and wage laws. California famously revamped its own laws on misclassification in 2019.

Countries can do the same, which can be devastating for a business trying to expand internationally. Even if you only have one worker in a country, losing access to a valuable member of your team can severely harm your ability to compete. Because different countries have different rules regarding classification, you must be extra cautious to ensure you classify your workers correctly.

Intellectual property rights with remote workers should be a larger conversation, yet not many businesses talk about the issue. When you work with team members in other countries, transfer of IP to your business can get complicated quickly.

Learn how Remote protects your intellectual property with Remote IP Guard.

Misclassification can create issues that have nothing to do with penalties from a government. In some cases, a messy classification could lead to a total severance of the relationship, leaving questions about who actually owns the work produced. You may see the issue as straightforward, but if a person in another country claims ownership of your IP, you could be in for a hard battle.

Don’t leave your intellectual property up for grabs. Make sure your employment agreements and contracts with independent contractors are ironclad. Not only does losing your IP harm your company, but legal questions about IP ownership could also cause potential partners to avoid working with your business.

No business wants to fight with its workers in court. From the outset, a legal fight with an employee calls the company’s reputation into question. Even if the company has the full backing of the law on its side, the bad press from the disagreement could prevent other potential employees and partners from considering future engagements.

Further, legal disputes take up both money and time. In cases of misclassification, especially cases involving multiple workers, the executives of the company have to spend their own time in court fighting the battle. Company leaders need to spend their time developing strategies and strengthening partnerships, not flying across the globe to argue in courts with unfamiliar rules.

Such legal disputes can quickly become expensive. A single misclassification can lead to a lengthy court battle, and multiple misclassifications can severely hamper a company’s ability to grow. Better to get it right from the outset than to leave classification to chance.

Say you go through a misclassification nightmare and emerge from the other side mostly unscathed. You pay some fines, dodge the bigger penalties, and keep the issue out of the press. Even in this unlikely scenario, your company is primed for more trouble down the road.

Regulators in the country in question have now dealt with your company on the wrong side of the law. They know you have done one thing incorrectly, and they will now look more closely to see whether you have broken any other rules. Your brand name is familiar to the wrong people for the wrong reasons, and it could take years to repair that reputation.

Misclassifying employees as contractors is about much more than saving money in the short-term. It’s also about damaging the reputation of your brand, losing the trust of multiple legal systems, and harming your chances of success in a country where you once saw promise.

Leave worker misclassification problems behind

Growing a global team shouldn’t be stressful. Remote makes it easy for companies of all sizes to work with global teams through our best-in-class global employment solutions. We provide free contractor payment services in addition to localized payroll, benefits, taxes, and compliance, so you can ensure everyone who works for your company is categorized correctly and treated fairly. Whether your global team includes 10 people or 10,000, we are ready to help.

Contractors or employees? Essential reading on the dangers of misclassification

The consequences of misclassifying employees as contractors

Entering into a relationship with a global employment solutions provider is a big decision. Choose the wrong one, and you could lose money, harm the trust of your employees, and expose your business to legal troubles. Choose the right one, though, and you can grow your global team with confidence.

Not all global employment solutions providers are created equal. Some own legal entities in the countries where they operate, while others rely on partner networks to do the heavy lifting. To help illustrate which model is better for your business, we have put together this helpful guide.

What is the difference between owned-entity and partner-dependent?

Imagine you need to withdraw money from the bank.

You walk in, present your identification, and make your request. The person behind the counter says they can’t help you, because your money is actually being held by a third party. You will have to wait a few days. Also, you owe them a money-withdrawing fee for the trouble.

This is what it’s like to work with a partner-dependent global employment solution. In the partner-dependent model, your provider does not serve you directly. Instead, they rely on a network of third-party partners. Partner-dependent global employment solutions providers relay your requests to their vendors, who often have vendors of their own, passing your needs down the chain while you and your employees wait for service.

Now, imagine going to another bank. At this bank, not only can you get a withdrawal, but you can also open new accounts for your business, adjust your investments, change your currency, and anything else you need, all without paying extra fees.

That’s the beauty of the owned-entity global employment model. When you work with a company that has its own in-country entities, you don’t have to worry about third parties behind the scenes or hidden fees being passed on to you. You work directly with your global employment solutions provider, and they take care of everything directly.

Why would a company choose to be dependent on partners?

In short: because it’s cheaper for them and more expensive for you.

Opening a legal entity in a new country takes a long time and can cost tens of thousands of dollars. Few global employment solutions providers are willing to wait that long or pay that much, even if doing so would lead to substantial increases in quality of service and savings for customers.

The most common reason companies choose to rely on partners is to provide services in more countries more quickly. If you see a global employment solutions provider claiming to offer full employment services in more than 100 countries, you can bet that provider does not provide those services directly. The company claiming to be the provider is actually an intermediary, outsourcing the employment to other companies in the countries, passing on their fees, and pocketing the difference.

In every situation, this leads to higher prices and unpredictable fees for customers (and, occasionally, for the employees themselves). Partner-dependent providers cannot guarantee their partners will not charge extra fees or change their pricing. So, while depending on partners allows some global employment solutions providers to offer service in more countries, they don’t actually offer those services themselves. As a result, the quality (and cost) of these services leaves much to be desired.

Understanding the advantages of owned-entity global employment

Providers who cut corners by outsourcing their global employment services fall short in several areas. But what are the advantages of working with global payroll providers and global employment solutions providers with their own in-country entities?

Owned-entity global employment delivers superior service.

Partner-dependent global employment providers cannot guarantee the vendors they use will not change their prices, alter their service agreements, or outsource their work to additional third-party vendors. Less control over the service leads to an unreliable experience for businesses and their employees. In many situations, employees who deal with partner-dependent providers feel like second-class citizens compared to their colleagues who are employed directly by the original company.

Owned-entity providers are significantly less expensive.

More third parties means more intermediaries looking for profit at your expense. With an owned-entity provider, the company pays one fee to one provider, and that provider controls the amount the services cost. Partner-dependent providers cannot offer that same level of control, which means they pass on extra fees to their customers to protect their bottom lines. With so little control over the process, partner-dependent providers often charge processing fees, onboarding fees, and other additional costs to avoid losing money in their position as intermediaries.

Owned-entity providers guarantee better protection for intellectual property.

Companies with remote workers must protect their intellectual property across international borders. Fail to do so, and a disgruntled employee or contractor relationship turned sour could become incredibly costly. Partner-dependent global employment solutions providers pass IP from one entity to another, exposing their customer companies to multiple points of risk. Owned-entity providers guarantee much stronger protections by keeping IP in house.

See how Remote protects your company's intellectual property with Remote IP Guard.

Owned-entity providers take better care of employees.

Employees want to be paid on time, in the right amount, and in the right currencies. They also want to receive competitive benefits packages and not worry about mistakes in their taxes. Further, employees never want to have their employment contracts nullified because of regulatory problems. Where partner-dependent providers cannot guarantee any of these things, because they do not have that level of control, owned-entity providers can.

Owned-entity providers safeguard your sensitive data.

Like intellectual property, sensitive data about your employees and your business deserves the strongest protections. Not only are businesses beholden to evolving data protection laws, such as GDPR, but companies owe it to their employees, customers, and partners to keep data safe. Passing data around among third parties is a recipe for disaster, but by working with an owned-entity provider, businesses can limit their exposure to risk and maximize the security of their sensitive data.

Owned-entity providers create a single point of contact for all your needs.

When one company handles all your global employment needs, you only need to contact one company to resolve issues or get answers to your questions. If your global employment solutions provider does not own its entities, you cannot get the answers to most of your questions immediately. Instead, partner-dependent providers must ask their partners for answers, which could take days depending on the priorities and workload of the partners.

Owned-entity providers maintain consistent billing.

A company with full billing control can ensure your bill remains the same price, every month, without unexpected fees. Companies that do not control every part of the process are at the mercy of their vendors. Owned-entity global employment solutions providers can keep their pricing consistent, while partner-dependent providers must regularly reset their prices based on the whims of vendors they cannot control.

Owned-entity providers understand local laws better.

Who understands the laws of a country better: a company that has an established legal presence in the country, or a company that does not? Providers without their own entities can only make educated guesses about local laws and pass off questions to their partners. On the other hand, providers with established legal entities have the experience and presence necessary to provide accurate, updated information about local employment laws.

Owned-entity providers deliver better benefits for your team.

Where partner-dependent providers cannot customize benefits packages beyond what their own providers can change, owned-entity providers have full control over their offerings. For example, companies looking to offer complex benefits such as stock options to their international employees should always work with owned-entity providers. From healthcare to retirement savings, owned-entity providers offer greater control and flexibility than partner-dependent providers.

Owned entity providers remain compliant when local laws change.

Different countries have different laws about how global employment solutions providers can operate within their borders. When those laws change, providers with in-country entities can adapt far more easily than providers who rely on third parties. If your company uses a partner-dependent provider, a single regulatory change could force you to find a new provider to continue employing your team members in that country.

Choose the best global employment solutions provider for your business

If you enjoy spending more money for services that are less reliable, less comprehensive, and more aggravating for your employees, partner-dependent global employment solutions providers meet the criteria. However, if you want to spend less money and receive superior service, stronger protections, and a first-class experience for your team, choose an owned-entity global employment solution.

The differences don’t stop there, though. Even among the small number of owned-entity providers in the market, differences can be significant. As the premier owned-entity global employment solutions provider, Remote offers the strongest protections for your intellectual property and data, the best employee experience, and the most comprehensive employment solutions for your international team — all for one low flat price. No hidden fees, no payroll percentages, and no surprises.

Don’t spend more money for a bad experience. Contact Remote today to learn more about our complete suite of global employment solutions.

If your global employment solution does not own its entities, your business may be in danger.

Owned-entity vs. partner-dependent global employment: What companies should know

When everyone works in the same office, intellectual property rights are fairly straightforward. Employees produce work on company time, using company property, at the company’s office, and that work belongs to the company. This traditional structure insulates businesses from most claims against their IP and invention rights.

Remote work changes the dynamic by introducing new vulnerabilities. That’s not to say companies should avoid hiring employees in other countries: on the contrary, a global workforce is an essential strength for companies to remain competitive, even small businesses. However, companies should be cautious to avoid unnecessary risk while growing their global teams.

As the top global employment solutions provider, Remote helps businesses with workers in dozens of countries protect their IP from both internal and external vulnerabilities. Let’s look at the challenges of international laws and examine how Remote provides the best IP and invention rights protection in the industry.

Which companies should care about IP and invention rights with remote workers?

The short answer: all of them. If you have workers abroad, you need to be concerned about protecting your IP and invention rights. Even if you don’t believe you have much intellectual property, you probably do. Your brand, for example, is part of your intellectual property.

Certain businesses should pay special attention to IP rights:

Tech. IP and invention rights for tech companies can be complicated. Many countries lack the proper regulations to account for all the different types of tech IP and methods of creation. Businesses working with foreign engineers, programmers, product managers, and other tech talent must be especially vigilant.

Finance. Every highly regulated industry requires the highest levels of protection across the board. In finance, companies working with new clients often go through internal audits, including the levels of protections for IP.

Energy. Invention rights are especially important for energy companies. Drawing the line between what belongs to the company and what belongs to employees can help businesses in this sector avoid costly legal battles and negative press.

Manufacturing. In manufacturing, every piece of machinery is filled with a variety of different types of IP and protected inventions. Manufacturing companies exercise enormous caution to prevent industrial espionage, so why wouldn’t these same companies take every precaution to protect their IP?

Startups considering liquidity events. Startups should be especially careful regarding invention rights and IP. That goes double for startups looking at a liquidity event, like an acquisition or IPO. The due diligence required to prepare for such an event not only includes evaluations of IP protections but also evaluations of relationships with employees and contractors. The last thing a startup needs before an IPO is uncertainty regarding ownership of the work it has created.

These are only a few examples of situations where IP and invention rights protections are essential. Now that it’s easier than ever for companies of all sizes to employ international workers, every startup should take IP protection seriously from the beginning to avoid major headaches down the road.

What are the dangers of poor IP protection abroad?

First, it is vital to understand that intellectual property laws vary from country to country. The approach a company uses to protect its IP and invention rights in one country may not work in another. Failure to understand, respect, and follow the laws of another country could result in loss of protections for the company’s IP and invention rights.

Losing these protections can lead to a host of problems: some small, others catastrophic. For example:

You could lose deals. Security is more important than ever. Partners want to work with companies that have robust protections in place. If you cannot promise potential customers that you own all you say you do (and will continue to do so), you could lose major deals you would have otherwise won.

You could fail an audit. Are you looking at a liquidity event, such as a sale or an IPO? Are you subject to inspection from regulators? If so, you cannot afford to leave your intellectual property and invention rights to chance.

You could damage your reputation. No company wants to be in the news for the wrong reason. An accusation from an employee or contractor that the company stole IP is definitely the wrong reason. With the proper protections in place, though, disputes end quietly before things get ugly.

You could get dragged into a costly legal battle. Without proper protections regarding remote workers in foreign countries, you could find yourself fighting in another country’s court system to keep your own IP. These battles can be difficult to win, especially in countries where laws on creation favor creators over companies.

In some countries, intellectual property rights default to the creator over the commissioner. So, if your company works with a contractor in another country, the intellectual property for the work that contractor creates may default to the contractor if the contract has any weaknesses. Employment contracts tend to be more secure than contractor agreements, but companies can still lose IP and invention rights protections in foreign countries in some instances.

The worst danger, however, arises when a company believes its IP is secure when it is not. Some global employment solutions providers rely on third parties, passing the IP of their customers back and forth between multiple places. This is one of the clearest advantages of an owned-entity global employment solution over a partner-dependent global employment solution.

How Remote protects your IP and invention rights around the world

Failing to protect your IP and invention rights comes with consequences. On the other hand, successfully protecting those rights insulates your business from harm while empowering you to grow your global team with confidence.

Remote offers the most secure, most reliable IP and invention rights protections in the industry. In fact, Remote’s global employment solution is so strong, we actually offer a higher level of protection than you could achieve through a direct transfer of IP from your international employees to your company.

Learn how Remote protects your intellectual property around the world with Remote IP Guard.

It may sound strange, but because countries have different laws on how IP enters and exits the country, Remote’s global employment solution can provide greater security than a direct employee-to-company international transfer.

Remote is able to offer the highest level of protection because:

Some global employment solutions providers do not own their own entities. Instead, they rely on partners to handle the workload on their behalf. Not only is this model more expensive for customers, but it also means your IP gets passed through multiple parties before finally reaching you. All that movement exposes your IP to unnecessary risk at every exchange.

Remote owns our own legal entities in every country where we offer global employment services. That means we never ask an intermediary to take possession of your IP. We are your global employment partner, and we provide our services directly to you.

We use an ironclad two-step IP transfer process.

As a global employment solutions provider, we offer a variety of services. Sometimes, we simply handle global payroll for your own local entities. Other times, we employ your workers on your behalf with our in-country entities, allowing you to hire all over the world without expensive overhead.

When we employ workers on your behalf, we use a two-stage approach to transfer the IP from the employee to you. First, we transfer the IP from the employee to Remote, in accordance with our country-specific employment agreements. Then, we transfer the IP to you. As international experts in IP and invention rights laws, we guarantee the maximum transfer of IP to you, every time. The IP belongs to you from the beginning, and we guarantee you receive it legally and easily thanks to our best-in-class service.

We deliver you the maximum protections under every country’s local laws.

You don’t have to be an expert in international IP law to hire internationally. We take care of everything to provide you with the highest level of protection in every country where you have employees. Remote’s in-country teams of legal experts craft employee agreements that comply with all applicable local laws, allowing you to rest easy.

What happens if your employees move to a new country? Don’t worry: we take care of that, too. Because we own our own legal entities, we have an international network of legal expertise ready to help from start to finish. The power of a global infrastructure with the precision of a local legal team — that’s the Remote difference.

Protect your IP and your global team with Remote

Remote’s global employment solutions include payroll, benefits, taxes, and compliance to empower companies of all sizes to employ top talent all over the world. We protect your IP and invention rights better than anyone else, in addition to providing your company and your employees with a first-class experience all over the world. Contact us today to learn how Remote can help you grow your global team securely.

How do companies protect their intellectual property right and invention rights with remote workforces? This guide walks you through all you need to know about IP and global employment.

Have remote workers? You need stronger IP protections.

Intellectual property and invention rights for global teams: What every company needs to know

If you can employ anyone, from anywhere, what should you pay them? What is fair?

To calculate compensation for remote employees, you have a few options. You can pay everyone based only on their experience and role, regardless of location. You can also consider cost of living to adjust pay for your remote employees based on where they live. If neither option sounds appealing, you can make up your own formula to determine remote worker compensation.

What should you pay remote employees? What is fair? Payroll and benefits expectations vary wildly around the world. With a remote team, you must make sure everyone feels valued and appreciated.

Global Payroll and Benefits

Permanent establishment: What companies with remote workers should know

[Webinar Recording] Relocation for International Employees

State Tax Reciprocity Agreements in the United States

What is it like for your employees when you use Remote?

Contractors or employees? Essential reading on the dangers of misclassification

Written by • Preston Wickersham

If your global employment solution does not own its entities, your business may be in danger.

Have remote workers? You need stronger IP protections.

Compensation for remote employees

The most common mistakes companies make when going remote

When should you convert a contractor to an employee?

How does workers’ compensation work for remote employees?

Affordable perks small businesses can offer remote teams

Questions to ask before you outsource payroll

How to manage an unlimited PTO policy

Should your small business outsource payroll?

Where do remote employees pay taxes?