Global Payroll — 17 min
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.
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.
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.
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.
It’s extremely important at this point that you are partnered with an organization that can help manage these pieces of your international hiring process. Choosing your partner is a big decision — for one thing, you need to make sure you find someone you can trust with payroll and taxes. For another, providers don’t all work in the same way.
There are two kinds of global employment solutions providers. Some own legal entities in the countries where they operate, while others rely on partner networks. Many employers of record provide a mix of some owned entities and some partner networks, depending on the country.
An owned-entity provider actually owns a legal entity in the country you’re hiring in. That means they’re really, legally there. They’re already compliant with all the laws, so they can do everything for your organization, from payroll to taxes to IP protection, in house.
Partner-reliant providers can’t provide all their services directly A partner network is exactly that: a collection of third-party companies. There’s more risk involved, and response times can be slower. If you have a problem, there may be more than one point of contact. Things may take longer because your point of contact needs to reach out to a vendor.
Third parties can also be risky. Owned entities are quicker to be compliant with local laws and don’t outsource your IP protection to a company you don’t know.
The choices don’t stop at owned-entity versus partner-dependent providers, although you should always try to work with a provider with its own entities in all countries where you plan to hire people. You should also know two common terms: a professional employer organization (PRO) and an employer of record (EOR).
These abbreviations are often used interchangeably within HR circles. While that’s not exactly wrong, there are a few distinctions. Think of it this way: all EORs are PEOs to some extent, but not all PEOs are EORs.
What does that mean? An employer of record legally employs workers in other countries on your behalf. You handle all the day-to-day management of your employee, but on the local paperwork, the EOR is technically the employer. This is the structure that allows you to employ people legally in other countries, and it’s one reason it’s so important to work with an EOR that does not outsource your employee experience to a third party.
Some PEOs do offer EOR services, but many do not. A PEO acts as a sort of external human resources department. They may be able to help you with payroll, benefits, and other HR-related tasks. Unless they explicitly offer employer of record services, however, they may not be able to help you with your plans for global hiring.
To make it clear, Remote is an employer of record offering full global HR services in all our covered countries. We only offer services in countries where we own a full legal entity. No half-measures here: When you work with Remote, you’re guaranteed the best experience, compliance, and security in the business.
To learn more about the differences between an EOR and a PEO, read our helpful article on the subject.
Creating a remote workplace is about more than simply hiring some workers online.
While hybrid work models provide a good short-term basis to grow your international hiring, you must update systems and processes that allow remote and globally distributed teams to feel connected, aligned, and valued as highly as employees in the office. In the long term, hybrid models can leave people feeling disconnected, overworked, and ineffective due to the mistakes companies often make when they start going remote.
Unless you consciously build a remote-first culture, you risk ostracizing your remote employees, who may feel like second-class citizens next to their on-site colleagues. As big a perk as remote work is, feeling left out of onsite bonding activities or perks — like after work drinks, lunches, or meetings scheduled in person — isn’t good for company culture.
Clear communication is critical when you’re working with a remote team. It can be easy to misconstrue digital communication, especially if you’re working across language or cultural boundaries. The best remote teams document everything. People work at different times and need to understand exactly what happened while they were sleeping.
Making sure that you’re anticipating the needs of the remote workforce goes a long way toward aligning your teams, creating a welcoming work environment for all, and retaining the workers you hired from all over the world. Check out what our CTO, Marcelo Lebre, has to say about asynchronous working.
Another thing to consider is how you’ll scale your international employment. You may start with one employee in another country, then find more talent in the area and want to scale.
Choose tools that will grow with your business. In building a remote-first culture, that culture will have to scale too.
Growing a culture takes strategy, a conscious decision to base your team around remote-first values. This means taking a proactive approach to fostering diversity and hiring inclusively. You must also decide what your company values and how your team members should embody those values.
Be intentional about creating your global team. Don’t silo employees in territories. Encourage people to meet one another in meetings, in productivity platforms, and while working on projects. Not everyone’s work hours will be the same, but everyone should feel they’re working together. As the pandemic ends, in-person gatherings become a great way to foster team spirit.
Employees who reach outside of silos tend to achieve more. So, don’t make your employees reach — keep them as unsiloed as possible so they can collaborate.
Culture builds every time you make a hire, whether you realize it or not. Your onboarding program should clearly communicate your remote-first work practices and make it easy for your new hires to start collaborating without stress.
Onboarding is your new hire’s first experience with your organization, so use this time to introduce them to your company and your culture. Reinforce communication guidelines by both demonstrating the sort of communication you expect and demonstrating it yourself. Asynchronous communication thrives on fewer meetings and well-organized documentation, so you should have plenty of available reading (and listening, and watching) for new people to consume.
Consider assigning your new employee a buddy in their time zone, too, so they feel included and know where to turn when they have questions.
Hiring your first remote employees, especially those who live outside of your country, can be intimidating. Of course, you’re worried about risk. Of course, it’s hard to know where to start. And of course, compliance, taxes, and costs are all daunting questions. But making that first international hire isn’t just possible: with Remote, it’s quick and easy.
We fully own legal entities in the countries where we operate and can help companies of all sizes employ workers in those countries. For the best intellectual property protections, the best experience for your international employees, and the most reliable partner for your global expansion, we’re here and ready to help. Whether you have questions or you’re ready to sign up, we would love to meet you!
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