Employer of Record & PEO 13 min

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

July 4, 2024
Preston Wickersham


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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 do global entity solutions and global employment solutions do?

Global entity solutions and global employment solutions help other businesses set up and operate in foreign countries. 

While similar, there are important differences between these two types of global solutions providers to be aware of. Let’s take a look:

Global entity solutions

These providers give comprehensive support to businesses to establish and manage owned entities in various countries. This includes assistance with company registration, compliance with local regulations, accounting, tax reporting, and legal representation.

Essentially, global entity solutions make it possible for businesses to operate internationally without the need to deal with complex legal and administrative processes on their own.

The benefits of this approach include the following:

  • It’s relatively easy to establish new entities in foreign markets with the help of an expert.

  • The provider makes sure all legal requirements are met efficiently, which mitigates risk.

  • Businesses can avoid penalties and reduce any costs associated with non-compliance with local laws.

Hiring internationally

Global employment solutions

Global employment solutions offer international hiring, payroll, and employee benefits management for their client companies. 

Their services usually include global employment outsourcing. That means a third-party provider employs staff on behalf of a company and handles all employment-related tasks. This allows businesses to hire talent in different countries without needing to set up local entities there.

Here are some of the advantages associated with this approach:

  • Businesses can hire the best talent from around the world without the need to establish a legal presence in each country.

  • Working with a provider streamlines administrative tasks like payroll processing, benefits packages, retirement plans, and other perks tailored to local standards.

  • The provider is responsible for adherence to local labor laws and employment regulations, reducing the risk of legal issues for the company.

Key differences between them

Global entity solutions focus on setting up and managing business entities, while global employment solutions hire and manage employees across borders.

Entity solutions are a good option for businesses that need a permanent presence in foreign markets, whereas employment solutions are ideal for companies looking to hire international talent without establishing local entities.

Using either of these services can significantly streamline your international operations. You can free up resources to focus on growth and strategic initiatives while not having to worry about the complexities of hiring internationally. 

But this is only part of the story. When considering global employment outsourcing, you should also familiarize yourself with the differences between owned-entity services vs. partner-dependent models.

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

Let’s use an everyday analogy to illustrate the difference between these two concepts.

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.

Wait, what?

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.

link to What does PEO stand for, and how is it different to an EOR?

What does PEO stand for, and how is it different to an EOR?

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Why would a company choose to be dependent on partners?

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

Legal entity setup 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 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 can’t 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 services 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.

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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. This can generate significant cost reductions. 

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. Failure 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. 

While 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 that rely on third parties, which gives you a strong compliance advantage. 

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.

In short, partnering with providers that have owned entities in the countries you want to expand to is far less risky than working with providers who are dependent on third-party outsourcing.

How to pick the right global employment solutions provider 

The best global employment provider for your company should:

Have a deep understanding of local regulations

Verify that your potential partner has a solid understanding of local labor laws and employment regulations in the regions where you plan to operate. Their expertise is critical for compliance obligations and smooth operations. 

Ask for examples of how they have successfully dealt with complex regulatory environments in the past.

Stay up-to-date on regulatory changes

Choose a provider that demonstrates a proactive approach to keeping up with regulatory and compliance changes. They should have mechanisms in place for monitoring legal updates. Regular updates and communication on regulatory changes should be a standard part of their service.

Use digital solutions

Opt for a provider that offers comprehensive digital or remote-based solutions. A modern, technology-driven approach guarantees more efficient payroll processing, employee management, and data security. 

Digital platforms also provide better transparency and real-time access to vital information, making it easier for you to manage your global workforce.

Be responsive to your goals and objectives

Whether you’re looking to expand rapidly, reduce your operational costs, or improve compliance, choose a provider that resonates with your strategic vision and can offer you the right solutions.

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Uphold strong customer support and service levels

Efficient, timely customer support is essential. Make sure your provider offers 24/7 support and has a dedicated account manager to handle your questions and issues. You need this level of service to prevent disruptions.

Get outstanding references and reviews

Look for testimonials and case studies from other companies similar to yours. Speaking to current clients will provide you with valuable insights into the provider’s reliability and efficiency, as well as the quality of their services.

Be scalable and flexible 

Your provider should be able to scale services as your business grows and adapts to changing business needs. Make sure they can handle the complexities of expanding into new markets and managing an increasing number of employees.

By following these tips, you can select a global employment provider that not only meets your current needs but also supports your company’s long-term health and strategic goals.

Choose the best global employment solutions provider for your business

If you enjoy spending more money on 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, the 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, an advanced global payroll hub, 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.

FAQs about global employment and global entity solutions 

Here are some common questions related to global employment outsourcing.

When should you consider using a global employment entity partner?

Consider using a global employment entity partner when expanding your business internationally or hiring remote employees in different countries. They help with compliance and management.

How many countries can a global employment outsourcing company cover?

A global employment outsourcing company can typically cover anywhere from a few dozen to over 100 countries, depending on the provider's network and expertise.

How long does it take to set up a global entity?

Setting up a global entity can take several months or more, depending on the country, the complexity of the business, and local regulatory requirements.

What types of business structures are available for a global entity?

Business structures for a global entity include subsidiaries, branches, representative offices, and joint ventures. These structures offer different levels of legal and financial independence and come with unique regulatory requirements.

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