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While the global economy is still recovering from the repercussions of a two-year pandemic, the war in Ukraine and the conflict with Russia are adding new worries to a global business climate that is already tinged with economic uncertainty. Many established multinationals as well as fast-growing start-ups find themselves in a situation where they have to take action to reduce their headcount and prepare for what’s to come in an unforeseeable future.
With a global recession hovering at our doorstep, businesses all over the world are going into crisis mode, and teams struggle under the added pressure of having to deal with economic worries and keeping everyone safe. And if keeping the business afloat wasn’t hard enough already, companies also have to make sure to comply with ever-changing employment regulations and fulfill their HR responsibilities as well as try to avoid layoffs.
To successfully navigate through the crisis, businesses need to be flexible, especially when it comes to their hiring and employment practices. Only those who can restructure their global teams quickly can seize opportunities as they present themselves and stay lean when they have to. One way of achieving this flexibility is to work with an Employer of Record.
This blog post tells you why Employer of Record solutions aren’t just suitable for periods of growth and expansion, and how EORs can help companies in times of crisis.
An Employer of Record (EOR) is a global employment solution that enables businesses to hire employees in countries where they don’t have a legal presence. By becoming the employee’s legal employer, the EOR takes over all the administrative tasks and legal responsibilities linked to the employment relationship.
Meanwhile, the company contracting the EOR service remains the de facto employer of the worker and maintains control over the employee’s daily activities, projects and workload. Employment outsourcing services such as EORs are typically used during phases of business growth and global expansion to quickly hire staff in new markets.
In this way, EORs allow companies to test new markets without risks and to start generating revenue with a local team while incorporation is still underway. What many businesses don’t realize is that an Employer of Record can also be of great use during times of economic uncertainty or downturn.
Here you can read more about how an Employer of Record simplifies global expansion.
This may sound like a paradox, but there actually are quite a few similarities between times of business growth and times of economic downturn or crisis. And it’s these similarities that make Employer of Record solutions equally suited for both scenarios.
One of the things crises and business growth have in common is that they require businesses to react as fast as possible. Whether it's exiting a crisis-hit market quickly or recruiting new talent at the first sign of a business opportunity, speed is everything. When the crisis hits, you want to be quick on your feet. The same goes for taking advantage of lucrative business opportunities.
Sudden changes are typical for both growth and crisis scenarios - although one could argue that growth is slightly more predictable than crises. This volatility requires businesses to be flexible and to quickly adapt to the new circumstances. Without flexibility, the company risks being paralyzed by market volatility and rapidly changing business needs, which usually involves financial losses and, in a worst-case scenario, downsizing.
When dealing with a crisis as well as when planning and executing global expansion, expertise is the most valuable asset. When times are rough, the last thing a business needs is an additional burden in form of HR, payroll or other compliance requirements. Not to mention the additional stress of an impending lawsuit resulting from a compliance error that was committed under the pressure of the situation. Expertise is the only thing that can get a business through a crisis safely.
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Crises and periods of growth are challenging times for businesses that require flexibility, expertise and speed of action. Employer of Record services fulfill all three of these requirements, which is why they’re a go-to option for many different crisis scenarios.
Here is how an Employer of Record can help your business in a downturn, during a global health crisis or in times of economic uncertainty.
Crisis situations, regardless of their origine, are often accompanied by legislative changes, which can also affect employment. When working with a globally distributed team, companies often struggle to keep track of all the legal changes that are happening in the different jurisdictions where they have employees.
If the members of your global team are hired via an Employer of Record, employment law changes and new regulations affecting payroll and other HR-related activities will be handled by the EOR.
If your HR and compliance needs are outsourced to one or several experienced EOR provider(s), this frees up valuable time and resources in your company and allows your in-house team to dedicate their full attention to what really matters, i.e. safely navigating the business through the rough patch.
According to a survey conducted by Oasis, around 45% of small businesses spend roughly one day per week with HR-related administrative tasks. The number of hours dedicated to HR admin and compliance is likely to increase when the business has remote employees in different countries, which means more work to comply with local labor laws and other regulations. This time is far better spent focusing on finding solutions to help your business back on its feet.
Multinationals have subsidiaries and offices in many countries around the globe from where they lead their operations. In times of economic downturn, their main priority is to reduce their global overhead by closing down entities that aren’t lucrative.
Under normal circumstances, this is accompanied by layoffs and the loss of all business operations and opportunities in the respective market. With an Employer of Record, companies can reduce their global footprint while continuing to employ (at least part of their) staff to keep operations going until the economic situation improves.
Hiring the best candidates is always a top priority for businesses, but it becomes especially important during crisis situations. Whether you are preparing your businesses for an oncoming recession or restructuring after a failed product launch in a new market, you need the best people you can get.
Since the best talent isn’t always available in your country, it’s necessary to expand the geographical reach of your talent search and start looking for candidates abroad, which requires an EOR to handle all the formalities while you concentrate on getting the business back on track.
Russia’s recent invasion of Ukraine is a perfect example of how an Employer of Record can help companies handle remote employee relocation and keep their staff safe in times of a crisis. Since Ukraine is the number one destination in Europe when it comes to IT outsourcing, many businesses have developers based in and around Kyiv. When Russian troops invaded the country, many skilled tech workers decided to leave Ukraine and seek refuge in neighboring states.
While leaving Ukraine was the best option for them to keep safe, moving to another jurisdiction also had an impact on their employment - a new country of residence usually means new labor laws, different social security contributions and more. Using an Employer of Record is a simple way to navigate these changes without compliance worries, and in the shortest delay possible.
Even during a global recession, not all countries are affected equally. While demand might dramatically decrease in some markets, other consumer markets might still be going strong.
Companies that are flexible and able to hire local teams in less crisis-affected markets can gain significant advantage over their competitors. While the competition is struggling to make money in their traditional markets, businesses setting up operations in other markets can continue to be profitable. All they need is an EOR partner who can help them quickly hire a local team.
Even with the best crisis management strategy, it’s not always possible to keep the business afloat without having to downsize. Letting people go is a hard decision to make, but if it’s your only option, you want to make sure the termination process runs smoothly and that all the formalities are respected.
Not only because your employees deserve a decent and compliant termination procedure, but mainly because respecting the statutory notice periods and providing the prescribed amount of severance pay will prevent potential lawsuits - which is the last thing your business needs at a time of economic downturn.
Employer of Record solutions can be used for more than just speeding up your global expansion. Thanks to the flexibility and cost-efficiency they provide, they can also be leveraged to hire in a recession, reduce your global footprint in times of crisis or keep your global team safe during a pandemic.
At Lano, we work with a global network of experienced Employer of Record partners who offer you the flexibility and expertise you need to keep your business going in times of economic hardship or crisis. Stay ahead of your competition with flexible global hiring and employment options and don’t let borders stop you from finding the best talent to help your business thrive despite economic uncertainties.
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