August 08, 2022
What is a global employment solution and why should you use one?
Different types of international employment solutions
What to consider when selecting a global employment solution
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The trend towards remote work has given employers access to a global talent pool. With asynchronous communication, videoconferencing and a growing number of tools to facilitate team collaboration across borders and time zones, hiring a global team has become a viable option for businesses of any size.
While diversifying your workforce and bringing in fresh talent and new perspectives may sound like a dream come true, there are many legal and administrative hurdles businesses need to solve when hiring employees abroad. Dealing with different labor laws and paying the right social security contributions are just two of the many aspects aspiring global employers need to be aware of. Not to forget the cost & time required to set up a foreign legal entity.
This is where global employment solutions like Employer of Record services come into play. These services offer companies a legal means to quickly and compliantly hire employees abroad without the administrative hassle. The only problem is that there are so many different providers and service models out there, that it’s difficult for businesses to know which solution to choose. In this blog post, we will show you the most common types of global employment solutions and tell you what to look out for when choosing a global hiring solution for your business.
A global employment solution is a software or service provider that facilitates global hiring for businesses wishing to expand internationally, by allowing them to hire employees in a jurisdiction where they don’t have a legal presence. There are different types of solutions and providers available which differ with regard to their range of services, but more on that in the next section.
What makes international employment solutions so valuable for expanding businesses is that they significantly speed up the recruiting and onboarding process, while simultaneously guaranteeing full compliance with local labor laws, payroll rules and other employment-related regulations.
Other advantages of using a global hiring solution include:
Increased operational efficiency
Lower costs compared to establishing a legal entity
More time to focus on business growth and core business activities
Access to local knowledge
Standardized recruiting and onboarding processes
Safe option for entering new markets
No need to set up local payroll
Not all global employment solutions are the same. Just as with payroll service providers, there are different operating and service models. Here are the three basic types you should know.
An Employer of Record (short: EOR) is a service provider that enables companies to compliantly hire employees abroad without having to incorporate in that jurisdiction. By hiring employees on their client’s behalf, they take the legal burden of the employment off their shoulders.
Employer of Record services typically include the whole range of administrative and legal tasks related to the employment, from drafting up the employment contract to processing payroll to paying employees. EORs can have different operating models, meaning that they either operate through their own legal entities or with a partner network.
There are several cases where hiring employees with an Employer of Record is the best option for expanding businesses. This includes testing new markets, hiring remote employees abroad and converting freelancers to full-time employees.
Read more about Employer of Record services and how they can simplify global expansion in our related blog post.
A Professional Employer Organization (short: PEO) is an employment solution which specializes in taking the administrative burden off the client business’s shoulders. In contrast to an EOR whose role is to act as the employee’s legal employer, a PEO’s services are focused on the HR aspects of employment only.
This means that a PEO will take care of HR tasks such as managing employee benefits and processing payroll, but the employing organization (i.e. the PEO’s client) will still need to establish a legal presence in the country where they want to hire new employees. From this point of view, a PEO could be seen as a co-employer which assists with HR-related and administrative tasks.
A PEO can be a good solution for businesses which are ready to fully commit to a new market and set up their own legal entity, but need help with the administrative aspects of employment in that jurisdiction. The same goes for businesses looking to hire large numbers of employees in a certain region, which justifies the investment of establishing a legal presence.
Got more questions about PEOs and EORs and what sets them apart? Then check out this blog post where we dive deep into the differences between PEO and EOR.
Another term that is frequently used in the context of global employment solutions is Global Employment Organization (short: GEO). Although it is often also referred to as global PEO or international PEO, it's technically not a PEO.
In fact, it’s more accurate to think of a GEO as a global Employer of Record, since they offer a similar service, i.e. employing employees on behalf of a client company, thus saving the employing business the trouble of setting up a legal entity. The difference is that GEOs offer their services in a wide range of countries.
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No two global employment solutions are the same, and businesses should make sure to select their service provider carefully. Of course, every company is different and therefore needs to find a solution that matches their individual business needs. But there are certain criteria to look out for.
One of the main questions you should ask yourself when selecting a global employment solution is how many countries it actually covers. Depending on their operating model, i.e. owned entities or partner model, the country coverage of different providers varies quite significantly.
While some providers may offer their services in as many as 160 countries, others may only cover 30 - or limit their services to a certain region like APAC. If you intend to grow your global team rapidly over the next few years, make sure to choose a global hiring solution that allows you to do so in as many countries as possible - or at least in the markets that are on your expansion road map.
Not sure if an Employer of Record is the right solution for you, given the amount of employees you’re planning to hire in one of your target markets? Our blog post “EOR vs. Subsidiary – Which option for your business?” can help you make the right decision.
Thanks to remote work, businesses are able to hire the best talent in the world, regardless of their location. However, this doesn’t make talent acquisition any easier. With the global talent shortage, the demand for skilled workers is higher than ever, and companies are fighting each other over the best candidates.
When hiring remote employees in other countries, speed is crucial. Therefore, the service provider or platform you choose should be able to hire and onboard employees as fast as possible.
However, make sure to carefully check and verify your potential provider’s claims. Some global employment outsourcing services promise super fast onboarding times, but then fail to deliver. So check their track record and what previous customers said about their experience.
The gig economy is constantly growing and most companies have at least one if not several freelancers and contractors working for them to support their in-house teams. If you decide to extend your search for full-time talent beyond the borders of your jurisdiction, then you should do the same for your contractors.
International contractors and freelancers can enhance your work team in many different ways, but working with a contingent workforce also has its challenges, such as navigating employee misclassification risks. When investing in a global employment solution, make sure your provider can also help you hire and manage international contractors.
The bigger and more distributed their global team, the more tools businesses usually have to cover all their global workforce management needs. The problem with having many different tools is that data and information which is stored in one system needs to be manually moved to the next one, and vice versa. Not only does this leave room for error, but it also costs a lot of time which could be spent on more useful tasks.
Integrating different tools and systems is crucial for increasing process efficiency and minimizing operating errors. This includes any global employment solution you may choose. A global employment platform that is worth its money should have an open API and allow for integration with your other HR and workforce management tools.
At Lano, we work with our own Lano API to integrate our platform with your favorite tools. Here you can read more on how you can improve your global workflows with Lano integrations.
There are huge differences between global employment outsourcing solutions when it comes to what they offer for your employees. Service providers should have a support function for your employees in case they have questions.
Furthermore, your chosen global employment platform should also give employees access to their individual documents such as contracts, job description, payslips and more. A positive employee experience is crucial for employee happiness and talent retention, which is why it should also be on your list of criteria when choosing a service provider to manage your global hiring and employment formalities.
Global employment solutions are based on one of two different operating models, either they own direct entities in each country where they offer their services, or they work with a network of in-country partners (ICP). Although both approaches have their merits, it’s generally recommended to choose a provider who operates with experienced in-country partners.
One of the main reasons being that they usually have several ICPs available for each country, which means that you can choose the best match for your business. In case of a global employment solution that operates with direct entities, you’ll be forced to to work with the one local provider they own.
At Lano, we work with a global network of trusted local EOR partners. Here you can read why we chose in-country partners over direct entities for our EOR solution.
International business expansion comes with many different compliance risks, many of which can become quite costly for the business. When choosing an international employment solution, it’s crucial to check the track record of the service provider. Do they have the necessary experience to compliantly handle recruitment, onboarding, registration processes and payroll for you? If you’re unsure about the provider’s expertise, it’s usually best to go and look elsewhere.
Another aspect to consider in this context is whether the provider has real local knowledge and a regional network to handle difficulties that may arise or to answer questions on certain niche topics like labor leasing licenses. Some organizations that offer global Employer of Record services have only just recently set up their own entities in different markets and are therefore still lacking the necessary knowledge and connections.
Expanding businesses have different needs when it comes to global employment solutions. Depending on the level of experience of their in-house team, they require different services. While some businesses may only need an Employer of Record service to avoid establishing an entity, others may require the full package, i.e. everything from recruiting to benefits management to processing payroll.
When growing a global team, you don’t want to have to contract a separate service for all your global employment needs. Instead, it’s easier to select a global employment solution that covers everything.
One of the key drivers when selecting an international employment solution is, of course, getting the best value for your money. When it comes to global hiring solutions, providers typically opt for one of two approaches. They can either charge their clients a fixed price per employee, or they can calculate their service fees as a percentage of the employee’s salary.
Since wages and salaries vary from country to country and from employee to employee, the second model usually results in less transparency for the business contracting the service provider, and predicting the final cost will become more difficult. What’s more, not all providers of EOR, PEO or GEO services have a transparent pricing model. So make sure to go with a provider who does.
Last but not least, you should make sure that the global employment solution you choose offers reliable customer support. Urgent problems with payroll or other HR matters can arise at any hour of the day, and when they arise, you need to move quickly to solve them. There’s nothing more frustrating than facing a problem and relying on an external service provider to solve it for you, especially if the provider is unavailable.
A good global employment solution should therefore have an efficient customer support team and be available during reasonable hours - also considering different time zones. Ideally, you should have a direct contact at the organization to reach out to. Also, check whether the provider has communication channels for your employees in case they have questions.
Building and managing a globally distributed team is challenging. Given the multitude of labor laws, payroll regulations and registration requirements, businesses rarely have the expertise and capacities to handle all their global employment needs in-house. That’s why they need a global employment solution to navigate compliance and other employment formalities in different jurisdictions.
Lano’s global employment platform is designed to support all your global hiring and employment needs. Thanks to our network of trusted and experienced Employer of Record partners, you can hire remote employees in over 150 countries - in full compliance and in record time. And if you need to work with international contractors, we can help you manage, onboard and pay your global freelancers too.
Book a demo with our expert team today and learn more about how Lano can help you hire, manage and pay your global team.
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