Acquiring qualified employees with the required skill sets can scale operations while minimizing skills gaps and talent shortages in various job roles. When thinking about growing your team, picking the right expansion method is one of the most important decisions you have to make.
When hiring globally, companies explore either entity setup or engaging an Employer of Record. But how do you evaluate which method is best for your growing organization?
Setting up a legal entity in a different country than your headquartered country is time-consuming with variable costs depending on your business complexity and need for professional services. Let’s look at some of the critical steps involved in setting up a legal entity in the U.K. if you’re a U.S.-based company.
Overall, the process can take several months and cost upwards of £15,000 GBP just to set up an entity. In addition to this amount, you must add the monthly cost of the new employee ( including their salary and employer contributions) and ongoing monthly costs to run payroll and maintain tax and legal compliance.
An Employer of Record (EOR) is a third-party organization that acts as the legal employer on behalf of your organization. Your EOR will handle various aspects of employment, such as drafting valid and compliant contracts, accurately processing payroll and withholding tax, and ensuring all labor law and tax requirements are met.
With an EOR, you will not have to set up a legal entity just to hire a U.K.-based employee.
At Borderless AI, we’ve made it easy to calculate the costs of hiring an employee through our employer-of-record solution. Our Employee Cost Calculator estimates the monthly cost of your new hire so that you can compare those costs to setting up an entity and hiring directly. Let’s take the same example of hiring a U.K.-based employee:
This is the monthly salary for the employee - their annual salary divided by 12 months.
This consists of your contribution or ‘employer burden’. In the U.K., it consists of workplace pension, apprenticeship levy, and national insurance.
This is the employee’s monthly gross salary + the monthly employer contribution. This is the monthly base number that you would use to compare the cost of setting up your own entity vs. engaging an EOR
This is the Borderless AI subscription fee - per month, per employee. You should compare this against the payroll subscription fee that you would have to use if you were operating a legal entity.
This is the exchange rate which changes daily. This would have to be paid regardless of whether or not you formed a legal entity in the U.K.
This is a standard fee we charge to transmit payment.
This includes the Employer Cost plus all other Fees.
Remember when assessing costs that most EOR providers require 1-2 months of salary deposit upfront while Borderless AI does not.
In addition to the monthly employer cost (employee salary + employer contribution) of a new hire, there are several other considerations for companies hiring globally.
With an EOR like Borderless AI, you can hire a remote employee in as little as 48 hours instead of the months that it takes to register a foreign legal entity.
A global EOR processes payroll compliantly and stays abreast of labor laws and accounting practices in a new country. On average, HR managers spend 20% less time on administrative tasks associated with payroll processing and employment management/compliance. In addition, because an EOR takes responsibility for all hiring and compliance, your organization can rest easy knowing that your global hiring practices are compliant.
Some estimates indicate that HR managers can save almost 25% on employment costs for more than 45 employees when using an EOR like Borderless AI not to mention the cost saving experienced by not settling up a permanent legal entity.
Interested in hiring globally?
When you choose Borderless AI, you can look forward to:
Speak with Borderless AI today and elevate your global hiring practices.
Borderless does not provide legal services or legal advice to customers, contractors, employees, partners, or the general public. We are not lawyers or paralegals. Please read our full disclaimer here.