Expanding operations across international borders offers numerous growth opportunities. One benefit is the ability to tap into global talent pools. International employees possess expertise that will help your organization grow.
However, there are challenges and risks in global hiring. An Employer of Record (EOR) mitigates those risks and provides solutions to overcome the challenges of hiring international employees.
Let's explore common risks associated with international employment and EOR best practices for risk management.
EOR Risk Management
An Employer of Record (EOR) provides protection against many global employment risks, but here are the top five.
Legal Compliance
Every country has its own labor laws and employment regulations. Hiring international employees involves understanding and following laws on:
-
Hiring and terminating employees
-
Financial reporting
-
Minimum mandatory benefits
-
Employment and overtime hours
-
Insurance coverage
-
Professional license applications
-
Tax filing and payments
-
And more
An EOR is an expert in global employment compliance. They possess expertise and knowledge on labor laws worldwide. An EOR ensures companies remain compliant with employment contracts and employee management. EOR compliance strategies include conducting regular audits and monitoring changing regulations to ensure they stay current. This protects clients from noncompliance with employment laws and associated fines.
Borderless AI enables businesses to compliantly hire, manage, and pay talent worldwide without establishing a foreign entity. We alleviate the complexities and risks associated with hiring global employees with zero deposits, dedicated in-house support, and AI-powered global employment law resources.
Payroll and Tax Requirements
Managing international employees involves adhering to complex and variable tax and payroll requirements. Effective payroll management is essential for maintaining employee satisfaction and your corporate reputation. Failing to pay employees what they are owed or within an appropriate time may cause legal issues and fines.
An EOR follows payroll and tax processes and avoids non-compliance and financial penalties. This includes:
-
Proper classification of employees and contractors
-
Withholding accurate tax amounts
-
Paying employees on time
-
Calculating the correct amounts
-
Administering benefits
-
Labor compliance reporting
Data Protection and Intellectual Property
Working with international employees makes it difficult to protect corporate data and intellectual property (IP). Every country has its own data security rules, which increases the risk of information leakage and data tampering. There is also the chance that international employees will violate data protection laws.
An EOR provides another layer of protection to secure corporate data and IP as they are experts in navigating what is necessary in varying jurisdictions to maintain your IP and data security.
Corporate Tax
Hiring international employees involves creating a permanent establishment (PE) in a foreign country. This arrangement has corporate tax implications and carries a variety of requirements to maintain. Failure to follow procedures may create corporate tax liability and potential double taxation on profits.
Global companies avoid corporate tax liabilities by partnering with an EOR. An EOR acts as the legal employer in the international employees’ country. This removes the need to create a PE and pay additional corporate taxes. An EOR also understands and leverages tax treaty provisions to lower tax burdens.
Immigration Regulations
Employing international hires involves securing work permits and visas. Failure to follow immigration regulations, or improperly completing paperwork for international employees, can lead to serious fines and penalties.
An EOR ensures the company complies with immigration laws when hiring international employees. An EOR also stays abreast of changes in immigration laws to maintain compliance, handles visa renewals and extensions, and prevents disruptions to business operations.
Conclusion
Hiring international employees provides numerous benefits to global companies. However, it also comes with many challenges. An Employer of Record (EOR) mitigates the risks. An EOR ensures your company complies with local regulations, payroll and tax requirements, data and intellectual property laws, corporate tax rules, and immigration regulations.
Borderless AI is a global payroll solution that leverages the power of generative AI to automate and speed up the process of onboarding, managing, and paying international team members. Book a demo today.
