There’s no denying that distance working has become the global standard over the past 12 months. The pandemic has changed the way we work – perhaps forever – in a way that affects each workplace differently.
Among the various advantages it presents to both employers and talent, one stands out: the new possibilities in international recruitment.
So what can we expect from a future in which ‘WFH’(Working from Home) has become the norm, how does it impact hiring from abroad and most importantly, how can companies take advantage whilst avoiding potential legal headaches and complications?
For many people, working from home has been a revelation. According to Owl Lab, 83% of people feel more satisfied with their job since making the switch to remote working.
Another survey conducted by Buffer found that a staggering 99% of people would prefer to distance-work, at least on a part-time basis.
It doesn’t take a genius to work out why remote working is so popular; in fact, you’ve probably experienced its benefits first-hand yourself over the past year.
Working from home means less time spent commuting and travelling, and more time spent with family, on hobbies or simply resting. And we all know more content, more fulfilled and less stressed employees are better contributors at work.
Some will say the very smartest companies latched on to distance working long before the pandemic, but whether or not the rest of us were slow to catch on doesn’t matter – what matters is we’re all in the same place now and for employees across the world, there’s no going back.
They’ve embraced remote working and so should their employers, because happy, productive employees are the greatest asset a company can have.
As any organisation that has tried it will tell you, distance-working has tangible benefits for businesses, dramatically improving talent retention rates and employer branding.
But as the practice becomes more commonplace all around the world, another key advantage becomes clear: all national boundaries become obsolete in the hiring process.
Companies can now attract candidates from around the world, drawing on a huge global talent pool. In many cases, this leads to a significant saving in the total cost of employment for newly hired employees, as well as a huge improvement in the quality of candidates.
For example, if a company wanted to hire a developer, the total cost of employment in Germany would be greater than the total cost of employing a developer based in Spain, even though the developer would receive the same net salary in both cases.
Differences in social security benefits can also have a major impact on how much an employee costs a company because of his or her place of residence.
Although it may be overwhelming at first to think about hiring someone thousands of miles away, possibly never meeting him or her face to face, the benefits of a global approach far outweigh any perceived disadvantages.
And at WorkMotion, an Employer of Record service provider, we make this transition smooth and painless – not only for the company in question, but also for their new employees.
For those companies that have already recognised the advantages of international recruiting and give their employees the opportunity to work from a distance, there are a few different ways in which they can implement this new strategy.
Let’s discuss the three most important ones: setting up a branch office, working with freelancers and using the Employer of Record model.
Which of these solutions is most appropriate for your company will depend on the specific circumstances and business planning goals.
For example, a company that wants to stay in a particular market for more than five years and has a large global expansion budget would seek to establish a local subsidiary.
Meanwhile a company that only wants to carry out a temporary project and is not too concerned about compliance may prefer to work with freelancers on a short-term basis.
And companies that want the best of both worlds often choose to work with an Employer of Record service provider.
So let’s look at these three solutions in more detail.
Establishing a local office can be a difficult, stressful and lengthy process for the entire organisation.
This option is usually the first choice for companies who are unfamiliar with other options, have massive global expansion budgets, are not under time pressure, employ more than 20 people per country and are of course certain that they want to stay in this market for the long term.
Setting up a legal company always requires effort, as it’s necessary to find local professionals who can ensure compliance using their knowledge of the labor laws and regulations in each country.
There are often many parties involved, including labor lawyers, tax advisors and local authorities, all of whom can make the process long and complex.
It usually takes several months to get a company up and running – and if the company is dissatisfied with the hired employees, the market or the results for whatever reason, it then takes further time and money to leave the market.
While the local office option is ideal for long-term ventures with high budgets, it is usually not the best choice when it comes to testing and validating new markets.
The second option is to hire freelancers for short-term work.
This option works if you only need part-time and project-based workers and you don’t care too much about long-term commitment, a suitable corporate culture or the retention of intellectual property and talent. A common problem when hiring freelancers is legal compliance.
Every country has its own rules when it comes to this type of worker and in most cases, companies aren’t aware of these rules, which is why some are constantly facing legal proceedings for non-compliance with local labor laws.
An example of this would be so-called pseudo-self-employment, where the person registered as a freelancer is de facto an employee of the company in order to avoid paying social security benefits and social security contributions.
This is a serious violation of labor law in many countries and entails sanctions not only for the freelancer but also for the company. Working with contractors is a solution for international employment, but it only works under certain conditions and it can carry enormous legal risks.
The third option is to hire an Employer of Record service to represent you locally.
This solution is usually preferred by companies that want to save themselves the significant time and effort of expansion, that want to hire employees in several countries at the same time, and/or that do not have a large budget or long-term plans for a specific market.
Another reason to choose this solution is the absolute legal compliance it delivers. Companies that want to ensure they strictly follow the labor laws in each country when hiring employees internationally should use the Employer of Record model, which works very simply and avoids any legal headaches.
Essentially, the company signs a contract with the Employer of Record provider, who in turn has built up a network of local partners who have gone through a rigorous selection process. The partners on their side then hire the selected employee in accordance with local laws and regulations.
WorkMotion is an EoR provider that also acts as an HR service provider and therefore takes care of all back-end, payroll and personnel matters relating to the employee.
However, the employee still remains part of the domestic company and the working relationship is the same as it would be if the employee worked directly for the company.
This model comes closest to the establishment of a legal company, without the company having to pay to look for local specialists or deal directly with labor laws in the individual countries.
In this way, a company can enter more than one market at the same time and stay as long as it makes financial and business sense. Furthermore, when using such a provider, all employee costs are summarised in a single monthly invoice per country, which is much clearer than with freelancers.
WorkMotion has developed an easy-to-use HR platform that allows companies to access and control all employee data and payroll in order to better manage employees in remote locations. This platform has one major advantage over using manual processes, which is the elimination of errors.
While it’s necessary to bring several employees on board manually, sooner or later a mistake is inevitably made that can cost the company a lot of money. But as soon as manual work is taken out of the equation, the error rate drops drastically.
And last but not least, the domestic company does not incur any additional costs if it decides to give up its presence in a country or part with an employee.
Once the contracts have been terminated by both parties and local work requirements have been met, there are no further obligations.
Long after the COVID-19 pandemic is over, its legacy on the way we work will still be felt by companies and their people. International distance working has become a necessity and will continue to have an impact on companies, their work culture and recruitment policies.
Now is the time to try out different options for permanent recruitment abroad and for most medium-sized businesses looking to take advantage of this brave new world, the Employer of Record model is the right choice.
The model is sustainable and allows companies to hire in several countries simultaneously, saving time, effort and money.
WorkMotion is uniquely positioned to support companies in hiring top talent internationally in compliance with the law – and we look forward to helping more businesses achieve their goals in 2021 and beyond.
We’re here to help you on your global hiring journey.