Global employment outsourcing is an employment solution that allows companies to assign their roles and duties to the Employer of Record (EOR). EOR completes all their legal duties and administration like global payroll, while client companies focus on their manager duties and control over the business and the workers, it doesn't matter from where they work.
The companies have a dedicated, in-house HR department that handles everything related to their employees. For large companies and entities who want to engage with the global workforce, it's safe to find the Employee of Record and use GEO services. Through GEO services, you don't have to create a foreign entity for each country where you find hired employees.
What is Global Employment Outsourcing(GEO)?
Global Employment Outsourcing is a legal entity that allows companies to hire employees abroad, without creating a branch outside their home country.
Employment law differs from every country, GEO acts as a legal employee of record (EOR) in each country. Through that, GEOs accept all the employer responsibilities like payroll, taxes, administration, and allowing companies to work compliantly while maintaining their global mobility and the option to outsource whenever they like.
Why Global Employment Outsourcing(GEO)?
Some of the reasons why GEO is necessary:
1. You don't have to worry about the legal issues
While hiring for the first time in any country one of the biggest challenges is to handle all the legal adherence. Every country has its own employment laws that you should follow. You are also required to follow laws that apply to a particular state, territory, and municipalities. In many cases, you'll have to understand different laws covering the following:
- Handling of personal data
- Minimum wage rates
- Overtime pay
- Maximum working hours
- Public holidays
- Annual paid leave
- Sick leave
- Parental leave
- Caregiver leave
- Healthcare coverage
- Working conditions
- Employment contracts
- Procedures for termination
With so many laws to follow, companies hiring international employees have a great risk of noncompliance. One wrong step can lead to fines or other legal penalties from the state or lawsuits from your employees or labor unions. These all can be avoided by global HR outsourcing.
When you hand over all the legal tasks to an organization that has deep knowledge of all the local employment laws, you don't have to spend your time and resources researching these laws or hiring lawyers to help you remain compliant. Instead, you are stress-free and can focus on doing other activities.
2. You don't have to establish any branch outside your country
If you are looking to set up HR staff and directly hire your new international employees then you'll have to set up a legal entity in that particular country. That's because many countries don't allow international employers to employ their citizens. Hence, you have to set up your company as an employer in the country. Entities can take different forms like branches and subsidiaries.
Setting up an entity is different for every country, in many cases, it's a large process that can take months to complete. It can be an added expense which the company can't afford. And even if you can afford to establish an entity, you should test into a new market before fully committing to establishing a subsidiary there. Because of all these reasons, companies chose to work with an EOE instead. Your EOR will handle all the HR tasks that you can't legally do without an entity and you'll still get to create relationships with foreign workers and test your growth.
3. You don't have to handle various payroll complexities
Handling payroll is a continuous HR task that you can't mess up. Managing payroll in your home country can be a big task but establishing international payroll can be an even bigger task. Paying your employees can require determining various things like:
- Determining an appropriate salary.
- Adding in bonuses when they are warranted or legally mandated.
- Paying the correct rates for overtime work.
- Paying employees at the correct intervals.
- Accurately handling holiday or sick pay.
- Withholding the right amounts for things like income tax and social security.
All of these things can be a bit tricky to handle but if you outsource payroll to EOR, then you don't have to handle any of these.
4. Outsourcing will save you money
Outsourcing always creates some expense but you will also have to determine which options will save you money in the long term. If you want to handle international HR in-house, you will need to establish an entity in the country and hire employees to handle all the HR work there. This all can add up fairly quickly. But by outsourcing your HR, you save money from not establishing an entity and also avoids expensive fines or lawsuits that come if you break the law.
5. You Don’t Have to Handle International Terminations
It's a complicated business in many countries to terminate employees. In the U.S. an employer can fire an employee for any reason at any time, as long as they don't break any law. Similarly, Denmark has a flexicurity system through which employers can terminate the contract of employees. But in many countries, there are certain laws and procedures that you should follow to let go of an employee.
Under the country's employment laws, if you don't follow them properly then your company will have to face several penalties. Some countries are more litigious as compared to others, and employees can sue you if they don't feel they deserved to be fired. Then, you’ll end up paying for back pay, front pay, emotional distress damages, and more. These situations can be avoided if you have a thorough understanding of the law. Working with EOR is a big incentive where you don’t have to handle these situations yourself. The EOR will know when they can legally terminate the contract of the client depending upon the situation. They will also know which procedures they should follow to handle the termination contract.
Global Employment Outsourcing Options or Global Employment Outsourcing services
GEOs take care of a wide variety of business needs of multinational companies.
Some of these tasks include:
- Helping you comply with local laws (labor law, rules, and regulations)
- Handling tax administration and insurance
- Filling the payroll requirements in the host country
- Creating apt employment contracts that follow the local laws
- Coming up with employee benefits
- Employee hiring and management
- Money transfer across the home state and foreign countries
- Processing the work permit and visa-related requests for each foreign employee (if applicable)
EOR focuses on all these tasks related to the employee administration side, while the client can focus on the communication side and set the terms. Things like job description, company position, salary are something that is discussed between the employer and employee, and GEO finishes all the legal tasks, collaborating in the entire process.
Benefits of Outsourcing Global Employment
HR services include more than human resources administration. It also includes looking for the best talent and making sure that your company doesn’t break any rules.
Some of the benefits of using the GEO services are:
GEO INCREASES SCALABILITY
With GEOs, you can quickly scale your company according to business requirements and industry shifts. They know better where and how to find new talent based on the local area circumstances.
NO MORE COMPLIANCE AND SECURITY ISSUES
If you’re looking to hire independent contractors and their job description looks similar which can be interpreted as an employee then you’re at risk of employee violations.
With GEO, you don’t have to worry about any such thing. The EOR is compliant with local labor laws and there won’t be any breaking of violations. This also results in minimizing any operational error regarding taxes and payroll.
GEO HELPS WITH ENTERING NEW MARKETS QUICKLY
Establishing a business entity in a foreign country is too complex and it takes a long time to get things working. EOR is a better solution if you want to start asap.
USING GEO IS COST-EFFECTIVE
Setting up a local branch only to hire a couple of people is too pricey. With GEO acting as the employer of record, you never have to go further than your HQ. The range of tasks a single GEO handles can also replace many different consulting firms, experts, and agents.
BETTER TIME MANAGEMENT AND INCREASED PRODUCTIVITY
Instead of handling the administrative HR tasks in-house, you’ll save more time by hiring human resources professionals to take care of it. While you focus on important tasks that increase your revenue, GEO acts as a global HR service and resolves every issue regarding international employees: payroll, taxes, complying with local labor laws, and more.