The business practice knows three main methods on how to enter a foreign market by working with international people.
These refer to engaging independent contractors, hiring directly local employees, or on the other side - working with an employer of record (EOR) such as Global Employment Outsourcing (GEO).
Each one of the named above presents its own benefits and risks, but more importantly, is to understand that depending on the chosen expansion method or model there is a specific list of requirements and actions to undertake in order to be compliant.
1. Engaging independent contractors? Less money, more papers
Nowadays with so many possibilities offered by online platforms like Freelancer, Upwork or Toptal, etc., many companies think of hiring individual contractors rather than employees, and it is understandable - no additional benefits, no salary, and the contractor’s legal activity is under his own responsibility. It works just great, especially for short term projects.
Things change while the working relationship is migrating to a longer period of time. There you go, if the local governments start seeing them as employees, the company is walking on the knife-edge of the non-compliance and tax evasion.
Here are the “symptoms” that indicate to the tax authorities that between your independent contractor and a usual employee there is no difference:
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The contractor receives regular transfers, usually in same amount
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The contractor receives transfers only from a single source, and does so for a long period of time
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The contractor is interacting with companies resources, people and equipment
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The contractor’s activity implies often travels, usually between the same locations
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The contractor does not have other sources of income
2. Can we just directly hire international employees? You tell me!
Besides the legal requirements for employing other country nationals, for an organization to open a subsidiary or a new company in a foreign country is a substantial investment of resources like time, money, and people.
The cost for the company registration is completed with many not-so-small ones, mostly related to bank accounts maintenance, legal advisory, regular taxes, people training, office rent, utilities, and this list may be continued.
Take into account that this method does not save you from other risks.
The need of keeping accounting records and monthly payroll calculations compliantly still remains.
3. Contracting an outsourcing services provider or employer of record (EOR)
It seems that in the middle of the riskiest and the most expensive is the employer of record solution.
Many problems get solved by working with an outsourcing company, like employing people compliantly, having a trusted legal and financial advisor in the host country, and besides you can have full confidence that you work with a team of experts.
In addition to all, your partnership is based on the specific contractual clauses that split equally both responsibilities and risks.
An important benefit from choosing to work with a global partner, mainly when your company has already a specific level o economical maturity, is the thing that you can focus on your business strategic goals.
This is perhaps the most qualitative benefit that you will feel only in the long term run.
Global expansion is not the kind of activity that happens somehow!
This activity has to be well planned. So, if you are thinking to conquer a new market, below we prepared a checklist that will help you to understand better which 10 things should you prior consider.
The first 10 things to do before going global in 2021
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No |
DESCRIPTION |
DONE? |
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1. |
Find out what do you need to hire people from a specific country |
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2. |
Check if there is a need for any kind of authorization/ certification to hire foreign people from the country where the company is established. Many countries have their own labor requirements and organizations that protect their employees. |
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3. |
Verify the tax laws applicable to you and your prospective employee |
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4. |
Ask for a labor law expert consultation regarding the regulations from the market you are interested in |
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5. |
Make a research for each country and collect the advantages and disadvantages to setting up a company in there |
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6. |
Ask for partner services proposal from different global payroll and accounting services providers. Compare them. Choose the one that fits your budget and your needs. |
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7. |
Collect information regarding payment methods. Include all significant details. Consult what the country’s law requires about paying the employees. |
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8. |
Take into account the cultural, language, currency, and time zone differences when making the choice |
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9. |
Design the people recruiting strategy. Compare it to the local hire methods. |
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10. |
Connect to all available information channels - government platforms, global organizations portals, social media, events, etc. |
Depending on the company activity sector you can add to this list other important and specific things that have to be checked.
If you choose to work with an outsourcing services provider that can help with people administration, payroll, and/ or accounting, make sure that the last can ensure compliance in the country you plan to grow.
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