Businesses today are increasingly operating at a global level, whether it’s to reach a new customer base or access a broader talent pool. The benefits of global expansion are obvious. But not so obvious is the complexity that goes along with entering new markets — varying local regulations, cultural nuances and the risk of noncompliance.
Bonus Material: An Employer’s Guide Whitepaper
For employers eager to tap into new markets, it’s now possible to hire talent beyond your home base, embracing a work-from-anywhere or remote work model while still benefiting from global expansion. And you no longer need to establish an entity in the target location.
Partnering with a Direct Employer of Record (EOR) makes the process quick and easy, alleviating the complicated legal process typically required of a business seeking to establish an entity overseas and eliminating the need for multiple solutions and vendors all at a fraction of the cost.
Understanding Local Employment and Tax Laws
When entering a new market or hiring global talent, it’s crucial to fully understand local labor and tax laws to ensure compliance and avoid potential legal issues.
There are slight variations even amongst the most common employment laws:
- The standard workweek in Canada is 40 hours.
- In France, a workweek is 35 hours and capped at 48 hours in a single week.
- The standard workweek in the UK is 40 hours over five days and may not exceed an average of 48 hours averaged over 17 weeks.
For companies looking to set up operations in a new country, compliance with all local tax and labor laws is non-negotiable, and penalties can even include prison time.
Global Payment Considerations
Having employees in multiple markets can make salary payments and typical administration complicated and tedious.
A few questions that may arise when paying international talent:
- What currency will my employee be paid in?
- What is the best way to transfer money to a different country?
- Will my employee encounter double taxation?
- What is the most cost-effective way to send an employee their salary?
Proper payment infrastructure is helpful when it comes to managing employee pay, taxes and benefits, which can be a time-consuming task for any HR and payroll department.
Time and Cost of Global Expansion
Setting up an entity in a new country is time-consuming, taking an average of 20 weeks. And that doesn’t include the hiring and onboarding of new talent. It’s also expensive, costing upwards of $80,000. That doesn’t consider other initial costs, such as employment registration fees, entity tax compliance, bank setup, in-country capital requirements and local legal and financial advice, as well as recurring expenses such as payroll, benefits and office space maintenance. These costs can easily exceed $20,000.
The Direct EOR Solution
Expanding into new markets doesn’t need to be costly, time-consuming or complicated. The most efficient way to overcome these barriers is by partnering with a Direct EOR to compliantly manage the legal, HR, tax and local compliance responsibilities.
A Direct EOR has an entity in the target market and serves as the legal employer of talent on your behalf. That means it hires its client’s employees in a target country under its local business entity and takes on all the legal risk. As the legal employer, a Direct EOR is responsible for:
- Handling visa, immigration and work permit processes.
- Running country-compliant payroll and taxes.
- Implementing local labor laws and HR requirements.
A Direct EOR can onboard, manage and pay staff on your behalf quickly and cost effectively. For example, on average, an EOR can set up and onboard a client’s employees in a new country in just four to eight weeks, and it costs as little as $10,000.
And with entities in more than 160 markets, a Direct EOR like Elements Global Services eliminates the need for third-party vendors.
Sectors Leveraging a Direct EOR
Tech and IT
When it comes to funding rounds and raising capital, many startups mention the desire for global expansion. These companies typically have a new product that needs to be quickly brought to market. Their nimble nature means they embrace a remote-first structure to support employees with work-from-anywhere agility.
Oil and gas companies often win limited-term projects in emerging markets. These organizations will operate in a country for a fixed term and opt to use an EOR for convenience, cost and time savings.
Top educational institutions are increasingly opening campuses overseas as international students seek to gain a world-class education without leaving home. An EOR provides an ideal foundation for expansion.
Pharma and Health
Pharmaceutical companies opt for an EOR to tap locations with higher densities of experts with the required research and development skillsets. These are often project-specific and can begin as temporary assignments that could eventually become permanent.
Set Your Organization Up for Global Success
Planning your global expansion strategy can be intimidating, especially amid uncertainties surrounding COVID and continued economic turmoil.
One of the key takeaways for organizations is to remain flexible and agile. For businesses, that means being able to respond to new opportunities as they occur, wherever they occur. For talent, that means being open to working remotely and flexibly, joining companies that aren’t necessarily located in the place they live.
That all says nothing of cost. Operating efficiently, particularly when it comes to cost, is always important when businesses emerge from an economic crisis; however, the pressures created by unprecedented restrictions on the global movement of goods and services mean these factors are now more essential than ever.
Although COVID has presented a series of unprecedented obstacles for companies to overcome, a Direct EOR offers a solution that secures your global strategy regardless of the challenges.
With a focus on saving our clients cost, time and local expertise, Elements Direct EOR allows you to expand with ease.
About Elements Global Services
Elements Global Services is a global tech firm, focused on software built to go beyond country borders and simplify a company’s ability to expand their business, onboard employees, manage compliance and pay globally. Headquartered in Chicago, Elements offers customers 100% direct Employer of Record services in over 160 countries, powered by proprietary HR technology that simplifies everything from payroll, benefits and human capital management to HR outsourcing, local compliance and visa & mobility.