The business case for hiring foreign employees is now stronger than ever. However, many owners and managers of ambitious businesses are still unsure how to hire a foreign employee.
In this article we explore the benefits of hiring foreign employees, and set out 7 steps explaining exactly how to hire a foreign employee.
1. The rise of international expansion, outsourcing and remote work, are all important reasons why business owners and managers need to know how to hire a foreign employee.
2. The potential benefits of hiring foreign employees include cost savings, successful transition into new overseas markets, and access to a larger pool of job candidates.
3. Businesses unsure about how to hire a foreign employee should take the following steps: confirm the candidate profile and desired location, consider alternatives, explore multiple sourcing channels, and employ a robust evaluation and hiring process.
4. For support with hiring foreign employees, consider Global Employment Organization (GEO) solutions, as well as the more traditional route of incorporating a local legal entity.
Why Do You Need to Know How to Hire a Foreign Employee?
There are three key reasons why any business needs to considering hiring foreign employees:
(a) The rise of remote work
(b) The steady growth in overseas outsourcing
(c) The move towards international expansion.
We consider each in turn.
First, the increase in remote work makes the hiring of foreign employees more attractive: You no longer need your employees within close proximity to an office.
Hire a foreign employee with Horizons EOR services.
Despite various HR challenges, such as proximity bias, the trend towards a remote workforce has been gaining momentum for a number of years. In 2018, one study suggested that the numbers of remote employees had risen by 80 percent in the previous decade. Business owners across multiple industry verticals have long questioned the need for a central office with high rental costs, employee travel restrictions, and the expenses associated with ongoing office maintenance. This trend has, of course, accelerated in the midst of the COVID-19 pandemic.
With significant advances in communications technology and more professionals favoring the gig economy, it’s never been easier to hire foreign employees wherever they are.
Second, the rise in global outsourcing requires the hiring of foreign employees. While the trend towards outsourcing has ‘wobbled’ over the last couple of decades, there are some indications that the Covid-19 pandemic is pushing an increase in the practice once more. It has been suggested that global outsourcing can be an important part of cost resilience: There is no need to commit to expensive office leases when the IT function, or customer support, can be contractually outsourced to a cheaper location.
While outsourcing does not involve the company itself directly hiring foreign employees, they still need to know whether there is a global outsourcing firm that will itself hire appropriate foreign employees.
Third, international expansion is often best achieved by hiring foreign employees. In international expansion, unlike outsourcing (where the overseas activities are contracted to a third party), the business itself establishes an outpost or location overseas. While it is possible to transfer staff from head office to an overseas location, visa and shadow payroll issues can make this significantly more complicated than hiring foreign employees.
What Are the Benefits of Hiring Foreign Employees?
Hiring foreign employees provides a host of benefits for ambitious businesses. By hiring foreign employees you can:
- Enter new international markets
- Entering a new foreign market can be beneficial in a few different ways: It can attract a whole new customer base, reduce labor costs [For more on labor cost forecasting, read about FTE in the U.S.], and allow for isolated and controlled testing of new products.
- Hiring local talent to support entry into a new market can give your products and services a localized feel: Local people are much better positioned — both culturally and professionally — to represent your brand within a new market. As locals, they recognize what consumers want and possess an intuitive feel for the nuances of the local market.
- In addition, hiring foreign employees for a new market will reduce the need to transfer existing employees to the new location.
- Access a larger pool of candidates
- Businesses that only hire employees in close proximity to their head office restrict their ability to connect with the best talent. Broadening the pool of potential candidates allows a business to benefit through remote solutions. When there are no longer any limitations on the locations in which candidates can be sourced, there is no reason to not hire a foreign employee as part of a global team. And with the assistance of a reputable third-party provider, the complexities associated with distributing global payroll can easily be mitigated.
- This is particularly true in the case of hard-to-staff positions, such as where hiring remote graphic designers.
- With global markets as they are, it’s possible to hire workers at competitive salaries overseas. Businesses can also save on costs that equally talented staff members may demand in the company’s main country of operation. Additionally, employee benefits will vary from country to country. With the right research and support, it’s possible to offer a lucrative package when hiring foreign employees, whilst still saving money on wages and benefits.
How to Hire a Foreign Employee — 7 Steps
For any business owners or managers wondering how to hire a foreign employee, we recommend the following steps:
- Confirm the candidate profile
- The first step is to have a clear idea of what you want out of a new hire. This means creating a ‘candidate profile’: Looking at the key tasks the individual is expected to perform, relevant qualifications and experience, and company culture, should all help form a picture of a desirable hire for the company.
- This profile is then used to inform the job description for the role.
- Determine where the employee is to be hired
- Where you intend to hire a foreign employee makes a huge difference to the process that should be followed. For example, a US company looking at hiring a foreign employee in the US needs to think carefully about meeting the (highly restrictive) work visas available there for foreign hires.
- Read more about this visa process at How to Hire Globally.
- If the employee is to be hired overseas it may be difficult for the company to directly hire employees there without setting up a subsidiary or using a global employment solution. We discuss these possibilities in further detail below.
- Consider alternatives to hiring employees
- Once the decision has been made to engage services or workers in another country, it is worth considering whether hiring an employee is necessary or desirable.
- For example, in some cases it will be possible to hire international contractors, rather than employees to fulfil your needs. Independent contractors are technically ‘self-employed’: Businesses that work with contractors pay them in a lump sum and do not withhold any income taxes. Additionally, they do not pay any payroll tax, social security or employer taxes. In practice, this allows a business to employ a contractor at a higher hourly rate than a regular staff member, whilst saving on the overall cost of labor.
- It’s no coincidence that the number of independent contractors has grown exponentially as the global market has evolved. In many ways, contractors are the ideal solution for businesses looking for minimal engagement from professionals employed to carry out certain tasks.
- Note, however, that it is usually not acceptable to treat a contractor in the same way that you would an employee, as this runs a risk of employee misclassification. That can mean substantial fines and backtaxes as a result of regulator action.
- Explore all relevant recruitment channels
- Once you know what kind of candidate you would like to hire, and where, you need to think about the ideal hiring channels for the candidate.
- This will often include a range of general job sites, LinkedIn, and any industry-specific job boards.
- It may also include engaging a recruitment agency or partner to use its own networks in the desired country to source employees. More on this below.
- Evaluate candidates
- Once applications and resumes are in, it is time to evaluate those applicants. While the candidate profile and job description are important here, it is worth keeping an open mind: For example, resumes or CVs from foreign applicants may follow formatting conventions that you are not used to.
- Interview candidates
- Once applications have been considered, it is time to implement an interviewing process. This may involve:
- Initial recruiter screening
- Testing (e.g., psychometric)
- An assigned skills task
- Interviews with the client company.
- Even where the business wishes to hire employees to work ‘in office’, it is worth considering whether remote interviewing would be satisfactory.
- Hire and onboard successful candidates
- This may involve the company itself or one of its subsidiaries doing the hiring, or it may involve using a global employment solution, such as an Employer of Record (more on this below). This usually involves issuing an offer letter (conditional or unconditional), collecting employee documents, administering a local contract, and providing training materials to employees. You may want to consider a local or international background check on your selected candidate.
How to Hire a Foreign Employee with Global Employment Solutions
A Global Employment Organization (GEO) supports businesses all over the world with hiring foreign employees, through a variety of mechanisms. The two most popular are establishing a legal entity, and an Employer of Record solution. We discuss both options below.
Establishing a legal entity
For businesses committed to having a long-term or permanent presence in a new country, with a number of foreign employees, the preferred option is often to establish a legal entity overseas such as a subsidiary company. This allows a full business presence in an overseas location, including the ability of the company to enter into contracts and make deals there.
It should be acknowledged that establishing an entity can often be costly and time-consuming. It requires an understanding of the tax framework and labor legislation pertinent to the country of expansion. It also requires the registering of a business with the necessary tax authorities and social security offices. Despite this, establishing an entity is often the best way to achieve long-term stability in an overseas market.
Although having an entity places all legal responsibilities on a business, many of the existing functions, such as payroll and HR management, can be contracted to a specialist third-party. This ensures that payroll is administered accurately, and all taxes and benefits are handled compliantly. In many cases, a third-party provider has accounting and legal professionals that possess expertise in all matters relative to local labor laws.
International Employer of Record
Many businesses seeking to hire employees need a cost-effective and fast, employment solution. For many of these businesses, it is worthwhile working with an Employer of Record service.
Under this arrangement, the global employment organization, through a local entity, becomes the legal employer of a company’s foreign employees. In doing so, they absorb liability for employees and oversee the administrative side of employment, including payroll, benefits, and workforce management. At the same time, the client company retains control over its local and foreign employees and directs their day-to-day tasks. This enables a business to bypass the need to establish an entity, whilst still maintaining an active workforce in their new market.
Partnering with an Employer of Record service is an excellent way to test a new market, before committing to a permanent move. A business can send a small team, for instance, to see if their products and services have a ready-made market. If so, a business may then choose to establish an entity and maintain full liability for its workers.
How Horizons Can Help You Hire Foreign Employees
Hiring foreign employees can be beneficial for businesses in a range of contexts: Whether motivated by remote work, international expansion, or outsourcing.
Key steps to follow include:
- Researching the best location for hire and a detailed candidate profile;
- Following a strategic evaluation and interviewing process;
A Global Employment Organization (sometimes known as a global Professional Employer Organization or global PEO) supports your business in hiring foreign employees in a country of expansion. Whether through an Employer of Record solution or incorporation of a local entity, they can ensure that the hiring of foreign employees is compliant with local labor and tax laws.
To discover more about Horizons’ hiring and recruitment solutions, reach out to our team today.
Frequently asked questions
If you wish that employee to work in your own country, then you need to arrange for the correct visas for that employee. A global mobility firm can support this.
If you wish to hire that employee remotely, or engage them through an overseas outpost of your company, a global PEO solution may be able to help you.
Yes. There are a range of possible visa classes that can be used to hire an employee overseas into a US-based job.
Where the US-based company seeks to hire a worker who will remain overseas, an international employer of record solution can be applied.