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.
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:
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:
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.
Frequently Asked Questions (FAQ)
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.
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.