Getting established in a new market requires knowledge of global hiring solutions. There is not a one-size fits all option for working with employees overseas. We believe that’s positive news for businesses seeking international expansion. Having more options ensures that you can find a solution or service that fits your company’s needs. For example, hiring an employer of record will give you payroll, employee and immigration support. Let’s explore your global hiring options below.
1. Foreign Independent Contractors
First things, first. Working with foreign independent contractors is risky. Despite the risk, it may be the best option for your business if you aren’t ready to commit to a full employee because you’re testing the market.
If your business decides to move forward with contractors, work with an in-country expert or international consultant to establish an ironclad agreement. The agreement should cover IP protection, clearly state autonomy, and meet the needs of your new country.
In addition, your US contracts will not hold up in foreign courts. You need to establish a local contract, drafted in both English and your new country’s language. To understand more risks associated with using overseas contractors, read our post on this topic.
2. Business Process Outsourcing (BPO)
A less risky option for businesses who are not ready to establish an actual presence in their new country is BPO. This service offers companies an option with little engagement, but high overhead.
BPO is a third-party provider that manages responsibilities and opportunities for all business processes. These procedures include supply chain, office administration, and manufacturing. For example, a familiar BPO is a call center that manages customer service phone calls.
Risks surrounding BPO relationships center around quality, control, and cost. As a company, you do not have control over your employees. The employees working for you on your processes are managed by the service you choose. As a result, if you run into conflicts with a BPO provider, and cannot find a solution, you could lose an entire department in a matter of hours.
3. Foreign Subsidiary for Global Hiring
Establishing a foreign subsidiary in your new market is the ultimate commitment. This option for global hiring is the formation of a legal entity in your new country and your parent company controls the ownership of more than 50% of the voting stock. Your parent company is typically the US-based headquarters.
This option for global hiring presents the lowest amount of risk in regards to labor laws, taxes, and IP. But, this is the most costly and timely option. Typically, a foreign subsidiary costs around $20K USD to set up has significant maintenance fees and takes 3-4 months to set up. In addition, it’s difficult to tear down and get out of the country if things don’t work go well.
Don’t be fooled. Your small to midsize business does not always need to establish a foreign subsidiary to achieve a legal presence in your target country. As you read, there are other options for hiring in foreign markets, and we will dive into another option below.
You may need a foreign subsidiary if you are already committed to the market and know you’ll be there long term. In addition, if your industry has regulatory requirements that dictate a local establishment, you may need to create a subsidiary.
4. International PEO (Professional Employer Organization) and Foreign Subsidiary as a Service (FSaaS)
International PEO and FSaaS are both employer of record (EOR) solutions. Essentially, a third-party company manages international employees in your new country on your behalf. This service manages all of the complexities associated with payroll, benefits, withholdings, and taxes.
Your company is still responsible for day-to-day management of responsibilities and employee liabilities, but International PEO and FSaaS help you stay compliant. One of the best aspects of using these options is you get rid of the need to establish a costly subsidiary while still operating in your new country with a legal entity.
These services are perfect for companies looking to save costs while testing out a new market. You reduce risks while working on your international expansion.
International PEO and FSaaS are our specialties. These are solutions that help our clients expand into foreign markets with ease and confidence. Get in touch with us today to discuss your options and determine if we can help your company grow overseas.