The concept of remote work had been simmering for a long time. It started in the 1970s when IBM tested out its effectiveness in home telecommuting, but it wasn’t until technology became powerful and commonplace that day-to-day companies saw it as feasible.
Throughout the 2010s, the list of tech companies that were employing remote workers was slowly growing. It wasn’t until Covid-19, however, that most were forced to view it as not just an option, but a necessity. Lockdowns were the catalyst for a dormant inevitability.
It’s not just that companies can go remote now thanks to accessible tech stacks, but that it’s economical. Lockdown-induced WFH is over, but the cat is already out of the bag with 81% of workers not wanting to go back to the office.
This makes way for both international hiring and having existing employees relocate to places with cheaper living. In this article, we will explore the benefits and challenges of hiring standalone overseas employees from both perspectives before unearthing ways to make it work better for all involved.
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Navigating the challenges and benefits of employing remote workers abroad without a legal entity.
Benefits of Standalone Overseas Employees for Businesses
Access to a global talent pool
By opening yourselves up to the global talent pool, you have a lot more potential candidates. Of course, this can bring with it some new challenges in how to navigate through these, but more choice is always better. Local talent pools can often be very difficult for companies to attract the right talent because of geographical limitations, meaning they either settle for underqualified hires or overcompensate to encourage relocation.
Reduced operational costs
Hiring overseas can directly lead to substantial cost savings. Not just because more choice in a variety of markets can lead to lower salary expectations, but because maintaining physical office overheads is increasingly expensive. Land, property, and utility bills are all on the rise, not to mention the more indirect costs of canteens, cleaning, and office supplies.
If hiring overseas was just about cost saving, there would be a backlash by now towards higher quality local talent. In truth, there can be productivity boosts despite the lower operational costs, though it’s not always that simple. Firstly, employees do not have to commute to work, meaning they are less likely to be exhausted and tired at work. It’s also motivating for many people to work from home abroad, and as a result, employee engagement can be higher. Challenges can present themselves in keeping a strong company culture despite the distance, as well as keeping communication and training effective.
Challenges for Businesses
Legal and tax implications
The biggest headache when hiring overseas is compliance with local laws. Not only does the company need to be compliant in its own country, but also navigate overseas laws which can be complex and written in a different language.
Taxation issues are one set of challenges, whilst worker’s rights and employment laws are another. The danger of noncompliance can be hefty fines; a common threat is thinking you’re entering a contractor-type of agreement, but overseas law sees it as an employment contract. Then, you may unknowingly be liable for breaking employment laws.
Insurance and liability concerns
Compliance and liabilities are a huge threat, so in reaction to that, employee liability insurance may be required. Liabilities also open up from areas within health and safety regulations too, which could require additional resources to ensure compliance.
The need for sound cybersecurity protocols grows each year. It’s such a difficult area for businesses to correctly manage at the best of times, but working with remote employees – particularly from abroad – can make things even more tricky.
The first and most obvious threat is the possibility of workers using unsecured Wi-Fi networks. It’s not enough to request them to use a VPN, but instead enforce it, among other protections such as identity and access management.
Data protection laws can also vary from place to place, so navigating these to ensure both you and your standalone employee are compliant in overseas jurisdictions is another challenge.
Benefits for Standalone Overseas Employees
Enhanced work-life balance
Work-life balance has become a very big thing in the 21st century, and for good reason. Employees demand a life outside of work that isn’t impeded by their work, and working remotely can help with that. Whether it’s avoiding commutes, family issues, or simply living in a cheaper area, remote work provides new opportunities for a work-life balance.
Opportunities to live and work in desirable locations
The digital nomad Instagram influencers may have tarnished the perception of a beachfront office armed with fresh coconut water, but there’s no denying that it’s a reality for many overseas employees. Whether they brag about it or not, greater freedom of where you can work from has tremendous benefits on mental well-being.
Flexibility in work arrangements
A remote relationship with work opens itself up to more flexible arrangements. By definition, they don’t need to be in the office after it’s been unlocked or out of the office before the cleaners are due. Flexible work arrangements can increase productivity and reduce stress levels.
Challenges for Standalone Overseas Employees
Obtaining proper work visas
Standalone overseas employees can face their own compliance challenges. Namely, the right to work in a country. After all, it’s one thing to visit a country on holiday and it’s another to have the right to work there. Suddenly, more paperwork is needed which can be complex and require a lot of waiting around.
Taxation issues and pension complications
If the employee is given the nod to work in a country, they have to pay the tax that they owe. Beyond setting all of this up, it can present confusing pension arrangements. For example, they may be required to contribute to a pension system in both their home and host country. Accessing pension benefits suddenly becomes complex, whilst in other scenarios it may actually pose an extra financial burden.
Navigating company policies and potential rule breaches
It’s not just your company that needs to worry about hiring without a legal entity and the subsequent penalties for noncompliance. In fact, the employee needs to ensure they’re compliant with the company too, who may have an agreement that they work in one country, but cannot suddenly navigate to another. In other words, just because an arrangement is created, it may now be fixed for some time, meaning they’re more of a working migrant than a country-hopping digital nomad.
Strategies for Successfully Employing Standalone Overseas Employees
Implementing flexible working policies
To maximize the benefits of employing standalone overseas employees, businesses should implement flexible working policies that accommodate cultural differences, the individual’s needs, and the difference in time zones. It’s no good working from across the world if it feels like you’re from working across the world. Asking for regular employee feedback is important here, as is not generalising for all employees when they have such varying circumstances.
Ensuring clear communication and collaboration
Chance encounters in the office, along with quickly demonstrating something over at one’s desk, are two things that don’t exist for standalone employees. Instead of conceding this as a downside, it needs to be replaced one way or another. Friday evening Zoom hangouts, clear and effective project management, and efficient channels for communication are all considerations. One small example is training employees in how to show each other their own computer display to make it easier to share or teach one another.
Leveraging global payroll services
Managing standalone employees presents such vast demands on administration and compliance that it may be worth outsourcing this to a global payroll service provider. When you compare various international payroll tools, it’s easy to see why they’re so popular.
These companies will, at minimum, help make paying overseas employees easy and take away the headache of benefits and pensions, but many will actually employ them on your behalf. In other words, they now become the provider’s liability, not yours.
Employing standalone employees abroad presents as many challenges as it down rewards. It’s a situation where, once the initial onboarding process has happened, most of the biggest challenges are already out of the way.
It’s not always economical, let alone possible, to hire employees from certain countries. What many companies will do instead is understand just one overseas market very well. For example, India has lower salaries, a highly educated talent pool, and is mostly English-speaking. Hiring each new employee will get easier and easier after the first.
Beyond compliance, it’s vital to understand the complexities of employing overseas workers from their perspective. Cultural differences and time zones need to be respected, as well as a great effort to maintain flawless communication.