1. Hire as a Contractor
Many businesses prefer to hire contractors as it is much simpler and cheaper, and some types of remote workers are accustomed to being hired as independent contractors. However, in some cases the worker will not want to be self-employed, and prefer (or requires) the security and benefits of an employment relationship.
Companies also need to factor in the risks associated with misclassification – where the labor or tax authorities assess that the person is an employee instead of a contractor. This is particularly a concern if the work relationship ends on bad terms and the contractor makes a claim that they are actually an employee and entitled to backdated benefits.
2. Hire as A Direct Employee of Your Home Entity
You can try to put the remote worker on your home country payroll. Whilst this might be very simple for the employer, it can cause tax and compliance problems for the employee in their own country. Some countries don’t permit this type of ‘remote payroll’, as they lose out on the tax and social contributions from both employee and employer.
3. Hire as an Employee of an Entity in the Foreign Country
If you have any business contacts in the employee’s home country, they might be willing to place them on their own payroll as ‘their’ employee. With this option, you just remit the employee’s compensation to the foreign business each month, while you will still manage their daily work and time.
The other alternative is to set up your own branch office for employment purposes, but that can be an expensive and complex option if you are only planning to hire a handful of people in that country.
4. Use a Global Employment Organization (GEO)
The GEO solution is a method of payroll outsourcing to a local employer of record in the employee’s own country. The GEO is already set up, and can legally hire and payroll your remote worker immediately, and the employee will have a fully compliant employment just as with any company in their country.
So which option is right for you?
Hiring and paying workers remotely is an emerging challenge for businesses that want to access global talent at a reasonable cost. How you engage and pay your remote employee will likely determine the long term success of the relationship, and each option should be weighed carefully to ensure both legal compliance and employee satisfaction.
About the Author
Shield GEO provides Employer of Record services. This allows companies to employ and payroll workers in countries where they don’t have an entity.