An employer of record (EOR) allows organizations to hire international employees quickly and compliantly without the need to set up a global entity, a Globalization Partners executive explained in the GPMI webinar “How to Support Your Company's Expansion Plans: Strategies for Payroll Professionals.”
Debbie Millin, Chief Operating Officer for Globalization Partners, guided webinar participants through reasons why companies are expanding globally and how payroll can lead the charge by understanding reporting and compliance needs.
Millin said the current pandemic highlights the ability to hire the best workers regardless of their location.
“I think we have all proven that we can work very effectively in a remote situation, which means you don't have to be limited to a commutable distance to your office anymore,” she said. “You now have the ability to hire the best talent literally anywhere in the world and get them working for you in a matter of days.”
Millin asked participants their biggest challenge in setting up payroll in a new country, to which 50% named regulatory and tax requirements.
She said companies have three primary reasons for expanding globally:
- Capture market share
- Access the best talent
- Diversify investments
“Market share is definitely the biggest reason we see in terms of companies wanting to try out a new market,” Millin said. “In order to do that, they must have someone in the market with existing relationships who understands that culture and its market trends.”
She pointed out the communication challenges presented in the form of language barriers, cultural misunderstandings, and differing employee benefits such as 13th-month pay in some countries.
To succeed in global payroll expansion, Millin recommends three considerations:
- Determine your market entry strategy before you start hiring
- Don’t try to “cut and paste” U.S. procedures and apply them to foreign markets
- Know the full scope of needs before assessing providers
Globalization Partners explains that in the EOR process, a company chooses its candidates and the EOR adds them to its worldwide compliant infrastructure. The company maintains control over the hiring and management of its employees while the EOR serves as the legal employer. In this role, the EOR handles payroll, taxes, benefits, and HR-related issues.
“As much as we talked about planning a global expansion strategy and thinking ahead, sometimes that is not how it works in reality,” Millin said, adding that sometimes payroll gets a call about a new employee in a country without any company infrastructure.
“An EOR structure allows you to get employees on board quickly and compliantly. You can avoid the money and time spent setting up entities. You make one payment to take care of payroll and back in the administration for employees around the world.”
The webinar, which included plenty of time for questions and answers, remains available on demand until 30 September 2021.
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Kerry Cole is Senior Editor of Membership Publications for the American Payroll Association (APA) and the Global Payroll Management Institute (GPMI).