We are currently at the peak of information technology; it has never been easier to communicate on a global scale as it is today. Globalization is the only way to expand into new markets. Many businesses are spreading their influence into foreign markets to grow their brand and increase sales.

However, setting up an international labor force is the biggest challenge when it comes to expanding into foreign countries. It can be rather cumbersome and time-consuming. If you are looking to hire human resources overseas, here are some of the hoops you will have to jump through:

Work permit

An employee must have a work permit to work abroad or for a foreign company. Its acquisition may take months in some regions. Different countries have different and often stringent work permit requirements. Most of these processes involve legal compliance, proof, and qualification certification. Some governments make it considerably difficult to bring in foreign workers to get their citizens employed instead. Others are opposed to specific foreign investors as they can be believed to pose unfair competition to local businesses.

Visa

After securing a work permit, an employee needs a visa to travel to a foreign country. The granting of a visa may depend on several factors that neither the employer nor the employee controls. Diplomatic relations, political climate, and other social factors may hinder one from being granted a visa or at the least require fulfilling several demands. In addition, a visa is only issued for a limited period, after which it must be renewed.

Foreign Labor Laws

Different countries have different labor laws. These laws dictate the employee-employer relationship, employee rights, and other work-related social and wellbeing requirements. Specific labor laws may force an employer to reevaluate the entire human resource structure. In some countries, labor laws are complicated and detailed, to avoid the hefty fines and penalties imposed on lawbreakers, most employers opt for a legal consultant specialized in labor law to handle such matters.

Three Engagement Models of Global Employment

As an employer onboarding and tasking employees in foreign countries, you are responsible for handling all the legal matters involving permits, visas, and labor laws. On top of that, you are also responsible for the employees’ wellbeing – housing, transport, ideal work environment, and the like. To ease the burden, international employers opt for one of three conventional services to assist in global employment.

1. Independent Contractor

You can hire the services of independent workers in foreign markets on a contract agreement rather than on a more tedious employment basis. Independent contractors are flexible and can tune their efforts quickly to promote your services and products in a market they are already familiar with. Business often hires contractors for sale purposes in an affiliate arrangement.

The problem with contractors is that they are not representative of the company or brand. Chances are, a single contractor may be working for several companies simultaneously. Time and resources must be divided among the various clients, including competitors. Besides, a contractor is not under the direct control of the employer.

2. Local Staffing Agency

Local staffing agencies work in the foreign country, source, vet, and hire local employees on your behalf. They take care of all the staffing within the local country’s legal framework, eliminating the need for legal consultation. They also serve on contract as an intermediary between the employer and employee.

Local staffing seems like an ideal solution for global employment. The problem is these agencies are localized in their host countries. If you are looking to employ workers in multiple countries, you’ll have to deal with several agencies in all the different countries. There are also some significant risks while working with local employment agencies.

You are not in control of the hiring process. The agency does the sourcing and vetting of qualified employees. You may have an unproductive labor force if the vetting process is not thorough.

The contact with the agency is agreed upon within the agency’s host country’s legislation. This means you’ll still need some familiarity with the contract’s foreign law.

You will still need to set up a payment platform for foreign workers. Usually, this is done by international funds transfer services and banks. Some countries are open to international funds transfers, others need persuasion, and currency exchange fees are included.

3. Establishing a Legal Entity

To grasp foreign law, you might find yourself hiring a legal entity to guide you through the legal framework of hiring employees in a foreign country. A local legal team with vast experience in labor laws in different countries is ideal for smoothening the hiring process since they know all the hurdles to jump. A legal entity also saves you time filling out legal paperwork and speeds up hiring.

Legal counsel and assistance are not cheap. Hiring international employees is lengthy, and retaining a legal entity for an extended period may be very expensive. A legal entity will only cover matters regarding the law; you will still need to put in much time and effort to resolve other hiring affairs.

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Global Employer of Record by Acumen International

An international workforce in a foreign market is an invaluable brand promotion and representation resource. However, the conventional hiring of foreign ambassadors is no longer effective; they present new problems requiring more resources. Innovations in international hiring services come from Global Employer of Record.

A Global Employer of Record (GEOR) is responsible for hiring and retaining a foreign workforce on your behalf. The company rendering such services covers hiring and employee upkeep, including payroll, amenities, and legal compliance for locals and ex-pats. GEOR eliminates the need for expensive infrastructure and additional human resources in legal counsel and agencies to hire and maintain employees in foreign countries.

The global Employer of Record contract is within the legal jurisdiction of your local country, which stays in favor of its citizens. GEO also reduces your exposure to misclassification risks.

Find out how beneficial Global Employer of Record is compared to other methods of international hiring – 4 Methods of Hiring Your Global Workforce

At Acumen International, we provide a risk-free, fast, and reliable global employment solution. We are a Global Employer of Record, serving in over 180 countries and growing. We employ foreign workers on your behalf and take responsibility for their welfare. Our goal is to make it easy for businesses to expand to overseas markets by providing hassle-free, 100% compliant international employment services.

Call us for a free no-obligation consultation on our service to onboard your foreign workers.

Before we get into the cases where a company may prefer employees to contractors and vice versa, let’s first clarify; who is an employee, and who is a contractor. At some level, the two may appear to be similar since a company can opt for either an employee or a contractor to perform the same duties; however, the two are entirely different entities from certain perspectives.

Key Differences Between Employees and Contractors

Here are some of the critical factors that set apart employees and contractors.

• An employee is a long-term worker hired on either a full-time or a part-time basis and is answerable to the employer company. A contractor (also known as an independent contractor) is a self-employed laborer hired by a company on a contract basis to complete a specified task or series of tasks, usually within a given period.
• Several enforceable employment and labor laws cover employees, both federal and state. Labor and employment laws do not cover an independent contractor. By law, employees have a right to certain benefits that should be provided by the employer such as insurance, housing, commute, and welfare depending on the state and job. Contractors have no right to any benefits.
• An employee earns hourly, daily or monthly rates paid in wages or salaries. And reports all money paid for taxation in a W-2 form after every tax year. A contractor can be paid in periodic rates, at the beginning of the contract, or after completion and fulfillment of allocated task or contract. The contractor is at liberty to dictate payment schedules to the employer or is open to a mutual agreement with the employer regarding the same. A contractor reports earnings beyond 600 dollars on form 1099 every end of the calendar year.
• An employee must adhere to a rigid work schedule stipulated by the employer in the job description. While a contractor, unless indicated in the contract statement, does not need to work on an employer’s schedule. The contractor only needs to focus on completion of the assigned task within the specified period. Employees are directly under the control of their employer; though, within legal reason. Employees must follow company rules and uphold its image. A contractor cannot be controlled by the employer and has little or no investment in the employer’s company image, mission or other jobs.

Both employee and contractor can be hired depending on merit and they both contribute to the company’s labor force. Depending on the company’s business needs in some instances it is better to hire contractors and in others the more permanent employees.

When to Hire Contractors?

The whole idea of contract workers is based around the premise that it is wasteful in both resources and time to hire employees for short-term or temporal one-off tasks. Short-term assignments are those that only take a short period to complete and mostly come around only once. Hiring short-term employees means setting up the entire infrastructure to accommodate fully entitled employees for only a short time.

This may work in local market. However, things may differ if you are hiring independent contractors overseas. Regardless of the duration of an assignment, penalties for employee misclassification are huge in some countries. This is without mentioning expatriate personnel that needs to be involved in short-term overseas projects. A foreigner needs to be officially employed in the host country so he is eligible to work there.

The choice between an employee and a contractor should be based on different factors when you are hiring locally and abroad.

These are mostly simple tasks requiring little or no supervision. An excellent contractor will have good work ethics and require little if any supervisor.

Contractors specialized in professional tasks requiring expertise, such as IT consultancy and security, come in handy in performing them on a contract arrangement. This saves on employee training and learning time.

Another case when hiring contractors may be advisable is work outside the central focus of business. Tasks that are not related to the primary objective or company mission emerge. Such duties are best assigned to hired contractors rather than employees.

When to Hire Employees

Employees are a more permanent solution to a company’s labor needs. Despite being more demanding than contractors, they are more reliable and easier to monitor and supervise. They also grow alongside the company and are deeply invested in its success, giving them an incentive to be productive.

Top Reasons for Converting FREELANCERS into FULL-TIME EMPLOYEES

Employees are mostly hired for performing:

• Long-term tasks
  Long-term tasks are the primary reason why there is a need for employees. Long-term tasks involve the core operations of a company or business. Tasks such as marketing, service, sales and production management are invaluable business operations. For such jobs, what is needed is a consistent and reliable workforce for everyday availability, which can only be achieved by hiring employees on a more permanent basis. Hiring contractors, in the long run, can prove to be expensive and have inconsistent results for lengthy tasks.
• Talent retention, reinforcing companies’ talent pipelines
  If a company has a long-term project and has a highly-skilled candidate, as a rule, it is willing to retain him. Employee status is more suitable than Contractor in this case. The company can provide an employee with all the benefits and equipment to motivate him, build a long-term relationship. Moreover, after the project termination the company has an official right to move the talent/an employee to another project within the company.
• Work requiring close supervision and administrative collaboration
  Crucial company operations require a close administrative handle. Such tasks need workers who can work closely with their superiors. Employees can easily be monitored closely, and their progress can be observed at regular intervals.
• Recursive tasks
  If a company has repetitive tasks that are separated by reasonable intervals, it may be economical to hire employees who will perform consistently every time.

The bottom line is, there are tasks only suitable for employees and others for contractors. In modern business models, it is increasingly becoming difficult to distinguish between the two. Most companies inevitably have to work with both contractors and employees; with contractors continually taking over workforces, in most cases easing access to valuable professional labor.

Remember in the States; the IRS considers every worker an employee unless they can be proven to be a contractor.

It is critical for an employer to correctly determine whether the individuals providing services are employees or independent contractors.

How You Avoid Misclassification Risks With Acumen International

Contractors are relatively less cumbersome and cheaper to hire compared to employees. Contractors have less social and resource demands. However, not all tasks can be assigned to contractors. It’s important for businesses to adapt to the rising trend of increasing contract workers in the labor force. Results from a recent study show that over 40% of the workforce in America is likely to be self-employed independent contractors by 2020.