It’s just so ironic how there are high unemployment rates in so many countries and at the same time, organizations aren’t able to find workers with the skills they need to fill specialized positions. So how can you keep calm and close those talent gaps?
One of the most effective ways to close your talent gap is to expand your search internationally. HR and hiring managers will have more candidates to choose from–not to mention some highly-skilled candidates–while finance may be able to benefit from lower-wage labor markets.
Before the age of the internet, it would have been quite difficult to engage a worker remotely but today, some estimates cite that one in five workers are telecommuting, a statistic that continues to grow. More and more business professionals are working virtually and having huge success so why not consider moving your vacancies from your home country into another country?
Well, I guess it’s not that simple is it. Even if you would be happy to engage an international worker, you really can’t do that legally if you don’t have a business entity in a particular country. Under some circumstances which depend on the nature of the worker’s tasks, you could theoretically engage a worker as an Independent Contractor, well, in some countries you can. But first you’d have to research the laws in that country and you’d have to research it thoroughly. If you relied on country-specific HR laws that you find on a Website, there’s a good chance that the information would be wrong or out of date and then you’d be putting your organization at risk of non-compliance.
This strategy of expanding a recruitment search outside of your home country sounds pretty complex after all and certainly not doing much to help you “keep calm.” But in reality, you can “keep calm” by employing one other simple strategy. It’s called Global Employment Outsourcing, or GEO. If you engage a service provider such as SafeGuard World International, they will engage an international worker on your company’s behalf. Your won’t need to establish a local business entity. You won’t need a local HR expert. And you can legally engage the worker for as little or as long as you need them.
So, you can keep calm and close your talent gaps afterall.
The use of Independent Contractors is on the rise, a seemingly attractive option for SMEs looking to go global and for MNCs who are expanding into new countries where they don’t have business entities or HR departments. Seems simple enough: find a worker, draw up a contract and compensate them accordingly. No big deal.
Well, it can be a big deal if the process is not managed properly, and there could be huge consequences for the hiring organization.
Here’s why your Independent Contractor (IC) may be the devil in disguise:
- He or she works in a country where the rules say that the IC is responsible for filing and paying their employment taxes locally, as opposed to the hiring organization. What if the IC doesn’t make the payments? In that case, the hiring organization would not only be responsible for making the payments retroactively, but may also be subject to penalties, which are often twice what the original taxes were.
- HR regulations are different for ICs than they are for workers who are deemed to be “de facto” employees; classifying the worker correctly is critical and every country has its own definitions. Often it’s defined by whether they work traditional business hours or on a project basis, whether they use their own equipment, if they are bearing any of the financial risks, etc. This classification will ultimately determine who is responsible for paying the taxes: the hiring organization or the worker. The challenge is understanding the classifications in each country and this is not the kind of information that can easily be found just by searching the internet, at least not “reliable” information. It needs to be researched thoroughly for each individual country.
- Let’s say an organization has been engaged with an IC in a particular country for several months and is now ready to establish a business entity in that country. This may involve a parent/subsidiary or partner relationship and thereby, triggers the need for an audit of the company’s financials. If the IC has not been managed according to all of the HR rules and regulations of that particular country, an audit may put the organization at risk for non-compliance and subject to fees. If, for example, an audit reveals that the worker is in fact deemed to be a de facto employee, then the hiring manager may have to comply with additional payroll obligations e.g., benefits, paid time off, etc.
- If an IC is generating revenue for the hiring organization in any particular country then the organization may be at risk of Permanent Establishment and may be required to pay corporate taxes. What makes the global IC arrangement particularly “devilish” is that foreign entities tend to be particularly vulnerable when it comes to tax audits and HR compliance, than a local business would be.
- The real devil may come out when the IC relationship is terminated, especially if the worker is disgruntled. They may take their knowledge to a competitor, refuse to hand over their contacts , or they could sue the hiring organization. This can be quite risky for the hiring organization because the majority of HR laws around the world are designed to protect the well being of workers.
Many organizations find these risks too much to bear and ultimately choose to outsource their global workers to a Global Employment Outsourcing company. That solution mitigates their global HR risks and frees up their time so they can focus on their core business and their global growth strategies.
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