Hiring employees outside of Ireland gives you access to a wider pool of quality talent, especially if you’re hiring remote employees. Being able to manage employees internationally will give your current employees more flexibility if they decide to move. Many employees are now choosing remote or flexible work. Being open to hiring remote employees may help you retain your key employees. Hiring and managing people in a country you’ve never done business in before can be complex and challenging. Dee Coakley, from Boundless, explains the tax and legal implications, and the options available to you if you choose to hire internationally.
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So, why should you employ internationally?
Access to talent
To convert contractors to employees
Contract Law for hiring internationally
When hiring and managing employees internationally, the legislation in the country where the employee is based will take priority.
For example, if an Irish employer hires an employee living in France, they will probably have an employment agreement written by the Irish company. However, the employee is protected by French laws. This can affect anything from holiday leave to sickness benefit entitlements. French employees also have the right to disconnect, which means they can’t be penalised for not attending to work matters, such as replying to emails, outside their normal working hours. This can help remote employees who work from home have a better work-life balance.
There is often a misconception that there are common employment laws that apply across Europe. There are a few EU directives around employment, such as the Working Time Directive. However, in most cases, employment laws are country-specific.
For example, many countries use collective bargaining agreements. These are agreed rates of payment for people in particular sectors. Most countries also have very limited legislation regarding what must be included in an employment agreement. Some US states don’t even use employment agreements. Instead, employers can “hire at will, fire at will.”
Tax Implications for hiring and managing internationally
As an employer, you’re obligated to handle employment taxes and pay employer taxes, such as PRSI in Ireland, in the country where your employee is a tax resident. Check out our post on how to register for tax for more information.
Tax complexity will vary by country. For example, according to Revenue, a person is considered a tax resident in Ireland if they spend more than 183 days a year here. Alternatively, they must have spent 280 days in Ireland in the past 2 tax years, with a minimum of 30 days in each year. Things can become more complicated in other countries, such as the US, where tax obligations vary by state.
Some countries may look attractive because of their lower cost of living, which allows employers to pay lower salaries. However, these savings can be offset by a high rate of employment tax. Boundless always advise talking to a tax professional in any country where you have tax obligations.
The idea of traveling from country to country to work is becoming more popular. These employees are known as Digital Nomads. However, this can be very complicated from an employer‘s perspective.
For example, employers need to confirm that their employees have the right to work in the country they’re located in. For visa purposes, the employee may have to define whether they’re on a holiday or a working holiday. They will have the right to protection from the laws of the country they are located in but may also be protected by the laws in their country of residency.
This can cause problems if the employment laws in these two countries differ. For all these reasons, many employers do not support the employment of Digital Nomads. Many large companies will provide a list of countries where their employees can work from. They will be familiar with the employment laws in these countries.
When employing people in another country, you must consider the employment laws in that country. Boundless provides guides on several countries. These include information on:
- Employee rights and conditions
- Taxes and benefits
- Hours of work
- Minimum payment requirements
- How employment can be terminated
Hiring is easier in a country if you’re planning to expand there or if several employees are relocating there at the same time. It can be a lot more complicated and time-consuming if individual employees are moving.
Options for hiring international employees
Hire the talent in other countries as independent contractors
This can be a lot less complicated from an employer perspective. However, some countries will take issue with this. Many will insist that if someone is acting like an employee, they should be treated like one, for example, in terms of paid annual leave entitlement.
Register locally as the current employer in the country
You will still need to obey local employment laws, pay taxes, and process payroll in the country. You will also probably need to hire a lawyer and an accountant to make sure you’re compliant. However, you usually won’t have to pay corporation tax, unless the employee is in sales. This process can also be time-consuming to set up. Getting an employer number from the tax authorities in certain countries can take up to 18 months.
Use a Professional Employer Organisation
A Professional Employer Organisation (PEO), like Boundless, will act as the Employer of Record (EOR) on your behalf.
Professional Employer Organisations (PEO’s)
A Professional Employer Organisation (PEO), like Boundless, will act as the Employer of Record (EOR) on your behalf. They will sign up for an agreement with the company that wishes to hire employees internationally. An agreement is then created between the employing company, Boundless, and the employee. This agreement is tailored to be compliant with the laws in the country where the employee is being hired.
As far as the government is concerned, Boundless is the legal employer of the employee. They are responsible for ensuring local compliance, filing for taxes, and making payments to employees, local tax offices, and benefit providers. They act as the payroll processor and will provide proof of employment for employees, when needed, for example, if the employee was applying for a mortgage.
Boundless will have a Limited Company or the equivalent set up in the country of employment. They will be registered for tax and have a local bank account. This is important as many countries require employees to be paid through a traditional bank account. Online banks such as Revolut or payments through Irish banks are not usually allowed for paying wages.
The employer company is only responsible for the day-to-day management of the employee. Although Boundless is responsible for creating the employee contract (in compliance with local laws), the company will recruit and hire the employees they need and allocate their work responsibilities to them.
Benefits of an Employer Of Record (EOR)
Experts in multiple jurisdictions
EORs like Boundless operate under the assumption that you know nothing about employment practices and laws in the country you are hiring in and that you have no legal or accounting team based there. Boundless currently helps companies employ in 17 countries. This means they can compare practices in your hiring country with those in your home country and make you aware of any differences. Often, when you hire an accountant in another country, they are only aware of the local accounting norms and believe it is the same everywhere. For example, in Portugal, it’s common for companies to have a 14-month payroll. A local accountant may assume this is the practice in all countries and might not know to inform you of the difference. An EOR will know to let you know these things in advance. Check out our How Much Does It Cost to Hire an Accountant? post for more details.
Taking the hard work out international payroll compliance
Boundless takes on significant legal risk as the legal employer of a company’s employees. For this reason, their goals are aligned with that of the company. They can help handle disciplinary actions including termination. Similarly, they can guide a company through redundancy practices, if needed. They will provide detailed written guidance on local laws around these things. However, there are some aspects they won’t take care of. For example, the allocation of shares is very complex and the infrastructure to do so in a compliant way often isn’t there, so Boundless will not usually deal with these issues.
What to look for in an Employer of Record (EOR)?
If you’re thinking of working with an Employer of Record to hire talent outside of Ireland, consider:
- Whether they will be the legal employer
- Whether they will be a direct employer or work through a partner
- How employer obligations are split between your company and the EOR
- The extent of their HR and payroll knowledge in the country you’re hiring in
- The structure of the employment contract
- What help they offer if you need to end an employment agreement
- How responsive they are to their customer companies
- How they manage payroll data and whether you will have an overview
- How they store and keep employee data safe
- How much it costs to employ someone through them
- Any additional terms of the agreement, including how it is terminated
Employee attitude towards being hired through an Employer of Record
The employee perspective on being hired through an EOR usually depends on the stage of the relationship with their employer. If they are currently in the hiring process, they may be wary about not being officially employed by your company. These concerns need to be addressed clearly.
Employees also tend to have questions when a foreign company buys their employer company and decides to start managing them through an EOR. Again, the implications of this should be discussed with your employees and all concerns should be addressed.
However, some employees reach out to EOR companies, such as Boundless themselves. They seek advice on how a company they wish to work for or are currently working for can employ them in a different country. EOR’s can make hiring remote employees outside your home country easy, especially for small businesses.
Hiring an Employer of Record (EOR)
Because of the legal risk they take, companies like Boundless will often pre-screen and interview companies before they will hire on their behalf. They don’t take on companies with hourly or seasonal employees. Employees need to be ongoing, full time and paid by salary.
Boundless charge a minimum of €350 a month per employee or 8% of the salary of an employee. For this reason, they’re not often a good option for very low-cost businesses.
You should keep in mind that some employees are more complex to deal with than others. For example, if you hire salespeople to sell out of another country, there will be tax and VAT implications depending on where the sale is made and where the customer is located. Boundless don’t deal with these issues, which is something you should be aware of if you’re considering employing salespeople in another country.
Hiring employees in another country can be complex and challenging, especially when hiring remote employees. However, the upsides can make it worth it. Hiring internationally can give you access to a wider pool of quality talent and mean that you can offer more flexibility to your current employees. Companies like Boundless can help you through the process of hiring and managing internationally. However, using an Employer of Record, such as Boundless, incurs a cost per employee, which might not be suitable for low-cost businesses. There are also certain types of employees they won’t help you hire, such as temporary or seasonal workers or sales employees.
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Rose is the Director of Sales and Marketing at Accountant Online. Rose has worked in senior leadership roles for over 20 years in both US corporates and Irish SME’s. Areas of expertise: Leadership, Strategic Planning, Executive Coaching, Mentorship, Online Business Management