What is a global employment solution?

Hiring employees abroad does not always require setting up a legal entity in the target market. Instead of going through the lengthy incorporation process, businesses can also opt for a so-called global employment solution. 

But what exactly is a global employment solution? What are the benefits of using such a service? And what types of global employment solutions can businesses choose from?

Services covered by an international employment solution typically include: 

• Provision of compliant international employment contracts

• Benefits management

• Payroll tax administration

• Payroll processing

• Legal onboarding

• Employee payments

The solution can either be offered as a direct service, where the organization enters into a contractual arrangement with the service provider that will employ the new hires, or in the form of a global employment platform that serves as the connection point between the hiring organization and several different service providers. The latter usually results in a wider country coverage.

Read next in the Lano Academy: Global employment models: owned-entities vs. partner-dependent approach.

Global employment solutions can be a great way to hire international employees in the following cases:

• The organization has little to no expertise in the field of international hiring and employment.

• The organization needs to hire workers quickly and has no time to set up a local legal entity.

• The organization is not familiar with the country-specific employment laws and payroll rules and therefore requires external advice and support.

• The organization is not ready yet to fully commit to the new market and establish a local legal entity.

• The organization is looking for particular skills and expertise and has found a suitable candidate in a foreign country where it has no legal establishment.

• The organization wants to test a new market, but has ruled out the use of independent contractors due to the planned project scope and duration.

The different scenarios provide guidance as to when an organization should consider the use of a global employment solution. However, there are some limitations regarding the suitability of such solutions. For instance, the legally permitted duration of the arrangement may be limited.

The same goes for the number of employees. Since international employment solutions are generally not intended for hiring large numbers of employees in one country, organizations should be prepared to establish a legal entity in such cases.

Global employment solutions are designed to facilitate cross-border employment and global expansion. Organizations that opt for this global employment option benefit from: 

• High level of flexibility: Hiring employees through a global employment solution instead of through its own legal entity allows the organization to exit a foreign market easily in case of a negative outcome of the market validation.

• Guaranteed compliance: Employment outsourcing services are experts in their field of business and know how to navigate employment laws, payroll regulations, and more.

• Full-service solution: Global employment solutions cover all employment-related administrative tasks and legal responsibilities, from drafting compliant employment contracts to processing payroll to generating payslip.

• Fast hiring option: Since the service provider is already fully established in the target market, hiring local employees is usually only a matter of weeks. 

• No big upfront investment required: Unlike establishing a local legal entity, the use of a global employment solution does not require any registration fees; nor are there any capital requirements. The only costs businesses need to cover are the monthly service fees.

• Quick onboarding of new hires: Hiring new employees through a third-party service provider enables a quick and easy legal onboarding process. 

• Fewer risks: Hiring employees compliantly through a third party can help mitigate common global employment risks such as employee misclassification.

• Easy transition to own legal entity: Should the organization decide to set up its own legal entity after an initial test phase, the global employment solution can be used to start building a local presence in the new market while the incorporation process is still underway.

Lano Blog

How an Employer of Record simplifies global expansion

Read more

International hiring and employment needs differ depending on an organization’s expansion targets, the level of commitment to a new market, the available internal knowledge and resources, and other factors. There are different global employment solutions organizations can choose from to meet their individual needs. 

• Employer of Record (EOR): An Employer of Record acts as the legal employer for employees hired in a jurisdiction where the contracting organization does not have a legal entity. The company that uses the EOR services meanwhile manages the employee’s day-to-day activities.

• Professional Employer Organization (PEO): A Professional Employer Organization is a co-employment solution that provides employment management services to businesses. The service model has its origins in the US, but has since been adapted to support businesses with their global employment needs.

• Global Employment Organization (GEO): A Global Employment Organization, sometimes also called an international PEO, is an employment solution that covers a variety of countries. In this sense, it enables cross-border employment arrangements around the world.

• Global Employment Platform: A global employment platform is a software solution for global hiring and employment that allows businesses to organize and streamline all their international employment activities through one single platform.

We will talk about each of these four solutions in more detail in the following chapters of the Lano Employment Academy. So read on.