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Remote work is on the rise for a good reason. It is cheaper for employers, eco-friendly, and frees up a lot of time that workers would otherwise spend commuting. It also allows employers to access the global talent pool when choosing potential employees.
However, it is not completely perfect. Hiring someone from another country means the employer will need to follow the local employment laws and regulations. This can be a demanding challenge for any employer who needs to navigate bureaucratic processes while keeping track of the company's daily activities.
Apart from knowing what to look for in remote team members, employers should also stay compliant with the law once they decide to hire a remote team member.
Consider going through this remote hiring checklist and never forget anything when establishing a global team.
When a person is an employee, they are entitled to certain rights and obligations. Employees are tied to the employer, who needs to pay social contributions and taxes for them. The employer also has more control over how an employee does their job.
On the other hand, a person with a worker status, an independent contractor, doesn't work directly for the employer. They are self-employed but provide services to the employer, for which they are compensated.
The first thing an employer must do is decide on the employment status of the potential hire. Will they be hired as one of the following:
This is essential because the hiring process and the legal compliance requirements will be entirely different for each of those. Hiring independent contractors isn't the same as hiring regular employees, no matter the country you hire them in.
Once the employer chooses what they need, they can start the hiring process and get familiar with the local laws and regulations.
Whether hiring employees or contractors in a foreign country, the employer needs to comply with its laws. This is complicated even for one foreign country, let alone dozens. An employer would have to keep in mind the following things.
An employer should ensure they pay the right amount in contributions or employee benefits. Most countries have these regulated by law and require the employer to withhold them from the employee's salary.
In addition to this, the employer must pay the correct salary to the employee. The salary should be paid as indicated in the contract. In most countries, the employer is required to keep payroll records for each employee.
For contractors, the employer doesn't have to pay contributions or benefits as these expenses are covered by the contractor.
Hiring someone in another country might mean the employer has to register a local entity (subsidiary). This usually entails additional taxes and fees. Most countries will tax an employer on the income made in the country. Alternatively, the employer can use an Employer of Record service that hires the employee on behalf of the company and takes care of the statutory benefits and taxes.
This is not the case when hiring independent contractors. However, the employer will still have to submit some tax forms to help the proper authorities track the contractor's taxes. These are the forms necessary for a US company hiring contractors:
Countries have vastly different employment laws. When hiring an employee from a different country, the employer must be compliant with various local laws.
Labor laws sometimes differ even within a single country. For example, some states like New York have the convenience of the employer test, while others don't.
Some countries prescribe mandatory days off for employees. Every registered employer will have to provide these. Also, maternity leave and paid leave are regulated by law in a lot of countries.
An employer who hires remote workers from more than one single country needs to keep track of all the holidays, vacation days, and sick leaves for all those different countries. This can be difficult at scale.
When hiring independent contractors, the employer doesn't need to provide any paid time off. However, most independent contractors form some agreements with an employer that has remote worker policies in place.
As more and more countries embrace remote work, the need to regulate it and protect the workers' rights increases. This has led some countries to introduce laws about remote workspaces. Countries like the US, the UK, or Austria have laws in place that regulate remote workplaces. This means that an employer needs to help the employee set up a home office where they can perform their duties.
The employer must provide all the equipment the employee needs to perform their daily activities. Usually, the employer provides these in the company offices. However, the regulations are more complex with remote employees. This is especially true if they work from a different country.
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