Many companies dedicated to expanding operations have done so through hiring international employees. However, detractors point out the added intricacies of doing business internationally, including navigating international labor laws, sponsorships, work visas, and various regulatory considerations.
Whether you’re currently considering hiring international employees to supplement your domestic workforce or even if you’ve already started your global expansion, this guide will help you uncover some recent trends, overcome key challenges when working with international talent, and identify the right software solutions for you and your global team.
Why Hire International Employees?
There are numerous benefits of hiring international workers. Not only do they make it easy to expand a business into new markets around the globe, but they also give organizations a global talent pool to choose from. International hires can add new skill sets to your team, help reduce employment costs, and add some much-needed language or cultural diversity to your organization.
Trends Driving International Hiring
Envoy’s 2023 Immigration Trends Report highlights the fact that 87% of U.S. employers are currently hiring foreign national employees for full-time, part-time, and freelance roles. With that in mind, let’s take a look at some of the most recent trends that are currently driving international hiring processes and strategies.
Overcoming Concerns With Inflation, Currency, and Capital
According to Mercer’s 2024 Global Talent Trends Study, which polled more than 12,000 C-suite executives, investors, HR leaders, and employees across numerous industries and countries, more than half of the respondents cited inflation, currency, and capital concerns as major influencers of their three-year plans.
Other concerns include digital acceleration (including the integration of next-gen AI, the rise of alternative work models, shifting economic interests, and even the threat of extreme weather or natural disasters caused by climate change.
Choosing Independent Contractors Over Full-Time Employees
Independent contractors are becoming more popular than ever before. According to Statista, the number of contingency workers skyrocketed from 15.8 million in 2020 to 36.6 million in 2023 within the U.S. alone. In Saudi Arabia, the number of registered freelancers rose 157% between 2020 and 2023.
The independent contractor boom is the result of numerous factors, including the embrace of the gig economy, changes in employment legislation, and the rise of remote and hybrid work environments.
Embracing Remote and Hybrid Environments
While large numbers of workers are embracing remote and hybrid employment environments, the same can’t be said for employers. Although LinkedIn saw a 146% increase in remote job applications from 2022 to 2023, they also saw a 46% decrease in remote job postings during that same timeframe.
Their studies go on to highlight the fact that 50% of recruiters believe that a fully in-office work environment has a negative impact on their recruiting efforts. Only 36% believe that an office-first hybrid environment has a negative effect on recruiting, and 29% believe that a fixed hybrid environment has a negative impact on recruiting.
Challenges of Hiring International Employees
The emergence of the remote workforce makes it easier – and more tempting – to hire international employees. By eliminating the requirement of in-office work, you can open up your roster to top talent from around the globe. However, there are a plethora of challenges to consider before recruiting foreign employees – some of which can have severe consequences if they’re not handled properly.
Legal & Regulatory Compliance
One of the most obvious challenges when hiring international employees revolves around legal and regulatory compliance. It’s tough enough to keep up with tax laws, local employment laws, and other regulations affecting U.S. workers, but it’s even more challenging when you add employees and independent contractors from other countries into the mix.
Labor & Employment Costs
Overall labor costs must be considered when hiring international employees. Workers who live in countries with higher costs of labor than the U.S. will require higher overall compensation than their domestic counterparts. Not only could these costs exceed your allocated budget, but they could result in claims of favoritism from those who live in countries with lower costs of labor.
Providing Fair Pay & Benefits
It can be difficult to ensure fair pay and benefits administration when it comes time to compensate foreign workers. What constitutes fair pay and great benefits in one location could amount to low pay and unsatisfactory benefits in another, so it’s important to consider the average costs of living, salary expectations, and common employment benefits in these regions before committing to an expansion.
Communicating With Staff
You’ll still need to maintain communications with your international staff members, too. While language barriers can be a major obstacle to overcome, you’ll also need to consider the different time zones when scheduling orientations, meetings, and training sessions that involve international team members.
Employee Misclassification
A rather serious issue that could lead to significant fines, and, in some cases, imprisonment, employee misclassification usually happens when full- or part-time workers are classified as independent contractors. For some organizations, it’s already difficult enough to classify their domestic workers without having to consider the added intricacies of classifying an entire international workforce.
Employee Outsourcing Software Solutions
Modern software solutions make it easy for organizations to manage their employees. When hiring international employees specifically, the options below stand out from the rest.
Employer of Record Services
Although they have pertinent applications for both the domestic and international workforce, employer of record (EoR) services are a great option when expanding local operations around the globe. Generally speaking, EoRs assume the brunt of the responsibility for the HR or administrative side of your workforce, including:
- Onboarding processes
- Processing payroll (including paying the employees in a timely fashion)
- Filing and paying any applicable employment taxes
- Overseeing benefits administration for the workforce, including claims for workers’ compensation and unemployment
- Maintaining regulatory compliance with any applicable employment laws
Not only does an EoR make it easy to expand into an international market, but it can help reduce your organization’s compliance risk, reduce operational expenditures, and expedite the process of onboarding new employees – both domestically and internationally. When using an EoR, it’s important to note that the EoR effectively serves as the employees’ legal employer. However, this isn’t the case when using a professional employment organization (PEO).
Professional Employment Organizations
When used in the same country as your primary headquarters, a PEO is technically classified as a co-employer. In this context, they primarily perform HR functions for their clients. This functionality includes:
- Human resources
- Employee payroll and taxes
- Employee benefits administration
- Risk and safety management
- Regulatory compliance
However, because some countries don’t allow co-employers, the use of standard PEOs is rather limited when working globally. Instead, most opt for an international PEO.
While there is quite a bit of overlap between EoRs, PEOs, and international PEOs, they can be differentiated by the purpose they serve. Standard or domestic PEOs serve as co-employers while EoRs and international PEOs legally count as standalone employers.
Global Payroll Platforms
Global payroll software is a good option for organizations that already have an established presence, either within their home country or within different countries. Whereas EoRs, PEOs, and international PEOs generally cover the full range of HR functionality on behalf of employers and employees alike, global payroll platforms really only focus on employee payroll functionality. Any extra services they may provide are considered a la carte and are unique to each individual payroll platform.
Bottom Line
Hiring international employees isn’t as complicated as it may seem. While there are some obstacles to overcome, such as the intricacies involving international labor and employment laws, modern software solutions like EoRs, PEOs, and global payroll platforms are capable of doing much of the heavy lifting for you.
