Job van der Voort, CEO and co-founder of Remote
Remote work is gaining traction as the new normal as a result of the COVID-19 crisis. According to a new survey, 57% percent of small and medium-sized business (SMBs) owners who turned to remote working during lockdown said they will likely maintain the option for employees in the long term.
Changing attitudes and new technologies now allow companies to plan for remote work as a long-term strategy. Despite the opportunity, though, many business leaders remain uncertain about what to do next. Rather than simply allow employees to work from home, companies should use this historical shift to widen their recruitment pool of talent beyond the UK. This tactic allows businesses to overcome skills shortages more easily, an issue that is especially critical in the tech sector.
However, pivoting to remote work and all its advantages is easier said than done. Large corporations have legal departments and corporate entities across the world that make hiring in the EU and other countries relatively easy. This is often not the case for SMBs who face a lack of resources to address payroll, labour laws, and job status classification.
Great talent exists all over the world. Access to high-skilled individuals should not be limited to large companies. Unfortunately, complexity and cost have locked out even well-funded companies from the international talent pool. To correct the imbalance, SMBs need resources and strategies to overcome international hiring barriers.
Businesses hoping to access new talent pools must be ready to address a few challenges:
Hiring independent contractors
Some countries (such as Estonia) are jumping on the recent surge in remote working by taking initiatives to lure tech workers. As attractive as some of these incentive programs can be, though, they tend to be the exception.
Businesses looking to hire talent outside the UK have to overcome the challenge of paying their new hires while complying with local regulations. This is one of the many obstacles to hiring globally and the predominant reason many small businesses avoid hiring employees from abroad.
Many businesses hire workers as contractors to reduce the burden of local compliance and to avoid the hassle of opening a local entity. However, this option has its disadvantages. Hiring contractors can make perfect business sense to staff short-term projects, but companies can face legal and financial penalties for working with “contractors” who meet the legal definition of employees.
What’s more, while many countries share similar standards, some have stricter rules than others regarding workers’ rights. Unlike fully-fledged employees, independent contractors are usually not entitled to benefits. If local regulators find that a company has denied benefits to an employee who should have them, the company could face penalties ranging from back pay to a partial or full ban on doing business within the country.
Setting up a local entity
One option to ensure the company complies with local labour, payroll, and taxation laws is to set up a local entity. Opening a legal entity allows employers to hire local full-time workers, but this approach is far more complex and expensive than hiring contractors. When opening legal entities, companies must typically find their own local payroll providers, banks, accountants, and lawyers.
This is the route I took to build my company, Remote. I had to crisscross the globe, once flying to several countries multiple times to complete a single document. I also have a standing weekly appointment at my local notary office to keep up with the paperwork, plus multiple mobile phone contracts to be able to receive SMS codes when necessary. In one case, it took us more than six months of active work to open our entity in a country.
Without a third party, this process is not a financial possibility for an average SMB, which brings me to my next point.
Working with an employer of record
An employer of record, or EOR, is essentially an intermediary between employees and employers that allows companies to hire individuals based outside the UK in full legal compliance. This option enables businesses to recruit talents in a different country without having to set up their own local entities or risk violating local employment laws.
The EOR acts as the registered employer in the eye of the local regulators and ensures compliance with labour laws in the country. The hiring company, on the other hand, retains the work relationship with the employee and manages the workflow, responsibilities, compensation, and day-to-day management.
This option frees SMBs from the administrative burden of local labour regulations, but again, there are a few disadvantages. Businesses using agencies must pay for the service, and most EORs require security deposits as well.
These costs sometimes discourage SMBs from seeking out global talent. However, smaller businesses cannot let enterprises retain exclusive access to the world’s best workers forever. As more companies turn to global hires, SMBs must find cost-effective options to employ full-time international workers.
Connecting UK businesses to global employment
Unfortunately, it is clear that our “global economy” is not yet truly global. Small businesses face steep challenges to employ and pay global teams. Despite the obstacles, however, SMBs cannot shy away from the opportunity to work with a wider pool of talent. Now that remote work has become the norm, SMBs should make it a priority to seek the right employment solutions and gain access to brilliant workers all over the world.