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What Is Employee Misclassification and Why Does It Matter?

Employee misclassification is the incorrect categorization of a worker as an independent contractor when they should be classified as an employee due to the true nature of the relationship, regardless of the type of contract they had entered into. This misclassification occurs when companies fail to meet legal criteria that distinguish employees from contractors.

Why is this problematic? 

• A loss of employee benefits: Employment laws and labor standards, such as tax obligations, health insurance, and workers' compensation, termination requirements, obligations, rights and procedures, differ between employees and contractors. If they’re misclassified, employees miss out on key benefits and protections.
• Lost revenue: When misclassifying workers, employers may not withhold the requisite amount of employment taxes required by law. Government agencies take this particularly seriously, as it means a loss of income for them. By some estimates, $3-4 billion is lost annually due to misclassification. 
• Fines and penalties: Misclassification can result in violations of labor law and costly penalties for businesses. This could even include court orders for retrospective reinstatement (with back-pay) of the individual as an employee of the company.

Employee misclassification is particularly challenging because the criteria for determining employment status vary between countries and states.

For example, a worker classified as a contractor in the US may be seen as an employee in the UK based on local labor standards. Because these rules can be complex, many businesses rely on expert assistance to ensure compliance across different jurisdictions.

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What Are The Differences Between Independent Contractors and Employees?

To avoid misclassifying employees as independent contractors, you first need to know how to distinguish between them. Here are the key differences:

Tax Obligations

Employees have income tax automatically deducted from their wages, while contractors are responsible for their own tax filings.

Degree of Control

Employees follow strict guidelines from their employer on how and when to perform their tasks, while contractors have more flexibility and autonomy.

Intellectual Property (IP) Protection

IP created by employees typically belongs to the employer, while IP created by contractors remains their own unless specified in contracts.

Employee Benefits and Protections

Employees are entitled to mandatory benefits such as health insurance, unemployment insurance, and workers' compensation, while contractors usually do not receive these same benefits.

Employees are also generally entitled to protection from discrimination and harassment, whilst contractors may not be afforded the same level of protection.

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Employee vs. Contractor Compliance Checklist

Correctly distinguishing between employees and contractors can get surprisingly complex: several tests exist for this reason, for example the Economic Reality Test test in the U.S. 

There are, however, some common hallmarks of misclassification. Here’s your checklist of the most common questions that government authorities use to determine misclassification. If you’ve hired a contractor and find your answers aligning with the characteristics of an employee, it’s a red flag that they may be misclassified:

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The Risks of Employee Misclassification

There are several risks to employee misclassification, whether unintentional or not – though the repercussions tend to be most severe if government authorities find that a business has intentionally misclassified workers or committed fraud. 

Some of the repercussions can include:

• Fines: Governments impose financial penalties for failing to classify workers correctly. 
• Reputational Damage: Misclassification cases can cause significant harm to your business reputation, especially if employees publicly sue for backpay or benefits.
• Potential Legal Battles: Misclassified workers may take legal action, leading to costly lawsuits.
• Back-pay to Employees: Employers may need to compensate misclassified employees for lost benefits, overtime, or wages, with the additional risk of reinstatement.
• Operational Disruption: Legal battles and regulatory investigations can distract from day-to-day business operations, affecting your business’ productivity.

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Which Industries Are Most Susceptible To Misclassification?

Whilst any industry is susceptible to employee misclassification, some industries have longer standing practices of misclassification than others or it’s generally more common. 

For example, businesses in sales, IT, high-tech, hospitality, entertainment, logistics and construction industries should be especially aware of misclassification risks. 

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Penalties for Misclassifying Employees as Independent Contractors

Penalties for employee misclassification differ between countries but can include financial fines, tax penalties, and reputational damage. For example:

United States

The IRS imposes heavy fines for unpaid payroll taxes, along with penalties for failure to provide benefits like health insurance or workers' compensation. The Wage and Hour Division of the U.S. The Department of Labor also actively pursues claims. For example, you can be subject to a $50 fine for each unfiled Form W-2, or charged a percentage of wages. 

Check out our full guide to U.S. misclassification penalties.

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United Kingdom

Companies may face penalties under the UK’s Employment Rights Act, including paying back-pay for lost wages, holiday pay, and missed pension contributions.

European Union

Penalties vary but may include large fines, repayment of lost unemployment insurance benefits, and damage to the company’s standing with labor unions.

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What Are Examples of Employee Misclassification Penalties?

Several notable legal cases highlight the consequences of misclassifying employees:

• FedEx was ordered to pay millions in fines and back-pay after it was found to have misclassified drivers as independent contractors.
• The UK Supreme Court ruled that Uber drivers were employees, entitling them to minimum wage, holiday pay, and other benefits.
• Nike faces potential tax fines of more than $530m,  as they may have misclassified thousands of temporary office workers.
• Microsoft paid $97 million to settle a lengthy lawsuit involving thousands of workers claiming they were entitled to employee benefits.

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How to Avoid Employee Misclassification as an Employer

There are several measures you can take as a business to avoid the pitfalls of misclassification. These include:

Create airtight independent contractor agreements (and abide by them)

Ensuring compliance and the correct classification starts at the recruitment and onboarding stages. When hiring contractors, make sure your contractor agreement is set up correctly in line with local labor laws. It should cover, amongst others (see checklist above):

• The terms of engagement and type of work they’ll perform
• The hours they’ll work or the length of the project
• IP Protection and confidentiality

In a worst-case scenario, a robust contractor agreement can be used in your defense in legal cases – assuming you truly haven’t misclassified the worker.  

Whilst the content of the contractor agreement is important, employers should still be aware of the “substance over form” principle, discussed above, and determine if it is applicable in the countries in which they hire individuals. 

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Stay updated on local regulations

Employment laws are constantly evolving, especially in the context of remote work.

Spend time researching local regulations for the regions you’re interested in, before taking the next step and hiring an independent contractor or employee.

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Run internal audits

Regularly review the status of all your workers to ensure they are correctly classified. Make sure this forms part of your standard policies or procedures, and assign ownership of the audit to a specific person or department so these checks don’t fall through the cracks of your business. 

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Convert contractors to employees 

If a contractor's role has evolved to more closely resemble that of an employee, consider offering them a formal employment contract. This can also hold the following benefits:

• It provides the worker with the benefits and protections they’re entitled to, which can boost employee satisfaction and retention.
• They will become an integrated member of your team and wider company culture.
• You can better safeguard your company data and IP.
• You’ll be able to assign them work that is more critical to your business.
• You can ensure that your business remains compliant.

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Seek expert help

It can take significant time and resources to stay compliant as a global business when hiring remote workers. That’s why many businesses choose to use global employment services like Playroll,  that have experts on-hand to help you make sense of local labor laws and stay fully compliant when hiring across borders.

I always feel completely calm and safe with Playroll, which is very important to me and the people we employ. I have complete trust that everything is done by the law.

Violeta Cirkovic, HR Generalist, Two Desperados

Read Case Study

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Ensure Global Compliance When Hiring Independent Contractors with Playroll

Employee misclassification can get complicated, but it doesn’t have to be a bottleneck to scale your global team.

Playroll can help businesses sidestep employee misclassification risk by ensuring compliance with employment laws in over 180 countries. No matter what type of worker you want to hire, Playroll’s team of experts will do the heavy-lifting to ensure your workforce is correctly classified and compliant – freeing you up to focus on your business growth.

Book a free chat with our team and get a compliance consultation, to ensure your business is not at risk of misclassification.

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The Benefits And Challenges Of Hiring International Employees

You gain multiple benefits when you hire remote workers. It goes hand-in-hand with hiring international employees and all the advantages of a global workforce.

Despite a trend of many companies enforcing a return to office, remote work has become an ingrained part of the working world post-COVID-19. According to Forbes, 12.7% of full-time employees in the U.S. work from home, while 28% follow a hybrid model. What’s more, a whopping 98% of workers want to work remotely at least some of the time – it will remain an integral part of the future of work.

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The Benefits Of Hiring Global Talent

When you hire remotely, you get a ticket to talent based all over the globe and can tap into many benefits that include:

Better diversity in teams

Hiring from various countries enhances team diversity in culture, ethnicity, and gender, which improves talent acquisition, customer experience, and employee satisfaction. In turn, this drives business profitability, according to a McKinsey report.

Access to wider talent pools

Before the rise of remote work, companies were largely restricted to talent based near their offices, or had to relocate candidates that were willing to move - often at great expense. This naturally restricts the number of candidates you have access to.

Remote hiring allows access to top talent globally, vastly expanding your candidate pool. This can be immensely helpful when sourcing hard-to-find skills or if your country is too small to find a good number of candidates for your open roles. 

More affordable talent 

By looking at countries with a lower cost of living, you can access quality, affordable talent across the globe. This can be especially useful for highly competitive, expensive roles as is common in certain industries, for example software development. 

Increased employee satisfaction

Employees have a strong preference for remote work, with 66% preferring fully remote work and 32% preferring hybrid. The majority of employees also report improved work-life balance when working remotely. Offering these opportunities to your team not only increases employee satisfaction as well as your employer reputation, but can also help retain employees. 

Using a global workforce platform like Playroll allows your employees to work remotely, from any location, with limited overhead costs and complete compliance.

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How TecEx Used Playroll To Double Their Global Team And Boost Employee Satisfaction

TecEx provides importer of record and compliance services for companies dealing with IT equipment. They wanted access to a global talent pool — but hiring remotely in new regions was not an option given legislative roadblocks, high costs and time-consuming efforts required to incorporate new entities. 

Playroll helped them to scale their company without diminishing the employee experience for their remote teammates.

“The Playroll platform is intuitive and well designed, allowing our HR and Finance teams the ability to seamlessly hire new employees in international jurisdictions where we are not established. Playroll’s customer success team is highly responsive and knowledgeable. This level of service and support has been critical to realizing our global expansion goals.”

• Kyle Tristan Telfer, CEO, TecEx

Learn more about TecEx’s global growth, made possible by Playroll

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The Challenges And Risks Of Hiring Global Talent

Hiring remote workers is more complex than local hiring due to additional legal and compliance requirements. If you want to reap the benefits of a global talent pool, there are several challenges you should be aware of before you get started:

The hiring cost in new markets

There are always direct and indirect employment costs to consider with any new hire – but international hiring can come coupled with costs you might not be aware of. To legally hire new employees in any new market, you need a legal entity in the region which can come with substantial costs. 

Many businesses opt to use Employer Of Record services for this reason, especially if they don’t have a large number of employees in a country. An EOR acts as a legal employer in a region on your behalf, so that you don’t have to take on the effort and cost of establishing entities yourself every time you want to explore a new market.

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Staying compliant with local labor laws

When you hire in a new market, you need to comply with the employment laws of the country the employee is based in. This means setting up compliant contracts that adhere to local labor laws.

You also need to classify your workers correctly to avoid hefty fines – for example, hiring a contractor but treating them like a full-time employee can open you up to misclassification risk.

Avoiding permanent establishment risk

Permanent establishment (PE) refers to businesses with a continuous presence in a country, requiring them to pay local taxes. There are a variety of factors that can lead to PE classification which differs by country, such as activity by employees that generate revenue, or having an address or bank account in a country. 

Not paying these taxes can make you liable to fines and penalties in that country, and cause reputation damage to your business. 

Setting up payroll administration 

Paying any new employee means having them on your payroll system, paying all required employer taxes and mandatory local contributions – and making sure they’re paid on time. You also need to ensure fair compensation while accounting for currency fluctuations with different currencies.

Fair employee benefits administration

There’s no one-size-fits-all when it comes to benefits. Each country has its own required mandatory benefits or contributions.

To attract great talent, you also want to provide attractive supplementary benefits – however, this also differs widely between regions. 

For example, employees in Norway might not find supplementary health insurance plans very attractive, since they enjoy free healthcare. In another country like South Africa, a great health plan can make all the difference to your employees.

Cybersecurity risk management

With many international employees, you will be sharing your data across borders. You’ll need to have good technological infrastructure in place to keep your data safe, as well as invest in training for your team to make sure they handle all sensitive data securely.

If you hire employees through an Employer Of Record, double-check that they offer services to ensure your IP belongs to the company.

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3 Ways To Hire Remote Workers

So, those are significant challenges – how do you overcome them to start enjoying the benefits of an international workforce and explore global expansion as an option? There are several solutions that you can consider depending on the needs of your business:

1. Hire independent contractors
2. Establish a Legal Entity
3. Use an Employer of Record

Hire Independent Contractors

One way to overcome the obstacles of hiring full time employees is to make use of contractors or freelance workers, instead. Hiring contractors can come with benefits such as:

• Completing short-term projects
• Tapping into the expertise of specialists based around the globe
• Paying less mandatory employment taxes and benefits

However, beware of using contractors in the long-term, and for the same amount of work you would give to full time employees. Hiring contractors but treating them like full-time employees comes with misclassification risk, which comes with fines, penalties and reputational harm to your business.

If you make use of contractors, make sure your contract with the contractor is correctly set up to comply with local labor laws, and that your IP and invention rights are protected. Using a contractor management solution through a service like Playroll can help in the set up of compliant contracts, protect your business against misclassification risk, or convert contractors to full time employees. 

Use this table as a guide to decide whether you require an employee or contractor for your needs:

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Establish a legal entity

Having an established legal entity in a new market can help you overcome many of the challenges mentioned. You can run domestic payroll for local employees, and it will help you avoid the risks of handling a permanent establishment improperly. Since it is considered a separate legal entity to the parent company, it can safeguard you against compliance risk.

However, establishing a legal entity can take a long time and comes with substantial costs – an estimated $20k+ in set up costs and $50K+ in operating costs per location.

To comply with local laws and taxes, you’d also need to hire your own HR, legal and finance experts in each new region. 

If you have definite plans to hire many employees in a new market, this approach could make sense. However, it can be a financial bottleneck if you want to explore new markets, quickly expand, or only plan to hire a handful of employees in a new region. Fortunately, there are affordable alternatives that still allow you to be legally compliant when operating in a new region.

Use an Employer Of Record

Another way to overcome the challenges associated with international hiring is to use an Employer Of Record, an increasingly popular solution for businesses that are expanding globally.

What is an Employer of Record Platform?

An employer of record is a third-party service that allows companies to employ international talent, without the barriers that are normally associated with global hiring. 

These services allow you to expand into new markets at a much faster pace than establishing your own entities.  Traditionally, only large companies with substantial resources could afford to employ the local HR, financial and tax experts needed to set up and operate local entities. 

An Employer of Record like Playroll removes these barriers and allows companies of all sizes to access global talent. An EOR provider with comprehensive services can:

• Set up employee contracts that are compliant with local employment laws
• Conduct automated payroll in multiple currencies
• Manage the administration of competitive, local benefits
• They can also help you navigate permanent establishment risk and make sure you are compliant with all required employee and employer taxes in new regions.

The usual pricing plan involves paying a monthly or annual fee per employee, instead of the steep set up and operating costs of establishing a legal entity. 

When Should Companies Use An Employer of Record Platform? 

Some of the most common reasons it might be time to use an Employer Of Record include:

• You want to test new markets and have the ability to easily withdraw from the market if it doesn’t fulfill your expectations. With an EOR, you can do this without the prohibitive costs associated with setting up, then closing down, an entity. 
• You want to make your first international hires in a new region, and can’t justify setting up an entity for a handful of employees. If you do reach the point of having enough employees to set up an entity, a flexible EOR such as Playroll can also assist with transferring  employees from their own entities to client-owned entities.
• Easily converting contractors to full time employees, without requiring the contractor to relocate to the country where your business is located.
• You want to offer your employees the freedom to work remotely, from any location.

How To Choose The Right Employer of Record Solution For Your Remote Workforce

There are many Employer Of Record solutions on the market. When choosing between services, ask questions such as:

Are they flexible with EOR to Owned Entity transfers?

Many EOR providers are inflexible when it comes to transferring employees between their own entities and client-owned entities, requiring a ‘resign and rehire’ approach – vastly complicating your relationships with employees. Playroll supports the flexible transfer of employment arrangements to client entities.

What is included in the base pricing?

Many EOR providers charge extra for everything beyond their core service offerings, such as dedicated customer support, or to provide localized benefits packages. Often, there are also hidden fees at stake that you’ll discover only when it’s time to pay the bill. Playroll has built-in compliance, dedicated support and benefits management included as part of its fixed pricing.

What kind of support can I expect?

Attracting and retaining talent for your team is an extra challenge when you’re operating in new markets. Your chosen global HR partner should act as an extension of your team. If you have to wait days to get an answer, your promising hire might have moved on already.

Playroll’s legal, finance, HR and support experts are available to advise on everything from payroll and local benefits, to setting up compliant contracts. Employers and employees alike have dedicated support managers available at no extra cost, to give you personalized service.

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How To Set Up Your Business For a Remote Workforce

Once you’ve settled on your method of how you’ll hire remote workers, there are important preparations and research you should do as a business before getting stuck into the hiring process.

Decide on a global compensation strategy

Besides the business of paying your remote workers compliantly, you should decide on your approach when it comes to global compensation – for example, do you pay location-independent salaries, or pay based on location and local cost of living? 

You might consider pegging salaries to the currency your business uses as a standard (for example, dollars). In this example, you would use the dollar amount as the base for an employee's salary, then pay employees in their local currency based on the current exchange rate.

Every approach comes with its own pros and cons. Read our full guide on the subject, and make sure your business is aligned on this decision before you start hiring internationally. 

Do thorough compensation benchmarking 

The country you decide to hire in will affect what a competitive salary band for a role looks like. Factors such as the cost of living, required employer contributions and customary local benefits can have a significant impact on your hiring budget.

Conducting research on this will be important, regardless of your chosen global compensation strategy. 

Tools to help you determine employee cost:

• Use Playroll’s free employee cost calculator to compare total employer costs in different markets, and get a detailed breakdown of required contributions in 180+ regions.
• Get an accurate idea of the cost of living in different regions using tools such as Numbeo.

Source global talent

To source remote workers in new markets, make use of the following strategies:

• Leverage local recruitment platforms that specialize in sourcing global talent. An Employer Of Record like Playroll can also introduce you to their global talent network to ease the process.
• Implement referral programs that make use of your existing employee’s networks, and reward employees for introducing you to quality talent that adds to your culture. This can be especially useful when expanding to new markets.

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Calculate Your Employment Costs With Playroll

Get a detailed breakdown of what your new employee will cost and compare different markets with Playroll’s free employee cost calculator.

Calculate Costs

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Steps For A Hiring Process That Attracts Global Talent

Finally, it’s time to dive into the actual hiring process. While much of this will follow your same process for hiring local employees, there are some special considerations.

Tailor your hiring approach to the region

Besides doing research on cost of living and competitive salaries per region, it’s important to know what the local employment laws and regulations are that you’ll need to follow – as well as cultural norms and practices that might affect how you communicate with candidates. 

Some countries also have provisions in place that can make it easier to do international business, financial incentives for remote workers, or digital nomad visas that support remote work. For example, remote workers in France receive a monthly working indemnity of €100, and the government extends various incentives to those planning to establish businesses in the country – while many countries such as Spain, Portugal and Japan have introduced digital nomad visas.

Playroll’s country guides, covering 180+ regions, can be a useful starting point to familiarize yourself with hiring in a new market.

Have a thorough job description and be clear in communication

Be clear in your job description about the nature of the role, such as:

• Whether it’s fully remote or hybrid, if you have an office in the country.
• Where your various teams are based and who the successful candidate will be reporting to.

This can help prevent any confusion about the role and your business. If you’re using an Employer Of Record, it can also be useful to explain the nature of this arrangement to candidates, so they don’t get any surprises on who will ultimately help them manage their leave, benefits and payslips.

Interviewing remote candidates

Since the COVID-19 pandemic, conducting interviews via video calls have become a standard part of the hiring process. That said, you should double check the basics when interviewing international candidates: 

• Ensure both parties have a strong internet connection, and include the interview link in all meeting invitations. 
• Double check time zones and that you and the candidate have the same understanding on when your interview will take place.

Sending an offer to remote candidates

Make sure your employment contract is compliant according to the requirements of the country. It should adhere to local labor laws that govern aspects such as:

• The work schedule: minimum working hours and overtime
• Annual leave and public holidays
• Salary and wages, as well as benefits and contributions
• Employer taxes
• Notice periods 
• Intellectual property

If using an Employer Of Record, they will handle setting up compliant contracts and offer expertise on every aspect of the offer you’re making to candidates. Alternatively, make sure you consult local legal, tax and HR specialists when setting up your contracts.

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How to Cultivate a Strong Remote Team Culture

Managing a remote, international employee can differ from working with a team member that’s locally based. Here’s our top tips on what to watch out for:

Set up efficient  employment management software

On a practical level, ensure you have great employment management software up and running that can make it easier for employers to handle the administrative tasks of a distributed workforce and for employees to access key documents or request leave. For example, Employer Of Record services offer portals for employees and employers alike and can integrate with other popular HR software.

Software tools that can make remote team management easier include, for example:

• HR and financial management software such as BambooHR and Workday
• Communication tools such as Slack or Microsoft Teams
• Project management tools such as Trello, Asana or Monday.com

Set priorities and check-in regularly

Clear communication is crucial in a fully remote environment, where frequent in-person check-ins are not possible.

Make sure your whole team knows what is expected of them and when, and be deliberate in setting up regular check-ins to flag any problems and address questions in a timely manner.

Create structure and thorough documentation

Without structure in place, miscommunication can easily occur in a remote team, ultimately wasting time and causing frustration among team members.

Your project management should be extra organized with a remote team, with a common understanding of what tools you use to check in on your work and track progress.

Similarly, house your documentation in one place so it’s easy for new joiners to orientate themselves in your business and make an impact sooner.

Make extra effort with connection

It can be easy to feel disconnected from team members when working fully remote, and there is an extra risk when you have team members of different nationalities working together who might also be dealing with cultural and language barriers to overcome. To counter this:

• Be extra conscious of making deliberate time to connect with your team members – for example, sending a message if you notice a team member being more quiet or stressed than usual can go a long way to foster genuine human connections. Give your team the space to connect with one another, whether that’s through your regular team cadences or dedicated remote team events.
• Acknowledge important days like birthdays or work anniversaries, and be deliberate in giving recognition when team milestones are reached or you notice a job well done. 

Take care of work-life balance

While many employees enjoy greater work-life balance with remote work, it can also blur the boundaries between work and personal life – especially if you don’t have strict working hours in place. Set and enforce work hours to prevent burnout, improving long-term retention of valuable team members.

Encourage flexibility and trust

Related to respecting strict working hours, be flexible when it comes to team mates in different time zones – a policy of flexible working hours can make a big difference here. Schedule your team check-ins during times that respect the working days of your entire team. 

While frequent check-ins are good in a remote setting, avoid crossing the line into micromanagement. Make it clear that you trust your team members to manage their tasks.

Facilitate onboarding for new hires

A structured onboarding program is especially important in a remote setting. Work with your HR team to develop a comprehensive program that gives new hires all necessary insight into the business and confidence with the tools they need on the job.

A popular practice is to pair new hires with mentors to provide guidance and support during their initial period.

Arrange security training  

As a business, your data is only safe if every employee helps safeguard it. When working with international employees:

• Arrange training on the use of VPNs to ensure secure remote connections.
• Educate employees on cybersecurity best practices and common threats such as malware and phishing attempts.
• Train employees on best practices when it comes to sensitive company and client information, for example being compliant with GDPR regulations if you’re operating in Europe.

Pay attention to cultural sensitivity and inclusion

When working with a global team, inclusive practices are especially important to make everyone on your team feel respected – it can also help your team if they’re going to work with clients based in different countries.

Offer training on cultural sensitivity and awareness, and survey your team regularly on its effectiveness and any improvements you could make.

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Building A Remote Team With Playroll

Your country's borders should not limit where you can source and hire talent – extraordinary people are everywhere.

As skills shortages continue, and competition for world-class talent increases, hiring remote workers will become the new frontier for more companies across the globe. 

Hiring a remote team compliantly can quickly get complex and come with significant challenges – but it doesn’t have to be. Playroll is on a mission to make borderless work a reality for thousands of businesses, of all sizes. By using a EOR provider such as Playroll, you can remove many of the risks and challenges of hiring remote workers:

• As your partner in international hiring, Playroll will handle onboarding, payment and benefits management in new regions, freeing up your time to focus on your business and connecting with your team.
• No need to establish foreign subsidiaries – we have a network of legal entities in 180+ regions to leverage on your behalf, and can advise you on the intricacies of hiring in every one of those countries.
• Avoid misclassification risk and use Playroll to compliantly hire and manage your contractors, no matter where they’re based.
• Built-in compliance and IP protection for your employment contracts.
• A team of legal, financial and HR experts to advise you every step of the way

Why Should You Hire Overseas Employees?

If you aim for global growth, hiring internationally isn't just an option — it's a game-changer. Embrace the diversity that sparks innovation and fuels creativity. The trend of hiring overseas employees, as highlighted in the World Economic Forum's analysis, reflects a strategic response to global labor market dynamics and technological advancements. 

Some of the top benefits include:

• Larger talent pools: Hiring globally expands your candidate pool, bringing in diverse skills and experiences from around the world to find the best talent regardless of location.
• Increased diversity: Embracing global hiring increases cultural, ethnic and gender diversity in your team, in turn boosting creativity, problem-solving and business profitability, according to a McKinsey report.
• Higher employee satisfaction with remote work: Remote work boosts satisfaction and productivity, with a growing preference for better work-life balance and reduced commuting stress.
• Cost savings: Hiring in regions with a lower cost of living can help you stay within budget for your roles while still accessing high-quality talent.
• Growing your global presence and better market insights: A diverse team across regions provides local market insights and cultural understanding, which is crucial for global expansion.
• Flexible workforce management: Operating globally allows round-the-clock operations and better customer service, leveraging different time zones for continuous support.

How To Choose Countries When Hiring Remotely

Ready to explore new markets to reap the benefits of a global workforce? When looking at hiring in a new country, assessing it according to these criteria can help you make the best choice for your business:

• ‍High levels of education: Hiring from regions known for their strong educational backgrounds ensures you have access to highly skilled professionals.
• ‍Good infrastructure: Reliable infrastructure, including top-notch internet connectivity and modern communication networks, helps your remote team to collaborate seamlessly.
• ‍Cost of living and employee benefits: Evaluate the cost of living and factors such as statutory employee benefits and employer taxes in each region, to get an idea of the cost of an employee in that region. For example, hiring in countries with lower cost of living and a lower cost to the employer can help you save on hiring costs. Use tools like Playroll's cost calculator to compare and optimize your employer costs effectively.
• ‍Shared time zones: Time zone alignment fosters real-time collaboration and can help your global team operate more efficiently.
• ‍Availability of digital nomad visas: Regions offering digital nomad visas or attractive tax incentives not only attract skilled remote workers but also creates a more supportive environment for your team.
• ‍Appetite for remote work: Embrace regions with a strong appetite for remote work, meaning your team members are motivated and committed to achieving shared goals no matter where they are.
• ‍Quality of lifestyle: Consider regions that offer a good lifestyle for employees, with access to many natural landscapes, vibrant urban centers, and diverse cultural experiences.
• ‍Political stability and safety: Choose regions known for their stability and safety, providing a secure environment for your team.
• ‍English proficiency: Ensure effective communication by selecting regions where employees have strong English proficiency or the necessary language skills to collaborate across borders and cultures.
• ‍Strong legal frameworks: Prioritize regions that protect remote workers' rights and have robust employment regulations. This creates a supportive and compliant work environment for your team to thrive.

Top 10 Countries to Hire International Employees

Based on criteria such as high education levels, reliable infrastructure, competitive cost evaluations, political stability, language proficiency, and robust legal protections, here’s our choice of top 10 countries to hire international employees. In no specific order:

1. Germany

Boasting a high level of education and robust infrastructure, Germany offers a competitive cost of living and attractive employee benefits. The country is increasingly embracing remote work, heightening its appeal to international employers.

Germany is renowned for its exceptional quality of life, which includes political stability and safety. Moreover, most professionals in Germany are proficient in English, making it an ideal environment for global business operations.

2. The United States

The United States features a world-class education system and advanced infrastructure, providing competitive employee benefits and strong legal protections. It accommodates various international business needs with convenient time zones and a diverse range of lifestyle options. English proficiency is also widespread in the U.S.

3. Portugal

The Portuguese have high levels of education, and there is an increasing emphasis on international programs and partnerships. The cost of living is generally lower compared to other European countries, while still having attractive benefits on offer to employees.

This makes it an attractive option for cost-effective international hiring. The country offers a high-quality lifestyle with pleasant climates, cultural richness, and affordable healthcare. Portugal is known for its political stability and safety.

4. Singapore

Singapore is known for its world-renowned education system and advanced infrastructure, particularly in technology and business sectors. Positioned in GMT+8, it facilitates global business interactions.

Initiatives like digital nomad visas and Tech Pass welcome skilled professionals and entrepreneurs, promoting a strong remote work culture.

5. Canada

Canada has a robust education system and advanced infrastructure tailored to modern business needs. Its convenient time zones facilitate global interactions, making it a favorable environment for international employers. Canada's openness to skilled professionals is evident through its various immigration programs, which support a strong remote work culture with progressive policies.

6. Australia

Australia also has an excellent education system and welcoming visa programs that encourage a diverse workforce. The country promotes remote work through flexible arrangements and progressive policies, ensuring a high quality of life. 

Australia is also noteworthy for its excellent healthcare, safety, and cultural amenities, supported by a stable political environment and strong legal frameworks.

7. Japan

Japan has advanced technology infrastructure and digital nomad visas on offer, promoting a strong work culture with flexible arrangements and innovative policies. 

The country offers a high quality of life, featuring excellent healthcare, robust safety standards, and rich cultural experiences. Japan's stable political environment and robust legal protections create a secure and supportive setting for both employers and employees.

8. South Africa

Well-known for its breathtaking natural landscapes, South Africa also has a relatively low cost of living compared to many Western countries – along with a multi-cultural workforce that is proficient using English as a primary business language. It also recently rolled out digital nomad visas to boot.

Positioned in the GMT+2 time zone, South Africa facilitates convenient business interactions across Europe and Africa, making it an attractive location for international employers.

9. The Netherlands

The Netherlands is celebrated for its education system and advanced infrastructure. With fast internet and a flourishing technology sector, the Netherlands is an excellent location for businesses that need highly skilled employees.

Its strategic location within the GMT+1 time zone heightens its appeal as a hub for European and global commerce. The country is politically stable and offers a secure environment for residents and businesses alike, supported by a strong legal framework that ensures transparency and protection for both employers and employees.

10. South Korea

South Korea is distinguished by its prestigious education system and cutting-edge infrastructure supporting technology and commerce. The country promotes a thriving culture of remote work with progressive policies and a digitally adept workforce. 

South Korea boasts a high standard of living, including exceptional healthcare, stringent safety standards, and a vibrant cultural scene, making it an appealing destination for international hiring.

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Up And Coming Countries for Remote Work

Several countries are actively implementing remote-friendly policies to facilitate the hiring of international employees. Notable examples include: ‍

Estonia

Estonia has introduced a digital nomad visa, which allows international remote workers to live and legally work in the country for up to a year. This initiative supports Estonia's reputation as one of the most digitally advanced countries in Europe.

Mexico

Mexico offers a Temporary Resident Visa, suitable for remote workers who can prove they have the financial means to sustain themselves. The country’s affordable cost of living and vibrant culture make it an attractive destination for digital nomads.

India

India is improving its digital infrastructure and regulatory frameworks to attract more remote workers. The country’s vast talent pool in IT and customer service makes it a viable option for companies looking to outsource these functions.

Brazil

Brazil has introduced visas that are more favorable for remote workers and improved internet connectivity across the country. These moves are part of broader efforts to boost economic activity by attracting international talent.

Vietnam

Vietnam is becoming increasingly popular among remote workers due to its low cost of living and high-speed internet. The government is exploring more formal policies to support remote workers, including extended visas and tax incentives.

Costa Rica

Costa Rica offers a specific visa for remote workers and digital nomads, allowing them to stay for up to two years. The country’s rich biodiversity, stable political climate, and high-quality healthcare system add to its appeal as a remote work destination.

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How Playroll Can Help You Hire International Employees

Navigating the complexities of global hiring isn't easy – especially if you first need to set up costly legal entities in new markets. Playroll simplifies this process by offering Employer of Record (EOR) services, handling hiring, onboarding, and management of international employees through our network of established legal entities in 180+ regions.‍

Speak with our experts to discover how Playroll can help you make your next international hire effortless, no matter where they are based.

What is an Employer of Record (EOR)?

An Employer Of Record (EOR) is a third-party service that assumes all employer responsibilities on behalf of another business, including payroll and benefits management for employees. EOR services are widely used by companies that are hiring employees internationally, without the hassle, time and cost of establishing a legal entity first.

The EOR acts as the legal employer paper, while you manage the employee's daily activities. 

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Top EOR Providers in 2025

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1. Playroll

Yes, we admit our bias, but can point to a proven track record of success when it comes to compliantly employing, managing and paying remote teams for businesses of any shape and size.

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Playroll simplified our expansion into new markets by providing a comprehensive understanding of local regulations. Through this partnership, we could immediately tick the box on compliance, at no risk to BET Software.

Gizelle Govender, Senior People Partner, BET Software

Read Case Study

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As a global Employer Of Record, Playroll stands out for its cost effective pricing, without compromising on the quality of its EOR services or support. It offers truly human customer support for both employers and employees to simplify international employment. This is in contrast to many competitors that rely on ticketing systems, do not offer dedicated support, or upcharge for support. We are uncommonly flexible when it comes to the needs of our customers, going the extra mile to customize contracts and facilitating transfers between EOR and client entities as needed.

Playroll’s user-friendly platform allows you to employ, pay and manage employees and contractors alike in 180+ countries, and provides a team of experts that ensures compliance with shifting employment regulations. Other services include comprehensive localized benefits packages, immigration support, and streamlining global payroll operations.

Pricing: From $399 per month, per employee. No annual commitment required for affordable prices.

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2. Papaya Global

Papaya Global is especially known for its comprehensive support in payroll processing, and is innovative when it comes to integrating AI within HR tech.  They have a broad range of customization options available to customers.

On the downside, Papaya Global relies fully on third party partners to provide their services, instead of having its own infrastructure of owned entities. This can mean extra fees being passed on to customers, on top of already hefty monthly EOR fees. It also means the EOR provider always has to liaise with third-party partners when providing customer support, which can significantly delay their response times.

Pricing: From $599/month, per employee.

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3. G-P (Globalization Partners)

G-P is a popular EOR choice that offers a broad range of products. They split their  EOR services between a core and premium offering. This can be useful for businesses that are looking for a broad range of options to pick and choose from. They also have many options to tweak and customize services, and advanced data analytics.

Globalization Partners does have its cons. Their pricing is complex and obscure, with reports of high monthly fees. Many of their EOR features are only available with their premium product, and they’ve received some negative feedback for slow customer service. Overall, this could make them a poor fit for smaller companies that have more limited resources and require more hands-on support to make their first international hires.

Pricing: Not publicly disclosed. 

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4. OysterHR

OysterHR is known for their fun branding and user-friendly platform, with quick onboarding times reported. They have a wide country coverage, and solid compliance credentials behind their name. 

On the other hand, they are priced at the upper end of the market for their EOR services, which can quickly prove to be a financial bottleneck for companies hoping to hire more than just a handful of international employees. In addition, there have been some reports of payroll mistakes and delays on public review sites. 

Pricing: From $599/month, per employee if paying annually. Monthly plans are priced from $699 p/month.

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5. Remote

Remote is a well-known EOR provider, with a focus on providing services through their own network of owned entities, which can be useful for businesses that want to avoid dealing with any additional third parties in the equation. 

On the downside, their EOR fees are very high compared to some other names in the business, and they have received some negative reviews on slow customer service and multiple points of contact. They also don’t offer a very wide network of country coverage for EOR services, with less than 100 countries covered, which can limit your ability to scale as a business.

Pricing: From $599/month, per employee.

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6. Deel

Deel is another well-established player in the EOR space, offering options to manage full-time employees and contractors in 150+ regions. They can be a good fit for businesses looking for an EOR partner with many owned entities, and a comprehensive range of integrations.

That said, Deel’s fees are expensive and require annual commitments for cheaper pricing, and they’ve received many negative reviews of hidden fees and unexpected costs. This can make it hard to properly budget for their services, and can prove too expensive for smaller businesses looking to scale globally.

Pricing: From $499/month, per employee if paying annually. Monthly plans are pricier, at $599 p/month.

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7. Rippling

Rippling is a popular workforce management solution, and is especially known for their broad range of products that include payroll, finance and IT management. This can make them a good choice for companies looking for a single solution to workforce management.

If you’re looking for a specialist in global employment and EOR services though, there are some cons to consider. Their pricing is not publicly disclosed, though high fees are reported – and they’ve received negative reviews of a bloated product with a steep learning curve, as well as payroll errors.

Pricing: Not publicly disclosed.

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8. Velocity Global

Velocity Global stands out for its wide country coverage as an EOR provider, at 185+ regions, which can make them a good choice for employers interested in stable support for any future growth plans. 

They are another example of an EOR provider that doesn’t disclose their pricing publicly, with reports of steep monthly fees. Another downside is the many negative reviews they’ve received for slow customer service and multiple points of contact, which can make them a frustrating provider to deal with if you value quick response times to enquiries.

Pricing: Not publicly disclosed. 

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9. Multiplier

Multiplier offers good pricing for the EOR services, and has a solid library of extra global hiring resources available for employers. They also have all compliance credentials needed to mitigate risk for employers looking to hire internationally. 

On the other hand, they take a complex approach to invoicing, and have received some reviews of slow and faulty payroll services. They’ve also received negative feedback on slow customer service. Overall, this can mean risk to your business if you value simple, timely payroll for employees.

Pricing: From $400/month, per employee.

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10. WorkMotion

WorkMotion is an EOR service that specializes in supporting European companies, and can also assist with in-country registrations – which can make them a good choice for EU companies looking to expand their business.

As for its cons, WorkMotion charges very high EOR fees that only become more affordable when hiring many employees. They also don’t offer any support in hiring independent contractors, which can be detrimental to businesses that are looking for a single service to hire any type of worker across the globe. Lastly, they don’t have SOC2 certification, which many businesses require to safeguard their data when working with EOR providers.

Pricing: €649 p/month ($724) per employee for up to 4 employees. Price decreases if onboarding more people.

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Why Playroll Stands Out

Playroll ticks the boxes on robust compliance, broad country coverage and many owned entities. This is similar to many of the competitors mentioned on this list, and are some of the standard offerings you should look out for when choosing an EOR provider that offers comprehensive services.

Overall, though there are many strong EOR contenders on the market, Playroll stands out for its competitive pricing, as well as its on-the-ground support for businesses of all sizes – with dedicated support and flexibility for both employers and employees. 

We believe quality support is the single most important trait for an EOR provider, since EORs support businesses that are expanding into jurisdictions they’re often unfamiliar with. This means quick responses to tricky compliance questions, flexibility to customer needs and a truly human touch is invaluable. 

Book a chat with our team to find out how we can help you scale your global team.

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Want Detailed Comparisons?

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