Here’s our quick 4-step guide for UK companies to expand their global footprint by employing overseas workers.
#1: Classify: remote employees or independent contractors?
Before you begin your global workforce expansion, it’s important to know what you’re looking for. Misclassifying employees as contractors is one of the quickest ways to derail an organization’s compliance record and incur hefty penalties. So what’s the difference?
- Have set working hours
- Work exclusively for the employer
- Perform services in the way the employer specifies
- Earn regular salaries or wages
- Need benefits
- Have part of their earnings deducted by the employer for tax purposes
In contrast, independent contractors provide services to multiple organizations. They complete projects on their own schedules and receive payment per project. They are technically self-employed, so they’re responsible for their own taxes.
More and more countries are tightening the screws on unscrupulous employers who misclassify their workers. A Californian company learned this the hard way just the other day.
So it’s vital to understand where the lines are drawn in the countries where you want to hire remote employees. Check out our handy guide to classification by region to learn more.
#2: Preparing for takeoff: remote-first onboarding
Once you’ve decided what type of worker you want to bring on board, make sure that you can do so smoothly and hassle-free. This is especially important for employees. They need to understand how your systems work, and where they can go for support.
Cumbersome or inadequate onboarding undermines enthusiasm and puts the relationship on the wrong footing.
Without direct human contact, it’s even more important to find ways of fostering cohesion. Gamification, partnering with other employees and video calls are just some of the ways to create an onboarding process that gets people motivated to be productive from the get-go.
#3: Get compliant: local tax and labour regulations
Without a thorough grasp of a country’s labour laws, hiring there is just not feasible. By employing overseas workers, a company assumes all the legal responsibilities that entail, as if they were in that country.
That includes compliance with labour law, tax filings and contributions. Generally speaking, you’re not liable for tax contributions if you’re working with independent contractors.
As a side note, it’s worth bearing in mind that an independent contractor who is a UK citizen living and working abroad is nevertheless under an obligation to pay taxes in the UK. If the country they’re in has a double-taxation agreement with the United Kingdom, they can avoid paying twice on one income.
Don’t make any moves until you’ve done your homework.
Some important topics for due diligence:
- Termination procedures: notice periods, grounds for dismissal
- Health insurance and pension contributions
- Maternity (sometimes paternity, too) leave
Playroll’s Country Playbooks provide an overview of the ins and outs of labour law in over 50 countries of interest for UK companies. It’s the closest thing (that we’re aware of) to a multinational legalese phrasebook.
#4: Prepare for remote payroll
When it comes to paying remote employees outside the UK, there are essentially five options on the table.
Keep everyone on your UK payroll: this can work for independent contractors, but it’s not advisable for employees. Non-UK citizens on your payroll won’t have a National Insurance Number; this is bound to raise some flags. Many countries don’t allow this anyway and require all foreign companies to establish legal entities in order to hire remotely.
Set up a local entity: if you plan to go all in on one specific country, then putting down roots makes sense. Registering your own legal entity in that country enables you to hire as many people as you need. It also gives you complete control over your HR processes.
But if you’re hiring a handful of people, or you’re going for a diverse spread across multiple countries, the time and expense that it takes to do this is not worth it.
Join with a local company: a foreign company that has close ties with your own can act as an employer on your behalf. This requires a high degree of mutual trust, as well as an airtight service level agreement. And it only opens doors in the country or countries where this partner has a presence.
As with option #2, this one has hard limits in terms of scalability.
Partner with a Professional Employment Organization: PEOs take over the entire HR function of a business, freeing time and resources for their clients to focus on growth. To work with a PEO, companies must first establish their own legal entities in the country concerned.
Enlist the help of an Employer of Record: this solution allows you to skip right past incorporation and get straight to hiring. Like a PEO, an EOR manages payroll and handles tax and legal compliance. It also provides appropriate contracts and onboard remote employees.
But unlike a PEO, an EOR does not require its partners to establish their own legal entities in target countries. For the duration of the relationship between a UK company and an EOR, the EOR acts as the legal employer of foreign nationals.
An EOR is suitable for smaller headcounts, generally no more than 15 employees. Once revenue increases, some firms transition to incorporating their own entities. But there’s a crucial interim period between a company’s first foray into global hiring and the incorporation of an entity. That’s where an EOR makes all the difference.
We could say a lot more about how EORs are helping UK companies sign up the very best global talent. After all, we are one.
Get a demo of our platform and put us through our paces to see if we’re a match.