Global Hiring Guide

What It Really Costs to Hire a Foreign Worker: A Comprehensive Breakdown

Mayank Bhutoria
8
min

The importance of hiring foreign workers is immense, offering a range of benefits from specialized skills and new perspectives to cultural diversity and innovative ideas. However, while the advantages are evident, HR representatives, executives, and managers must also consider the associated costs. The process of hiring employees from abroad is complex and involves various expenses that extend beyond traditional hiring costs, including visa applications, relocation expenses, and compliance requirements. Companies must be prepared for the financial commitment required to integrate international talent into their workforce.

Understanding the costs and benefits is crucial to ensure that hiring foreign workers aligns with your company's strategic goals and budget. It involves more than just the initial investment; ongoing expenses such as compliance, mandatory benefits, and employee training also play a significant role. A well-thought-out approach can help businesses balance these costs with the substantial advantages that foreign employees offer.

How Much Does it Cost to Hire a Foreign Employee?

Compliance Costs

Companies must allocate resources to ensure that they adhere to immigration laws, employment contracts, and tax requirements in the employee’s home country. This may involve engaging legal counsel or hiring global compliance specialists to navigate the complexities of international employment law.

For example, Canada has strict compliance requirements for hiring foreign employees, including obtaining a Labour Market Impact Assessment (LMIA) and adhering to immigration regulations. Compliance costs can vary, but they typically include legal fees, LMIA application fees, and other government charges. 

Visa sponsorship costs

When hiring foreign employees, one of the most significant costs is immigration and visa processes. Each country has its own immigration laws and the fees vary depending on the type of visa and the country of origin. 

For example, when a U.S. employer wants to bring an international employee on-site, they take the H1-B visa route. An H1-B visa can cost you around $5000 or more when accounting for immigration lawyer fees, filing fees, attorney fees, and other potential charges. 

Relocation assistance

Relocation costs can vary significantly depending on the distance and scope of the relocation package. However, according to American Relocation Connections (ARC), the average relocation package costs between $24,000 to $97000 or more. These costs typically include moving expenses, temporary housing, travel expenses, and assistance with settling in.

In Australia, employers hiring foreign employees often offer relocation packages. The cost can range from AUD 10,000 to AUD 15,000, depending on the complexity of the move. It typically includes airfare, shipping of personal belongings, and temporary accommodation.

Benefits Costs

These costs are the compulsory contributions and benefits that employers must provide according to a country's laws and regulations. 

For example, the Norwegian government provides shared and flexible paternal leaves for 59 weeks, which can be split between the parents respectively. Norway’s national insurance scheme pays 80% of the regular income for 59 weeks of leave. If an employee wants to take a reduced leave of 49 weeks, national insurance pays 100% of their income.

Mandatory employer costs

Employers are often required to contribute to social security and other mandatory insurance programs on behalf of their foreign employees, by local regulations. These costs can add up significantly, particularly in countries with robust social welfare systems. 

In Australia, Eemployees are entitled to superannuation contributions from their employers. By law, employers must contribute 10% of an employee’s ordinary earnings on behalf of the employees into the chosen superannuation fund, which serves as a retirement savings scheme for employees in Australia.

Competitive Benefits Costs

In addition to mandatory employer costs and mandatory benefits costs, you can offer competitive benefits packages to attract and retain foreign talent. These benefits can include health insurance, retirement plans, stock options, and wellness programs. While providing competitive benefits can enhance employee satisfaction and loyalty, it's essential to consider the associated costs and feasibility within the company's budget.

Training and onboarding

Training and onboarding foreign employees require additional resources to familiarize them with company policies, procedures, and culture. Language barriers, cultural differences, and unfamiliarity with local business practices may necessitate specialized training programs or mentorship initiatives. 

Gloroots Salary Calculator

By understanding the costs associated with hiring foreign employees, you can make informed decisions that benefit your organization and its workforce. Gloroots' salary calculator simplifies the process, providing real-time market data and comparisons with US salaries that helps you acquire an ideaacquire get an idea of the global payroll ranges. This calculator helps you find the right salary based on job title, country, and median salary information for various roles across more than 45 countries. Using this tool, you can strategically plan budgets and compensation packages, keeping your global workforce engaged and satisfied.

How to use the Gloroots salary calculator?

Using the Gloroots salary calculator is straightforward. Follow these steps to get started:

  1. Select Job Title and Country: Choose the job title from the provided drop-down list and select the country where you are hiring.
  2. View Salary Information: Once you've selected the job title and country, the calculator will display the average salary information for your chosen role.
  3. Compare with the US Median Salary: The calculator compares the salaries with the US market and will then show the difference between the selected country's median salary and the US.
  4. Use the Data for Planning: With the information obtained, forecast salary requirements and plan budgets more effectively, budget for salaries, and ensure competitive pay scales.

Here is an example: The average salary of a backend developer in Australia

Benefits of Hiring Foreign Employees

  • Access to diverse skills

Hiring foreign employees adds more diversity to your talent pool, enabling you to harness different skill sets that emanate from specific cultural settings. This can be particularly beneficial in industries with skill shortages or where specific expertise is in high demand.

Having employees from different countries can help expand your business into new markets. Their knowledge of local markets, languages, and business practices can facilitate international expansion, foster relationships with overseas clients, and unlock opportunities in new markets.

  • Increased Competitiveness

Hiring foreign employees can make a company more competitive in the global market. By leveraging their unique skills and knowledge, businesses can differentiate themselves from competitors and offer more comprehensive services to clients worldwide.

  • Innovation and Creativity

With a diverse team, companies are better positioned to encourage a broader range of ideas and approaches. This often leads to increased innovation, allowing businesses to stay ahead of industry trends and meet evolving customer needs.

Challenges of Hiring a Foreign Employee

Hiring foreign employees can present several challenges that employers must navigate carefully. Here are some of the key challenges:

Employment compliance 

Employers must ensure compliance with various employment laws and regulations, including immigration laws, labor laws, and tax laws. Failure to comply can result in penalties, fines, and legal issues. Understanding and adhering to the specific requirements for hiring foreign workers in the respective country is crucial.

Employee benefits 

Providing appropriate employee benefits to foreign workers can be complex. Employers must consider factors such as healthcare coverage, retirement plans, and other statutory benefits based on the country's laws. Ensuring compliance with local regulations and offering competitive benefits packages can be challenging.

Setting up a legal entity to hire foreign employees 

In some cases, employers may need to establish a legal entity or subsidiary in the country where they intend to hire foreign employees. This process can be time-consuming and expensive, involving legal and regulatory hurdles. Understanding the local business environment and navigating the setup process effectively is essential.

Hiring contractors for long-term engagement 

While hiring contractors may seem like a more straightforward option, there are risks associated with misclassifying employees as contractors, especially for long-term engagements. Employers must be cautious about compliance with labor laws and avoid potential legal issues related to employee misclassification.

Hire International Employees With Gloroots

Gloroots offers a comprehensive solution to streamline the process of hiring foreign employees globally. With our Employer of Record (EOR) services, you can seamlessly onboard talent from over 140 countries while ensuring full compliance with local laws. Gloroots takes care of employment contracts, payroll, benefits administration, and offboarding, allowing you to focus on growing your business. With our user-friendly platform and dedicated support team, we ensure you a hassle-free experience when expanding your global workforce.

FAQs

1. Who is eligible for international workers?

Companies can hire international workers from any country, provided they comply with the relevant immigration laws and regulations of the country where the worker will be employed.

2. What is the limit for foreign workers? 

Many countries have a dependency ratio ceiling (DRC) or quota, which sets the maximum ratio of foreign workers to the total workforce that a company in a specific sector can employ. For example, if the DRC for the services sector is 35%, the total number of foreign workers in a services company cannot exceed 35% of its total workforce.

3. What is a foreign worker? 

A foreign worker, also known as a guest worker, is an individual who works in a country other than their country of citizenship, often through a guest worker program or temporary work visa, to pursue better job opportunities than those available in their home country.

Content
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Ready to take your hiring global? Let’s talk. Our experts have got you covered. 

Speak to us