Too Much Time Onboarding?
As your company grows and expands its reach, you may need to relocate some of your employees to different countries. Whether you want to send existing employees overseas or hire new talent from abroad, employee relocation is essential to your global expansion strategy.
Relocating employees helps retain talent as evidenced in a global movement survey: 25% of respondents were interested in moving abroad for work. On the other hand, relocation allows companies to move in-house talent to scale operations in their own foreign subsidiaries.
However, relocating employees internationally goes beyond booking flights and packing bags. It requires proper planning and compliance with the home and host countries' legal and regulatory requirements. From navigating tax implications to aligning HR policies with local labor laws, every aspect requires careful consideration for the relocation plan to be successful.
This article discusses the challenges of international employee relocation and how partnering with an Employer of Record (EOR) can help you streamline the process and ensure legal compliance.
How does Global Relocation Differ from Domestic Relocation?
Both Global employee relocation and domestic relocation require employees to move. However, key differences present challenges to both employers and employees.
Visa and work permit requirements
When sending employees to work abroad, you must obtain the appropriate work permits and visas for their legal status to ensure compliance with the new country's regulations.
A tourist visa won't suffice if your employee works abroad, even for a short assignment. For example, if your employee travels to the US for short-term business purposes (less than one year), they must get a B-1 visa, not a B-2 visa, mainly for tourism.
But when relocation is within a home country, you don't have to deal with immigration headaches.
Language and culture
Expanding your company into new territories may introduce language and cultural barriers that may not be present when employees relocate within their own country.
For example, an employee who relocates from an English-speaking country to Japan may struggle to communicate with team members because of language differences. The cultural differences between both countries are also likely to be more pronounced.
Language disparities can make finding the right people for the job harder. Specific language skills are necessary for effective communication and operation in the new market.
Employee wages and benefits
Employee wages and benefits won't pose a problem within a home country. But in international relocation, each country has its own rules for salaries and benefits.
In some countries, annual paid days off are mandated, while others require no paid leave. The same applies to wages. Some countries demand organizations pay a certain minimum hourly amount, which may not apply to a different country.
Example: According to the compensation structure in Australia, employees must receive twice their normal hourly wages if they work on Sundays and public holidays.
In countries like Brazil and Mexico, 13-month payments are mandated by law. The employee's salary must also be deposited in a government-approved bank.
Costs are often calculated for domestic moves based on the distance between locations and the volume of items moved. However, they don't demand the exact level of logistical coordination for international relocation.
Meanwhile, international relocation involves additional expenses such as freight charges, customs duties, and possibly storage fees. Here, the method of shipping also affects the cost.
Taxes affect both domestic and international relocations. For instance, in the US, some states impose an income tax, whereas states like Alaska, Florida, Nevada, and South Dakota have no state income tax.
However, tax disparities become even more noticeable when employees relocate abroad. Employers must withhold the right amount and type of taxes from employees' paychecks to prevent potential complications.
How Does an EOR Help With Relocation?
Global employee relocation comes with its own set of complexities. An Employer of Record (EOR) can help handle all the legal, administrative, and compliance-related tasks associated with employing staff in a new location.
How can EORs help acquire visas for relocating employees?
1. Ensures legal compliance: EORs strongly understand local labor laws and immigration regulations. So, they check if the visa application process complies with all the legal requirements. This reduces the risk of errors or oversights that could delay the visa application.
2. Expertise in visa processes: With a dedicated team or partners who specialize in handling visa and immigration processes, EOR can handle the paperwork, documentation, and other procedures required for various types of visas, including work visas, dependent visas, and permits for relocation.
3. Streamlines communication: EORs act as a central point of contact between employers, employees, and relevant authorities throughout the visa application process, streamlining communication.
EORs simplify the visa acquisition process for international employee relocation, allowing employers and employees to focus on their respective roles and responsibilities.
How can EORs fully onboard a permanently relocated employee through their local entity?
Onboarding a permanently relocated employee through a local entity involves several steps to ensure compliance and the employee's smooth transition.
Here's how an EOR can fully onboard such an employee:
Employee pre-arrival preparation
Legal compliance: EORs check if the local entity complies with all the legal requirements linked to employment, including labor laws, tax regulations, and any industry-specific regulations.
Documentation: EORs prepare all necessary documentation related to employment contracts, benefits enrollment, tax forms, and local entity registration.
Background checks: EORs help you perform background checks in adherence to local labor laws.
Communication: EORs streamline communication by eliminating the hassle of dealing with multiple vendors to ensure visas and documentation background checks happen seamlessly.
Asset management: EORs help deliver workplace logistics such as IT equipment, workplace accessories and other resources necessary for their role.
Payroll processing: EORs set up the employee in their payroll system, ensuring all necessary information, such as salary, tax withholdings, and benefits, is accurately recorded.
Benefits administration: EORs also help you offer the right benefits, such as health insurance, in a manner that’s competitive and relevant to the employee’s relocated country. EORs also help you customize and offer other fringe benefits as well.
How Can EORs Help Prevent Permanent Establishment Risk?
Permanent Establishment means having a taxable presence in a foreign country, which leads to taxation in the company's home country and foreign countries.
Several factors trigger PE risk, including having a physical location, generating revenue locally, and controlling employee activities from the parent company. So, spotting such triggers is crucial to navigating international tax regulations effectively.
Partnering with an Employer of Record like Gloroots can mitigate PE risks. Our EOR services manage the legal and tax aspects of employing workers in foreign countries on behalf of client companies.
Note: Partnering with an EOR does not remove all PE risks, as the workers still operate on your behalf, and you manage them daily. However, this approach significantly reduces PE risks while providing a cost-effective and efficient solution to international expansion.
Benefits of Using An EOR for Employee Relocation
Compliance with local regulation
Relocating employees can be complicated by local employment, taxation, immigration, and labor laws.
Since EOR providers are well-versed in these regulations, they ensure that the organization and the relocated employees comply with the local laws, rules, and regulations. This eliminates the risk of legal issues or penalties.
An EOR can streamline all the processes, providing a single point of contact for relocation-related tasks such as visa processing, background checks, and onboarding onto the EOR’s foreign country entity. This saves time and reduces stress for employers and employees, from handling paperwork to visas to payroll setup.
Relocating employees often subject mobility teams to risks related to compliance, legal issues, and cultural differences. EORs mitigate these risks efficiently as they bring valuable local market knowledge, enabling you to tailor your HR policies and procedures to meet the expectations of the host country.
While traditional relocation methods may incur high costs due to multiple vendors and administrative overheads, EOR services offer cost-effective solutions because you are bundling up services with an EOR, which often translates to lower costs.
Establishing a legal entity in a new country is also expensive. But when you partner with an EOR, you eliminate the need to set up local entities, hire local HR staff, and invest in infrastructure.
Relocation vs EOR For Expansion: An Honest Comparison
While thinking about growing your business overseas, you might get stuck choosing between two main options: relocating employees independently and using an Employer of Record (EOR) service for relocation. This comparison table will help you choose your company's global expansion plans best.
How Gloroots Can Help
Gloroots EOR streamlines the international employee relocation process. It handles administrative tasks, ensures compliance, secures your reputation as a global employer, and supports employers and relocated employees.
Our EOR helps in onboarding processes, handles global payroll, and ensures employees get accurate salary payments on time.
We also provide country-specific insurance coverage, customize benefits for each employee, and ensure employees receive proper support. Are you looking to relocate your employees overseas? Get in touch with Gloroots today.