How to Hire International Employees Without an Entity

Congratulations on thinking of hiring outside your home country, as I am well aware, entering a new geographical location is a calculated and strategic action for companies that are either trying to access talent pools or make the best of fresh developing opportunities for their businesses. 

However, establishing a legal entity abroad not only throws a few challenges at you but also depletes funds and postpones your aspirations for global business expansion and development. Fortunately, I have a fantastic news for you, your business can now hire the best talent across the globe without being forced down the rabbit hole of creating a legal entity and exploring all the necessary compliance.

Through this article, we will browse through the better, faster, and more reasonable medium to hire a workforce overseas without setting up a subsidiary, see all the choices at hand, and learn what suits your business the best.

Why Avoid Establishing a Legal Entity?

As discussed above, the first and natural thought after thinking of establishing a remote team overseas would be to register a legal entity. However, in reality, establishing an entity is significantly more costly and complicated than most people would expect. 

The mentioned expense can easily be linked to:

1. Registering a legal entity calls for handling plenty of documentation, certificates, and local rule compliance.
2. Legal entity establishment might take from months to years, depending on the nation, very-very time-consuming, I know right?
3. One of the major factor that forces many companies to take a step back is the costs and commitment associated with setting up and running an entity, bundle that with the cost of building infrastructure, local taxes, and continuous compliance.

One thing is for sure, the conventional approach of entity creation is usually unhelpful for companies looking for agility and efficiency. Startups and all the modern day organizations can use these two options instead:

1. Hiring international contractors
2. Partnering with an Employer of Record (EOR)

Hiring Contractors for Flexible and Agility

For businesses looking to dip their toes into global hiring, engaging contractors is an excellent first step. Contractors allow you to fill skill gaps, complete short-term projects, and remain flexible in your hiring commitments.

Advantages of Hiring Contractors

One great thing due to which the contractor economy has turned so big is because of their ability to deal with the projects and scale up or scale down depending on the exact demand of the client and current market conditions.

 

Another reason why a lot of organizations turn to Independent Contractors for their paltry tasks is that it eliminates the burden of administrative and infrastructure expenses on them; also the contractors do not need to be equipped with the perks that the full-time employees get.

 

You can see that contractors are especially a boon for companies with changing workloads or time-bound projects that need specialized knowledge. Contractors are also game changers if you are able to club multiple contractors from different nations together, as it helps derive diverse points of view, promoting creativity and innovation.

Risks and Challenges Associated with Hiring a Contractor

Although using contractors gives you phenomenal freedom, they do not come without their long string of negative consequences, which mainly revolve around:

 

1. Workers Misclassification

Many nations across the globe have stricter criteria for labor classification. In case you fail to raise the correct invoices and pay them accordingly and timely, your organization can be at risk of legal conflicts, which could be as little as a minor fine to a loss of hundreds and thousands of dollars. From our experiences, we have learned that in India, you could face such a situation under PE Risk (Permanent Establishment Risk).

 

1. Restricted Sustainable Development

I am sure this is hands down one of the most important criteria for which organizations stay clear of contractors for critical organizational functions. The contractors lack the skin in the game and often even the dedication to make a difference or lead by example as they are struck with their SOPs (Standard Operating Procedures) and as a result of this it would be quite inconvenient to build a committed and cohesive team, especially if you intend to do it via the global workforce.

Partnering with an Employer of Record (EOR)

Partnering with an Employer of Record (EOR) is the magical wand that will set things straight for you. As I have learned, opting for Employer of Record services is the most effective way for companies hoping for operational consistency and long-term success. Why I love EOR services you ask? It’s pretty simple; actually, EOR enables you to do what you do best, by providing you with total operational control and sits in the back seat acting as your legal employer for overseas/ international hires.

What Does an EOR Do?

 

Frankly, if someone asks me what does an EOR do, my reflex answer would be it does everything you need for your employees. But I know that is too vague, so let me try and break down what EOR actually covers through its administrative and compliance-centric approach. 

 

1. Create employment contracts that are legal and compliant
2. Managing local tax withholding and payroll
3. Monitoring and management of employee benefits and insurance
4. Help with travel arrangements and visa documentation
5. Guaranteeing adherence to local employment rules
6. Providing continuous legal and HR support

 

With all the above-mentioned tasks being handled like a pro by your EOR, it removes your requirement to create a legal entity in a foreign country by functioning as the legal employer.

Key Benefits of Partnering with an EOR

 

1. Smooth Navigation Through Compliance 

Local labor laws change significantly with each country. This is where the local legal knowledge of an EOR, like Remunance with India, guarantees your company remains compliant with laws, therefore lowering or, to an extent, even eliminating the danger of fines or legal conflicts.

 

1. Cost Effectiveness

As we have looked through the above example, registering and running a subsidiary can cost upwards of tens of thousands of dollars in annual bills, along with the cost of registration and documentation. With an EOR running the show, you can focus on optimizing your resources at a better cost.

 

1. A Quick Start

The trouble and the pace of registering a company might still be relatively fresh in your mind, it is no easy task, on average, forming a subsidiary company could take anywhere between a few months to a year, working with an EOR partner lets you hire employees and get started in a matter of a month, personally at Remunance we have onboarded and helped clients kick start operations in as little as two weeks.

1. Scalability

In uncertain times, businesses might need to scale up and down instantly, and an expert EOR can help you do this in an instant. So, be it compliance or be it scalability EOR is right by your side.

 

1. Employee Benefits Management
   In today’s competitive job market, you know how tough it is to attract and retain top-performing talent; your competitive perks could play a significant role in setting things straight. An EOR guarantees a good employee experience by providing and handling top-class employee benefits such as health insurance, retirement funds, and leave policies.

Contractor vs. EOR – Which is Right for Your Business?

I know a lot of information above can be a verbiage for many and to keep things simple and put everything in perspective, here is a table that would compare the key offerings and keep things squeaky clean and easy to understand. 

Aspect	Hiring Contractors	Partnering with an EOR
Commitment	Short-term	Long-term
Cost	Lower upfront, limited scope	Higher ROI, broader team management
Compliance Risk	Higher	Minimal
Employee Benefits	Not provided	Comprehensive benefits included
Team Cohesion	Limited	Strong

 

Did reading about EOR make you feel you are missing out on something huge? Worry not, we will take it from here, book a free consultation with our expert today. 

How Does an EOR Streamline Compliance?

One of the most challenging things about employing international remote employees is understanding and following local labor laws and tax rules. However, an EOR company resolves/ streamlines compliance by:

1. Performs regular and timely audits to uphold compliance standards.
2. Guaranturing correct payroll processing and tax withholding.
3. Good relations with local administrative bodies.
4. The legal and financial team is well-versed in all the local details. 
5. Writing agreements compliant with local labor rules.

Cost Analysis – EOR v/s Subsidiary

Now that we have established the supremacy of EOR, let’s take a few moments to understand the costs associated with establishing a legal entity and relatively how does EOR fair:

• Entity Setup Fees: From our research, we found out subsidiary formation costs $4,000–$20,000 depending on the country you are targeting.
• Annual Maintenance Costs: The costs of accounting, compliance management, and infrastructure can pile up quickly. Our research suggests that subsidiaries, on average, spend up to $100,000 on maintenance.
• Time Investment: Starting from a few months, the time invested can go up to 18 months.

However, interestingly, with an EOR, businesses are able to cut down on all of these costs, and it’s not just about the cost benefits, with EOR, even the timelines are shortened, and the accelerated entires help in freeing up valuable time and resources for other strategic implementations.

Conclusion

Globally growing your company can take time and effort. However obvious the choice of forming a legal entity may be, once started, it usually turns out to be expensive and time-consuming with multiple compliance issues. To help eliminate these problems, there are modern and practical methods, like working with an Employer of Record (EOR), which are quick, easy, and reasonably priced substitutes.

With an EOR, you can let the professionals handle the complexity of compliance, payroll, and employee benefits management while you concentrate on your primary company goals. An EOR guarantees you remain quick, compliant, and competitive whether you are scaling your workforce across the globe or employing your first foreign employee.

De-stress and access the best talent on the planet, hire your first foreign employee with style. Make a free appointment with Remunance today

Let us create a reality where hiring is unrestricted.