On the lookout for a fantastic workforce, companies have increased hiring efforts internationally. This entails balancing between the impact and value of new global hires and varying compliance obstacles.
At the same time, the pandemic has forced many employees to move homes, relocating to different jurisdictions, which adds a range of payroll, compliance, tax, and legal issues that companies need to tackle.
In a recent TechGC Virtual Panel, called Legally Speaking - Taking Your Team Remote, Deel’s CEO, Alex Bouaziz, spoke to Trish Scearce (Head of Legal, Postman, Inc.), Jamie Hurewitz (Head of Legal, Mattermost), and Kjelti Kellough (GC, Getty Images) about the ins and outs of hiring remote teams and how to make the most of global hiring strategy.
The challenge of global hiring brings about a spectrum of approaches. Some companies are strictly strategic and plan well ahead. Others have a higher risk tolerance and adjust their stance with each new hire.
What often happens in practice is that companies react, instead of act, when hiring across the globe. And this leads to non-alignment between departments. Trish Scearce advises hiring teams to consider legal counsel ahead of making the hire. Her tip is that companies find strategic legal partners in countries of hiring in advance.
“Think of the infrastructure you have in place to support remote hiring. For instance, we have a global payroll provider and they’re helping register us as an employer in several other countries and I’m using local counsel to create employment agreement templates. You need HR operations because you’re going to start to scale out in all these different countries and there are all these different laws [you need to comply with].”
Even though some companies have just started to hire remotely, chances are that going forward more of them will start to follow suit.
For this to happen compliantly, companies will need to continuously assess their global hiring strategies and check how they perform against a varying set of laws in terms of payroll, taxes, benefits, stock options, pensions, and healthcare.
As for how to approach this, Jamie Hurewitz says that companies should assess their own “risk tolerance” and find where their threshold lies. Her views are that some companies may be fine with employing individual contractors across several different countries, while others may shy away from that approach and hire certain roles in a narrow selection of countries, i.e. the ones where they already have a subsidiary.
Building on the operational side of scaling the hiring strategy, Kjelti Kellough mentioned that although many companies traditionally chose to focus their hiring efforts on countries of subsidiaries, there’s now a need to explore past that point. Employers don’t want to lose great employees and want to find a balance between their workforce making the move to a different jurisdiction and ensuring the company compliance looks the part.
In her opinion, what matters more is “whether the organization is culturally set up to support remote hires, as legal and tax obstacles can be solved.”
One of the panel takeaways is that remote hiring requires continued assessment. Each country has its own set of rules on taxes, pension schemes, payroll and benefits, which are just a tiny fraction that keeps evolving. And to stay compliant, companies need to set up a strategy that will support this scaling.
In practical terms, this means that companies should:
In Jamie’s words, from a legal perspective, it would be wise to keep the revenue-generating roles, primarily sales, but also marketing, in the countries where the company has a registered subsidiary. This way, the sales executive may have fewer constraints when executing a deal, which helps ensure the company’s desirability in the market.
As for benefits, regulations are at variance between countries. Some lack laws on stock options but insist on pension schemes. Others don’t recognize work for hire or have a different classification methodology.
One way to solve this issue is co-creation. Jamie suggests that companies work with employees on finding the best solution for them to feel part of the team. For instance, if stock options aren’t feasible in a country, maybe employees would rather have regular bonuses or some other means to compensate them.
Once the pandemic hit, many employees, previously working from international tech hubs such as New York, San Francisco, or Dublin, went back home in search of a safer, cheaper, and more reliable environment to brave the pandemic.
This has raised the question of compensation, taxes and payroll benefits. If an employee moves from a major city to a less expensive area, should their paychecks stay the same?
The safest advice is to discuss this upfront. The panelists all agreed that the solution needs to include the company’s tax team and employees early on. With enough research and honest conversation, there is room to strike balance between the company’s risk exposure and employee satisfaction.
For instance, any relocation for up to 90 days is something that many companies approve of, but anything that would include permanent relocation would require more scrutiny. Some companies pay salaries regardless of the location, others tie it to the employee’s place of residence. In Kjetli’s opinion, this is best solved by assessing the impact the employee or role is making and the risk the company faces, then looking to find a mutual agreement where possible.
So as the breadth of international hiring expands, companies should remember to continuously assess and adjust their policies, understand strategic goals and how hiring fits it and finally how risk-tolerant they want to be. Only through such a flexible approach can they ensure they’re on par with the shifting nature of global hiring compliance.