How to Choose a Company and Which Tasks to Delegate?

An increasing number of company leaders are considering outsourcing personnel management and payroll calculation tasks. This may be due to expanding business geography, changing the tax residency of the headquarters, relocation of a significant portion of employees, entering new markets, the need to circumvent business restrictions in certain countries, or a desire to reduce tax rates.

Companies exploring relevant offerings in different countries have two options:

Choose a partner company to handle payroll services, including all technical aspects of monetary transactions with their employees and freelancers.

Outsource the entire hiring process to a company registered in another country, relieving themselves of the responsibility for the bureaucratic complexities associated with personnel management.

Deciding on such solutions is solely the prerogative of business owners or management. In any case, it is important to carefully assess the situation and consider the risks to be faced and the benefits to be gained from outsourcing.

When making such decisions, it is essential to conduct a thorough evaluation of the current state of affairs, financial documentation, as well as the challenges and tasks that lie ahead for the company. Consider your team composition, existing collaboration conditions with various specialists, their current locations and relocation plans, the need for team expansion or geographic expansion of business operations, possibilities for reducing the tax burden, and the competencies of your legal and accounting professionals in international labor law and various payment systems, among other factors.

It is no secret that payroll management is not a simple process. The transition to remote work and managing a global team further complicates matters. How do you determine when it is worth investing more effort, time, and money in strengthening your own team, and when outsourcing to a specialized third party may be the optimal solution?

At first glance, outsourcing financial and legal tasks may entail slightly higher financial costs than maintaining in-house specialists. However, the drawbacks of the former option often outweigh the apparent advantages.

An outsourced payroll provider guarantees compliance with local legislation and assumes all risks associated with labor classification, tax deductions, and government reporting. As specialists in international payment transactions, they also ensure accurately calculated and timely payments, taking into account fluctuating currency exchange rates and the intricacies of modern payment systems.

Thus, making the right choice between an international or local payroll company can actually save a significant amount of money. It eliminates the need to maintain an in-house team to handle a large volume of paperwork, payment and tax calculations, as well as the administration of benefits and social contributions.

How to Select a Company and What Tasks to Delegate?

The payroll calculation processes are not limited to monetary payments. They may also include the following optional services:

●   Employment contracts and terminations;
●   Tax deductions;
●   Employee benefits packages;
●   Pension obligations;
●   Insurance;
●   Bonuses and incentives;
●   Relocation packages.

Each new international contract requires a thorough understanding of local legislation. After all, every country operates according to its own tax code, and all its nuances must be complied with.

When hiring employees through a third-party company, they take responsibility for processing and withholding taxes in accordance with local laws. This means that there is no longer a need to worry about missed payments or the emergence of other ‘costly’ problems.

How to Select a Partner Company?

1. Analyze the market of companies providing human resources management services in your chosen country.
2. Evaluate the experience of the companies you have selected and clarify their competencies in key areas.
3. Request information about the cost of services and their experience specifically in your industry.
4. Thoroughly review the contract terms, including the cost and scope of included services, the presence and competencies of the assigned manager, and the responsiveness of their support.

Don’t forget to inquire about the security of storing and using the data you will be sharing. Entering into a contract with a third party for payroll calculations means disclosing your financial information and your employees’ data.

Before assessing an offer from a potential partner, prepare information about the current employment relationships within your company.

For example:
●   You have full-time employees only.
●   You have both full-time employees and contractors for specific tasks.
●   You manage a large network of contractors in one country.
●   You have foreign employees working full-time.
●   You manage a large workforce of employees and contractors operating in different countries around the world.

The more complex the composition of your team and the dispersion of their residences, the more challenging it is to manage financial processes.

How Does the Company Hiring Process Work?

A registered employer, known as an Employer of Record (EOR), takes on the task of hiring personnel on your behalf in another country or countries (depending on your needs).
Formally, individuals hired through the EOR will be employed in the respective country. However, in practice, they remain your employees, with the exception of changes in documentation.

After signing a single contract, the EOR takes care of ongoing personnel management tasks, including salary calculations, tax and social contributions, and benefits administration.

It’s important to note that working with an outsourcing company is not a co-employment arrangement. According to the documents, your new partner becomes the sole legitimate employer for the employees. However, in practice, they only handle the documentation process without interfering with your day-to-day business operations.

By opting for this approach, you gain:

●   Time and resource savings. Your team can now focus on core business processes.
●   Expertise in local legislation and payment management, alleviating concerns about risks and unforeseen expenses.
●   Flexibility. The ability to quickly adapt to changing needs and utilize the most suitable solutions.