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How We Pay our Remote Employees around the World

Shield GEO employs 26 people around the world on top of our GEO employees. By nature, we are a global company, and by culture, we embrace remote work and flexibility. That means we have employees in countries where we don’t have business and vice versa.

We also employ our staff across a spectrum, depending on a range of criteria. As a company, we hire contractors and direct employees for different roles, and we also utilise third-party employers (like us!).

There are a few reasons why we use each method, and of course, there are pros and cons for each. Below, we outline the different ways we pay our workers and offer some advice on how you could pay yours. 

Hiring and Paying Contractors

Contractors are often hired for a specific job or period of time at a rate of pay. They are not a regular staff member and therefore often do not usually receive the benefits of a regular employee. This includes paying their tax, retirement planning and leave packages. The administrative burden for contract work largely lays on the individual, not the company.

Benefits of Hiring a Contractor

1.    It’s easy!

Hiring contractors is the simplest method to set up from a company perspective. It’slow responsibility and low effort in terms of ongoing day-to-day requirements. After settling a contract with the individual, all that’s required is paying an invoice and abiding by the agreed upon terms and conditions between yourself and them.

This method works especially well when we are employing people for a shorter period or on a freelance basis.

2.    There isn’t a great alternative

There are some instances when employees actually request to remain contractors rather than transitioning to direct employees. In some cases, the employees’ home country may not offer health benefits or retirement planning, so it works better for them to manage these aspects themselves.

3.    It allows us to try out a new country

Contracting allows us to limit our liability. If we are entering into a new country we deem to be higher risk, we might engage a contractor for a probation period until everybody is happy with the conditions.

Contracting, while appealing for its simple and straightforward approach, isn’t always an ideal solution to hiring overseas workers.

The Challenges of Hiring Contractors

1.    Compliance

When contracting it’s important to consider the legal implications. Often there are limits to how long you can engage someone contractually, particularly if the work they are doing is effectively that of an employee. If someone is working for one company with set hours, reporting to the same person and using the company’s equipment, then tax and employment laws would consider them an employee. Of course, it depends on the particular country’s specific laws as they can vary, but this is something to keep in mind and worth investigating early on.

2.    It doesn’t work for everyone

As well as putting the administrative burden on the individual, contracting doesn’t allow us to provide employee benefits. For example, social security, insurance and retirement planning are all things which are made much easier by employee status. If we didn’t believe in employment and that people should be protected and taken care of correctly, we wouldn’t be in this business.

Using Third party GEO employment

As a GEO ourselves, we really believe in the usefulness of third-party employers of record when the circumstances call for it.

Using a GEO is generally the simplest way to employ someone outside of the countries we’ve incorporated in. While there can be a bit of back and forth setting up with a new partner, the administrative burden and ensuring compliance with local customs lands on the GEO, not the company.  

Benefits of Outsourced Employment

1.    Outsourced compliance

When employing out of country, the hardest part is ensuring you understand all of the legal and tax requirements. This can take a lot of time and research to understand, and it is a lot easier to outsource. We can trust our local partners to keep us compliant.

2.    We believe in the process

As a GEO ourselves, we truly believe in this practice and see the benefits of outsourcing across all of our clients. Using a GEO is easier to set up, allows for immediate start dates, shares the responsibility and ongoing administrative burden and offers more than we could ourselves.

While we love using local partners, there are some issues to consider.

The Challenge of Using Third Party GEO Employment

1.    It can be hard to remain consistent

One issue that we’ve come up against is ensuring our systems remain consistent across all employees while using a third party. GEOs will generally have their own policies in place which can make it hard to create a company-wide procedure. For example, if we say expenses need to be in by the last week of the month, but our local partner want them in three days before we now have to change our system or accept inconsistencies.

Direct Employment

We have entities in Australia and the UK where we directly employ staff. When incorporating, we knew we’d be in those locations for a very long time (if not forever!), and we would always have a team there too. It also makes sense to have branches in those areas for the business.

Some excellent benefits come with employing people directly.

Benefits of Direct Employment

1.    Lower cost once there are a number of employees

There’s always a tipping point in every country where it just makes sense financially to set up an entity. This is what we mean when we talk about a spectrum. Each payment method feeds into the next. 

When the cost of fees outweighs the cost to establish there’s no longer a need to use a third party. That number will depend on the country and how long you as a company wish to remain there. Some may be as low as five employees, others up to 100. Although, there are some countries where you may never want to incorporate due to the red tape and compliance. At the end of the day, it’s easier to outsource than to deal with it all yourself.

2.    It can help with business

For our particular business model, we’re not just employing our own staff but the staff of our clients. This means the actual number of employees in a specific country could be much higher than the couple employees we have working from that country. If we set up our own entity, then we can bring those under our umbrella as well.

Though difficult to quantify, there may also be instances where having an entity in a particular country, for example, the US, may help to gain clients in that country. It’s one of the reasons we’re considering incorporating there.

3.    High level of control

Employing directly allows us to set our internal policies however we like. There are no restrictions on how and when we pay our employees. For example, we can choose the date that works best in our cycle. If we want to offer stock options, we can do that. If we wanted to change the health insurance offering, we could do that. There are no limitations from a third party who may not offer a benefit we’re interested in providing. 

Despite the benefits, there are a couple of reasons why we haven’t incorporated in every company we have employees stationed.

The Challenges of Direct Employment and Incorporating

1.    Difficult to set up

There’s a reason we rely on third parties so often, and why we recommend them so often. Setting up an entity is complicated, time-consuming and expensive. We’ve been interested in incorporating in the US, but their country-specific regulations are causing us to wait off a bit.

2.    All responsibility is on us

While employing directly allows you to have full control it also comes with full responsibility. When things go wrong or employees have questions –it’s on us. When using a local partner, they can take care of it all, but if we get asked about a tax issue, we have to go to our accounting firm or figure it out ourselves.

As you can see each method has strengths and weaknesses, but we utilise each for different purposes. For our company, the combination of each way allows us to have solutions for every stage of our growing and changing company.

 Need more information about employing in a new country? Learn more about:

Looking to hire an employee overseas? Get in touch.

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