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General

1. What is Shield GEO?
2. What are the core services provided by Shield GEO?
3. What is a GEO?
4. Why use a GEO?
5. What are the advantages of using a GEO?
6. GEO vs DIY (do it yourself)?
7. What are the cost savings in using a GEO?
8. What is the difference between a GEO and a PEO?
9. What countries does Shield GEO operate in?
10. Is there a minimum or maximum period we can engage Shield as a GEO?
11. Is there a minimum number of employees to use a GEO service?
12. How does Shield GEO comply with data privacy regulations like the European Union’s General Data Protection Regulation (GDPR)?

Payroll & Tax

1. How are taxes and social security contributions paid?
2. Who pays the taxes?
3. Who pays the employee?
4. Can you support shadow / dual / split payrolls?
5. Who calculates payroll?
6. Do you support different currencies when processing payroll and invoicing? If so, what method do you use to calculate the exchange rates?
7. How do you handle Foreign Exchange?
8. What are the standard payroll dates?
9. Standard pro-rata calculation?
10. When processing additional payments (eg. commissions), do you use gross or net amounts?
11. Can you run out of cycle payments?
12. Do you provide payslips?
13. How do you handle taxable expense reimbursements as salary?
14. What are reasons why expenses are viewed as taxable?
15. How do you handle taxable benefits?
16. Why do my employees have to create a new expense report for the Employer of Record?
17. Can we set the local salary in a foreign currency?
18. Can we reimburse employee expenses directly when using an employer of record service?

Employment

1. Who manages the employees?
2. Who is responsible for the employees?
3. Who is the employer?
4. Are they employed on local employment contracts?
5. Who will be issuing the employment contract to the employee? Will it be between ShieldGEO and the employee?
6. How will I be notified of any changes to in country requirements?
7. Do you offer a benefits package?
8. Are employees covered under Shield’s Insurance? 
9. Can you provide local Medical Insurance?
10. How do we manage leave requests and tracking leave consumption?
11. How do we inform you of changes to the monthly salary or payroll?

Immigration & Work Permits

1. Can you sponsor work permits?
2. Can you arrange the work permit but we continue to employ the person directly?
3. Do you help with business visas?

General 

1. What is Shield GEO?

Shield GEO provides Employer of Record solutions in more than 90 countries around the world, ensuring legal compliance and rapid deployment of staff into any market for our corporate clients. We make international employment simple.

2. What are the core services provided by Shield GEO?

Our core services are to employ international workers on behalf of our clients. This means we take on the responsibility for payroll, tax, immigration and employment compliance. Often this is for companies that do not have an incorporated entity in a foreign country. We offer dedicated, end to end service that covers every element of employing staff into the host country, greatly reducing the risk and workload for our clients.

3. What is a GEO?

A Global Employment Organization (GEO) is an intermediary between the client and their international assignees, that acts as the employer of record in the host country and handles every aspect of the legal and administrative requirements of employment in that location. Also known as Global Employment Outsourcing this service allows companies to employ staff in overseas locations quickly, simply and cost effectively.

4. Why use a GEO?

A GEO is a cost effective and secure method of quickly employing staff into new or existing international markets, saving the time and expense of incorporating a local entity.  The number one concern for companies with active global mobility programs is compliance with employment and tax regulations. A GEO is already established in the host country and takes on the responsibility of making sure all legal, employment, tax and immigration requirements are met.

5. What are the advantages of using a GEO?

The main advantages of using a GEO is that it makes international employment simple.  Our customers attest that having Shield GEO handle the administration and compliance of their overseas staff, with a single point of contact and consistent service across all locations, has been transformative. It has become much easier to meet the expansion objectives of their business stakeholders.

The other benefits include:

• Cost savings
• Speed of deployment
• Full compliance with immigration and labor laws
• Flexible payroll approaches
• Assistance with both onboarding and repatriation of assignees

6. GEO vs DIY (do it yourself)?

Companies that elect a DIY approach face the daunting task of navigating complex local laws and regulations, including the need to set up a local corporate entity.  Unless the HR department has broad expertise and legal resources to meet this challenge, there is an ongoing risk of non-compliance in the host country.

By using a GEO solution, a company can minimize the risk of non-compliance, and rely on the GEO’s expertise to initiate or expand business activity in any foreign market.  Because the local entity is already in place, there is no delay in employing staff in the host country.

7. What are the cost savings in using a GEO?

The cost savings in using a GEO occur at every stage including:

• No need to set up, register and meet capital requirements for a local corporate entity – our employer of record is already in place
• No requirement to engage the full suite of host country advisors : tax advisors, employment lawyers, immigration specialists, payroll providers, incorporation advisors, etc.
• Streamlined payroll processes for all employees in the country
• Minimizing the potential for permanent establishment and corporate taxation
• No corporate tax or social security filing requirements – all covered by the employer of record
• Easy closure of employment without requirement to shut down entity

8. What is the difference between a GEO and a PEO?

A PEO or Professional Employment Organization differs from a GEO in several ways.  The PEO is typically a co-employer with the client, while a GEO acts as the sole employer of record.  The PEO can assist with some registration and insurance requirements, but the GEO provides a more complete employment solution for clients.  PEOs are frequently used within the US to handle multistate payroll issues, while a GEO can function across international borders for ease of payroll and employment compliance.

9. What countries does Shield GEO operate in?

Shield GEO provides employment solutions in more than 90 countries, most of which you can find on our website. If there is a particular country you’re looking at that is not listed on the website, please get in touch.

10. Is there a minimum or maximum period we can engage Shield as a GEO?

Shield GEO’s Employer of Record solution is very flexible in terms of duration. We have clients who have used us for 3 months whilst their local entities were being established. And other clients who have been with us over 5 years. There may be restrictions on minimum or maximum duration in a particular country or situation, especially if work permit sponsorship is involved. We’ll make this very clear to you up front.

11. Is there a minimum number of employees to use a GEO service?

There is no minimum. We’re happy to help you with a single employee.

12. How does Shield GEO comply with data privacy regulations like the European Union’s General Data Protection Regulation (GDPR)?

As an Employer of Record, Shield GEO may be required to collect and process personal data of an employee and their spouse, partner or dependents. We only collect this data with the consent of the employee and it is only used for performance of our duties. We have reviewed our Data Privacy Policy and processes to ensure that we meet the criteria of the GDPR legislation as well as other relevant data privacy legislation in the countries where we operate.

Payroll & Tax

1. How are taxes and social security contributions paid?

Employer and employee taxes are handled according to the host country requirements. These will be clearly outlined in your initial quote along with an explanation of how they are calculated in each host country. Each month we’ll invoice you, in advance of the payroll date, for what we call the Total Cost of Employment. Total Cost of Employment is the gross salary, bonus payment or allowances to the employee, employer contributions like tax or social security, expense reimbursements and our monthly management fee.

Employer taxes (e.g. payroll taxes) and social security contributions are shown as itemized inputs on the monthly invoice and included in our client reporting. When we run our monthly payroll process these amounts are paid to the local authorities as required.

Employee individual income tax and social security are deducted (withheld) from the gross salary in the monthly payroll process and then paid to the local authorities as required. These deductions are reported on the employee payslips and their summary reports.

There are some notable exceptions like France and Hong Kong where the employee is liable for their own tax submissions. We still assist the employees with calculating their taxes and submitting their returns in these locations.

2. Who pays the taxes?

Shield GEO handles payment of income taxes and employer taxes to the host country tax authorities as part of the payroll process.

There are some notable exceptions like France and Hong Kong where the employee is liable for their own tax submissions. We still assist the employees with calculating their taxes and submitting their returns in these locations.

3. Who pays the employee?

Shield GEO, as the Employer of Record, will pay the employee their net salary through the local payroll.

4. Can you support shadow / dual / split payrolls?

Yes, as long as local payroll and statutory withholding rules are met.

5. Who calculates payroll?

Shield GEO calculates the payroll in advance of each payment date and invoices you for the “Total Cost of Employment”. Total Cost of Employment is the gross salary, bonus payment or allowances to the employee, employer contributions like tax or social security, expense reimbursements and our monthly management fee.

The Shield GEO payroll invoice will show all these amounts as separate itemized inputs. This is also supported by our payslips and monthly reports.

6. Do you support different currencies when processing payroll and invoicing? If so, what method do you use to calculate the exchange rates?

Yes we can invoice our clients and accept payment in 15 currencies (AUD, CAD, CHF, CNY, DKK, EUR, GBP HKD, JPY, NOK, NZD, SEK, SGD, THB, USD, ZAR). In most instances, we have to payroll the employee in the local currency of the country. But our clients understandably wish to be invoiced in their home currency or a “major currency” like USD or EUR.

Our standard approach is to calculate the salary and employer inputs in the host currency and then convert it into the desired currency at the published rate on www.oanda.com site +/2% for foreign exchange variance. This is to take into account any fluctuation between the day we raise the invoice and the day we receive funds from our customer. We can reconcile any shortfalls on the following month’s invoice.

7. How do you handle Foreign Exchange?

If the client invoice currency and employee payroll currency are different, we apply a foreign exchange (FX) variance of 2% to any local currency inputs on the client invoice. For example, if the client will pay us in USD but we must pay the employee in KRW, then we’ll calculate the USD total based on the current USD/KRW exchange rate +2%.

In this example, FX fluctuation can occur between the date when we raise our USD invoice (between 3rd to 7th of the month) and the moment we have converted the USD into KRW (between 20th and 25th of the month). The 2% buffer allows us to account for any change in the USD cost of paying the employee salary and statutory contributions.

We have found that 2% is enough to cover most currency fluctuation. But in case of a pronounced FX loss we would invoice for the shortfall in the following month.

8. What are the standard payroll dates?

We ask clients for input on 1st of each month.

We need those inputs confirmed by 3rd of the month

We raise our invoices by 7th of the month

The invoice should be paid by the 15th of the month

We pay the employee normally on 28th of the month but this varies by country.

9. Standard pro-rata calculation?

Many countries will have their own standard pro-rata calculations. These may be just customary, or they may be statutory requirements. But where we have some freedom to set the pro-rata this is our default formula: 

We take the annual salary and divide it by 260 (the number of week days in a normal year). This gives us a “annual weekday salary rate”

We then multiply the “annual weekday salary rate” by the number of week days since the employee started work. We include public holidays.

E.g. If annual salary is 120,000. 120,000 / 260 = 461.54

Employee starts work on 10th of January 2017 which means 16 week days.

461.54 * 16 = 7,384.64

We evaluated a number of other formulas before settling on the one above. For example:

• Dividing the monthly salary by calendar days in the month to get a “monthly calendar day rate” and then multiplying that by the number of calendar days since work commenced. We didn’t like that this formula penalises the employee if they start work in a month with 31 days.

Annual salary is 120,000. Monthly salary is 10,000.

10,000 / 31 = 322.58

Employee starts work on 10th of January 2017 which means 22 calendar days.

322.58 * 22 = 7096.76

• Divide the monthly salary by the number of week days in the month to get a “monthly week day rate” and then multiply that by the number of days worked. We didn’t like that this penalises the employee for weekends and public holidays.

Annual salary is 120,000. Monthly salary is 10,000. January 2017 had 22 week days.

10,000 / 22 = 454.55

Employee starts work on 10th of January 2017 which means 16 days worked.

454.55 * 16 = 7272.80

• Divide the monthly salary by 30 to get a “30 day salary rate” and multiply that by the number of calendar days since work commenced. To be honest we didn’t really evaluate this one but we have come across it in Latin America and it doesn’t make much logical sense. The employee gets heavily penalised in February!

e.g. monthly salary 10,000 / 30 = 333.33
employee starts work on 10th of January (31 days in January)
days since work started (30-10) = 20 (note this is always based on 30 days even if the month has 28 days or 31 days).
3333 * 20 = 6,666.67

10. When processing additional payments (eg. commissions), do you use gross or net amounts?

It depends on the client instruction. We always ask whether an input is to be paid gross or net. e.g. for a commission of SGD 10,000

Paid Gross

This amount should be paid gross to the employee. Paid gross means we should add the employers social contributions on top of the SGD 10,000 when we calculate your invoice. And the employee should receive the net amount after employee social security and income tax is deducted from the SGD 10,000.

Paid Net

This amount should be paid net to the employee. Paid net means that we’ll add employees social security and income tax and the employers social security on top of the SGD 10,000. The employee will receive the SGD 10,000 into their account.

11. Can you run out of cycle payments?

Yes we can normally process payments outside our normal payroll cycle, with a few exceptions specific to certain countries. We charge a fee of USD 150 to process a payment out of cycle. This fee covers the additional bank fees and administration costs which can sometimes include having to re-run the payroll.

12. Do you provide payslips?

Yes we provide payslips in two formats. The host country payslip will be issued as per the statutory requirements of the host country. We also aggregate all payslips onto our Shield format which means we can provide summary reporting to clients across their employee populations. It also makes life a bit easier for expat GEO employees who may have trouble deciphering the local payslips.

13. How do you handle taxable expense reimbursements as salary?

We assess whether each expense is taxable or non-taxable according to the tax regulations of the host country. Non-taxable expenses are processed as a normal reimbursement and are not subject to tax or social security.

However “taxable” expenses need to be “grossed up” by adding the income tax, employee social security and employers social costs. We then have to process this through the payroll and paid with the employee’s salary:

1. We will invoice the client for the “grossed up” total
2. We deduct tax and social security
3. We then pay the remainder (which equals the expense amount) to the employee.

14. What are reasons why expenses are viewed as taxable?

– Not a valid business expense according to the tax regulations of the host country e.g. gym membership

– Amount is in excess of limits on expense reimbursements. E.g. client entertainment expenses can be claimed if the amount is less than USD 100

– Supporting documentation insufficient. E.g. no original receipt, receipt in wrong format

For example in Spain, Private Medical Insurance cannot be reimbursed as an expense. It is considered a “Taxable Benefit” and subject to income tax and social security. So if you wish to reimburse your Employees for this cost, these expenses would need to be “Grossed Up”. If the Private Medical Insurance costs EUR 1400 per annum we need to calculate the Income Tax and Social Security that applies to it. Then we’d invoice you for the “grossed up total”. This would be EUR 1400 + Income Tax + Employees Social Security + Employers Social Security.

15. How do you handle taxable benefits?

Many employers will want to offer their GEO employees benefits like private medical insurance. In some countries these benefits may be treated as a taxable benefit under the the host country regulations, which means they are subject to income tax and social security. We can still deliver the net benefit to the GEO employee by “Grossing Up” the taxable benefit. This does result in a higher cost to the end client.

We advise whether each benefit is taxable or non-taxable according to the tax regulations of the host country. Non-taxable benefits are not subject to tax or social security. Depending on host country requirements they may be handled in a few ways:

– paid by the employee and reimbursed

– paid by our local partner

– provided directly by the end client

We will advise you whether your preferred approach is possible.

However “taxable benefits” need to be “grossed up” by adding the income tax, employee social security and employers social costs. We then have to process this through the payroll and paid with the employee’s salary:

1. We will invoice the client for the “grossed up” total.
2. Then we deduct tax and social security.
3. Then we pay the remainder (which equals the net taxable benefit amount) to the employee.

For example in Spain, Private Medical Insurance is viewed as a “Taxable Benefit” and therefore subject to income tax and social security. So companies that wish to provide this benefit to their employees need to fund it through the payroll in the same way as salary. To calculate this, we “Gross Up” the benefit amount. If the Private Medical Insurance costs EUR 1400 per annum we need to calculate the Income Tax and Social Security that applies to it. Then we’d invoice you for the “grossed up total”. This would be EUR 1400 + Income Tax + Employees Social Security + Employers Social Security

16. My employees already submit expense reports to us in a particular format (E.g. Concur or Expensify or Expensebot). Why do they have to create a new expense report for the Employer of Record?

Unfortunately local tax regulations sometimes require us to review and record expenses in a particular format. Generally as long as we get a detailed expense report from our client (itemised expenses with currencies and conversion rates clearly marked) then we can normally handle translating that into the particular format required by the Employer of Record in the host country. The only additional overhead for the employee might be they have to sign the extra expense report when they send in the original expense receipts.

17. Can we set the local salary in a foreign currency?

In almost every country we have to pay the employee a salary fixed in local currency. And that salary should be specified in local currency in the employment contract. So if we are employing someone in Mexico then their salary is in Mexican Pesos (MXN) in their employment contract and we must pay them in MXN.

This can pose a challenge if our client wishes to fix the salary in a different currency, for example, USD. There are a couple of different approaches we can take. The biggest question is why the client wishes to fix in a different currency, as this will influence which approach is best. Is the client trying to cap costs at a particular USD total? Or is the client trying to ensure the employee earns at least a certain USD amount even if the local currency fluctuates?

There are 2 approaches we recommend. These are outlined below using a hypothetical example of an employee who the client wants to pay USD 10,000 per month in Mexico. In our example 10,000 US dollars converts to 188,000 Mexican Pesos.

Option 1: Fix in local currency

The simplest approach is for the client and employee to agree what the salary should be in local currency and this becomes their fixed salary. This will mean that the cost to the client will change as the foreign exchange rate changes. The salary can be adjusted, but typically it can only be increased. Lowering the salary requires agreement from the employee and may also raise red flags with tax and labour authorities.

Example : Employment contract states salary as MXN 188,000 per month.

Option 2: Fix in local currency but adjust according to FX variance

This approach gives the employee the greatest certainty if they want to benchmark their salary against a foreign currency. Basically we fix the salary in local currency but also monitor the conversion against the benchmark. Then if there is a discrepancy we can pay the employee a discretionary “variable fx bonus” to make up the difference. This bonus can be calculated quarterly (also possible to do monthly or annually) and paid to the employee in the following months payroll.

As in option 1 this adjustment can normally only be made to increase the employee salary. Lowering the salary requires agreement from the employee and may also raise red flags with tax and labour authorities. It is most common in this situation for clients to say if the FX moves in the employees favour, they pocket the extra. If the FX moves the other way then they are given the bonus to compensate.

Example : Employment contract states salary as MXN 188,000 per month plus a variable fx bonus to ensure the employee receives the MXN equivalent of USD 10,000 per month. Every 3 months we review the salary against the FX rate. If the MXN 564,000 proves to be less than USD 30,000 then we pay the employee a bonus to make up the difference.

18. Can we still reimburse employee expenses directly when using an employer of record service? 

We recommend expenses be paid through the local employer of record. But it is not obligatory in every country. Just to be clear if expenses are reimbursed by the client directly to the employee, Shield GEO will not be responsible for ensuring it is done compliantly.

There are three risks. These are worst case scenarios and we cannot say the probability of these situations occurring. It is for the client and employee to assess the risk and decide their actions.

1. Without the local employer of record reviewing the expenses it is possible that the client may reimburse something that should actually be treated as a taxable benefit.
2. During an audit the employee may be required to justify why payments they received from a foreign entity are not income.
3. The tax authorities may become alerted to the client having business activities in the country.

Employment 

1. Who manages the employees?

Although staff are legally employed through Shield GEO, day to day management of employee work hours, methods and projects is still handled by the client.

2. Who is responsible for the employees?

The client maintains primary responsibility for the employee’s activity and conduct in the host country, however as the Employer of Record, Shield GEO is directly responsible to the authorities for the employment. Especially as concerns immigration, tax or labor issues related to the employment. We’ll work with you to make sure that you and the employee understand any unique statutory requirements of the host country such as working hours restrictions, annual leave entitlements and so on.

3. Who is the employer?

Shield GEO through its partners acts as local employer of record in the host country.

4. Are they employed on local employment contracts?

In almost all instances a local employment contract is required to comply with host country labor and employment laws. We will work with you to draft an employment agreement that meets the host country regulations and also incorporates, where possible, any additional terms you may wish to include. For example your corporate policies on confidentiality or annual leave policies. The general rule is that local regulations will take precedence, but if your corporate or home policy is more generous than the local requirement we can include it in the employment agreement.

If necessary we can supplement this local employment contract with other supporting contracts such as a home employment contract, a letter of assignment or an Employer of Record agreement to cover any additional terms. This is particularly relevant where you wish to incorporate terms into the employment which aren’t recognized under the local employment contract like stock options or non-competition clauses.

5. Who will be issuing the employment contract to the employee? Will it be between ShieldGEO and the employee?

Shield GEO uses a network of local partners to handle the in-country employment. So the employment contract will be between the employee and our local partner. We issue the employment contract to our client and the employee in advance so they can review it. We work with the client, employee and local partner to accommodate any requested revisions whilst keeping the contract compliant with the host country regulations.

6. How will I be notified of any changes to in country requirements?

Your Shield GEO Account Manager will inform you whenever there are changes that will affect your employees in the host country. We’ll let you know what is going to change, when the change is scheduled to happen, how it will impact the existing engagement (if at all) and what options are available to mitigate any impact.

7. Do you offer a benefits package?

Non-statutory benefits are provided by the client as part of the employee’s compensation package.  Statutory benefits in the host country such as insurance or social security are provided as part of the payroll withholding process.

8. Are employees covered under Shield’s Insurance?

The employee will be covered under our Professional Indemnity and Public Liability insurance as well as any other employment related insurances required by the laws of the host country like workers compensation or medical insurance

9. Can you provide local Medical Insurance?

Yes we can assist clients in providing their employees with  a full range of private medical insurance including health cover, accident and injury, medical repatriation and family cover.

10. How do we manage leave requests and tracking leave consumption?

Leave requests are controlled by you. The employee will request leave directly to their line manager or HR as normal and you will review/approve it. But we need you to report any leave consumed (annual leave, sick leave and unpaid leave) each month when you supply the salary inputs. This allows us to track against the overall accruals. If you are in any doubt whether a leave request is in line with the statutory allowance or if there is a certain protocol in a country to grant or deny a leave request, please talk to your account manager.

11. How do we inform you of changes to the monthly salary or payroll?

Salary approvals are controlled by you but actioned by us. So we will contact you on 1st of each month asking you if you have any additional inputs. And then we will incorporate any changes it into our calculations from salary increases, bonus payments or leave without pay.

Immigration & Work Permits

1. Can you sponsor work permits?

Yes.  The GEO as a valid, legal entity can sponsor work permits for employees on assignment.

2. Can you arrange the work permit but we continue to employ the person directly?

In order to obtain a work permit from immigration, the GEO employer of record must directly employ and payroll the employee inside the host country.

3. Do you help with business visas?

Business visas for use outside the host country: As the Employer of Record in the host country we are often required to support GEO employees in business visa applications for travel outside the host country. We are happy to provide whatever support is required although it may incur an additional fee.

Business visas for use inside the host country: A GEO employment solution eliminates the need to obtain short term business visas since all employees will be isssued valid work permits.  This avoids any complications with immigration authorities around the overuse of business visas for multiple stays in the country.

In some countries we can dramatically reduce visa processing times and expense by using a business visa for the employee to enter the country and then lodge their work permit application. Sometimes it is even possible for the employee to start work in the host country from the moment their work permit application is lodged. If these options are available we will inform our client during our initial assessment.