An expanding company is often faced with the daunting task of setting up a new office in a foreign jurisdiction, and complying with all local laws and regulations. However, there is an alternative to this approach, by using the global employment solution offered by Shield GEO. A multinational that is expanding into a foreign market can use Shield GEO to employ and payroll their staff in a particular country.
What this means is that the company does not have to set up a formal entity in the host country, which saves the time and effort of researching and complying with the numerous local rules in the jurisdiction. Instead, Shield GEO becomes the legal employer of record and can help the client with employment contracts, payroll, tax and withholdings and immigration requirements.
Shield GEO acts as the Employer of Record, becoming the in-country employer of the staff. Shield holds all the necessary licenses, insurances and registrations to employ and payroll staff on behalf of the client. The client remains responsible for the day to day management of employees, but Shield administers all local employment steps.
This service saves the client the effort and expense of using in house resources for employment, which can include:
– A company to establish your local entity and office space
– Local employment lawyers and accountants and immigration professionals
– Local partners in countries where co-ownership is required
– Local human resources, payroll partners and employment professionals
Instead, a client can use Shield GEO to handle all employment formalities and requirements, allowing for quick and cost-effective staff deployment. We combine our expertise in specific country rules and regulations with a solid background in managing global payrolls. In essence, Shield GEO becomes the in-country HR administration for our clients in the new locality.
There are several distinct options for using Shield GEO employment solutions, depending on the type of employment relationship desired and the scope of the work assignment.
In this option, home country employment is in ‘hibernation’, such as leave without pay, to allow local employment compliance in the host country. The advantages of this option for the employee include maintaining continuity of the home employment relationship while on assignment, along with tenure, stock options or pensions. This also offers a sense of job security to the employee while on foreign assignment, and in the event of termination the employee could have legal rights under the laws of both countries.
Disadvantages for this option are the interruption of certain home country benefits, work roles and the possibility that the employee could be taxed in both countries (although there are usually foreign income offsets for this situation.) The risk for the company is the creation of ‘permanent establishment’ by the employees work activities in the host country, which could trigger corporate tax liability.
Under this option, the employee is only employed in the host country, with no home country employment relationship with the client. This brings an evident ease of administration, since the only rules and taxation applied would be from the host country. On the downside, this increases the likelihood of triggering permanent establishment by the client, especially if the employee’s activity is generating income or concluding contracts on behalf of the client.
This option may be less appealing to the employee, especially if they have a long service record in their home country and established benefit payments or status. It is likely they would have no legal recourse in the client’s home country, and Shield GEO would be their only employment relationship in the host country.
In this situation, the employee may maintain their full home country employment relationship, while Shield GEO becomes the local employer of record only for the purposes of local compliance with payroll contributions and withholding.
This option is the simplest to put into place, and the least disruptive to the employee who is treated more like one on ‘foreign assignment’ than having true expat status. Local rules are complied with to maintain the client’s ability to enter the market quickly with experienced staff, but assignments may be limited depending on the visas and work permits obtained.
In this scenario, the employee is employed in both the home and host country at the same time, which can add flexibility in some areas. Payroll administration can either be split or run as a ‘shadow payroll’, which could complicate employee taxable status. If there is no tax treaty in place, double taxation could occur for the employee, and there is a continuing risk of permanent establishment for the client.
There are obvious advantages for the employee, who will enjoy an uninterrupted relationship with the client in the home country, including payment of benefits and pensions as well as length of tenure status. These elements give rise to job security and legal rights, possibly in both countries.
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