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The Ultimate Guide to Global Employment Solutions

What is a Global Employment Solution (GES)?

A GES is a legal and compliant method to employ workers abroad, without having a branch office or entity in the foreign country.  A company expanding internationally can use the GES to employ one or more workers, run payroll, withhold taxes and contributions and ensure that all host country employment laws are followed.

The GES becomes the ‘employer of record’ for purposes of employment administration, while the home country employer/client continues to manage and oversee the work of the employee.  The GES is applicable for both expats on assignment as well as hiring locals for either expansion projects or remote work roles.

As companies increasingly seek global talent, the GES becomes the simple and cost effective method of employment abroad.  Whether a company is setting up a call centre in Philippines or hiring IT talent in Asia, the GES can meet their needs from recruitment, hiring, on-boarding and putting the employees on a local payroll.

Why Use a GES Instead of a DIY Approach?

If a company decides to use a DIY approach, they will need to accomplish all of the following before an employee is able to work in the foreign country:

  • Incorporate a local entity and comply with all registration requirements
  • Hire in country employment lawyers, accountants and immigration experts
  • Find a local partner for countries where co-ownership is required for foreign companies
  • Set up and run a local payroll using HR and payroll resources
  • Apply for and sponsor work permits for expat employees

If the same company instead chose to use a GES, the GES would handle all of these steps for them, including setting up local employment contracts and making sure that all taxes and contributions are withheld accurately.  The time and cost savings are significant, allowing the HR department to focus on recruitment, hiring and management of employees.

When Might I Need a GES?

One of the main reasons that companies use a GES is to avoid the time and expense of local incorporation in a foreign country, solely for employment purposes.  The GES also offers a high level of flexibility, in country expertise and HR support in unfamiliar foreign jurisdictions.

There are several different ways to structure the foreign employment, depending on the country and what is best for the employee:

Outsourced Employee Option 1: Localized Employment with Hibernation of Home Country Employment 

This involves suspending or ‘hibernating’ the home employment, while organizing local employment in the host country. It ensures statutory compliance, while maintaining some continuity for the employee in the home country. 

For instance, if a company wants to assign an employee from the US to Singapore for six to twelve months, this might be the best choice, as it is the least disruptive and allows the employee to return home with no interruption of benefits or seniority.

Outsourced Employee Option 2:  Fully Localized Employment Solution 

Another solution is to have fully localized employment, and no employment in the company’s home country.  This would be the best option for a UK start up to hire remote tech workers in India, so that the they can have full employment administration and benefits in their own country.

Employed in Home Country with Statutory Contributions Made in the Host Country 

If an employee on assignment is reluctant to give up their home employment, then the GES could become the employer of record in the foreign country solely for the purpose of making statutory contributions.  This may only be suitable for shorter assignments where there is no local tax liability for the employee, and which could mean there may be limits on work permit length.

Dual Employment

A company can also use a GES employer of record in combination with home country employment, with the payroll being split between the two countries, or some portion being a ‘shadow payroll’.  This is slightly more complex method, but does achieve the goal of maintaining home country employment and host country compliance.

Alternatives to Using a GES

There are a few alternatives to using a GES for international employment, aside from a full DIY incorporation approach.  If a company has existing business contacts or partners in the country, that company might be willing to put the employees on their payroll.  This requires a fairly solid history with the company, but can be a viable option for either expats or locals.

The only other way to hire foreign workers is via an independent contractor relationship, which is simpler for the company, but does not entail as much control, accountability or loyalty as there would be with an employee.

Benefits of Using a GES

The benefits of using a GES for companies hiring abroad start to become obvious when compared to the alternatives.  The GES is a true local employer, which shifts all of the employment administration from the client’s HR department to the GES.  This increases efficiency, and avoids any potential compliance problems in the new country.

Although the GES charges a fee for their service, the costs of a DIY approach are far higher when you include all of the incorporation, set up and management expenses in running a foreign payroll.  Also, the fact that the employer of record is already established in country by the GES means that employees can be hired and onboarded almost immediately to assist with expansion or begin remote work roles.

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