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Using a GEO to Hire an Employee Overseas: Pros and Cons

Hiring an employee in a foreign country carries risk, cost and time factors that may be new to your HR department, and an efficient solution has to be found that meets your business needs but also ensures compliance with unfamiliar laws.

The initial challenge is:

How can you assess the overall task of setting up foreign employment, especially if you don’t have a legal entity in the new location?  Where do you even begin with a DIY approach to overseas employment?

This is where the GEO employer of record solution comes in, which can work well for companies that want to hire local employees to run operations, send expats on assignment or to build a remote team in multiple foreign countries.  With a GEO, all of this can be accomplished in a few simple steps that allow your employees to begin work as quickly as possible.

What is a GEO (Global Employment Organization)?

If you are not familiar with the GEO service, then you may be surprised how efficient it is to employ workers overseas using this model.  In essence, the GEO becomes the employing entity in the new country, so that your company does not have to set up a local branch just for the purpose of employment.

After HR completes recruitment and makes a job offer, the GEO hires your employees directly in the country and provides end-to-end employment support and compliance.

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How does a GEO arrangement work?

The GEO arrangement really has three separate parties:  1) your company, 2) the employee and 3) the GEO employer of record (EOR).  The EOR steps into the role as the formal employer in the foreign country, but only for purposes of compliance and administration.  You continue to manage the employee’s time, work product and methods while the GEO tends to payroll, withholding and ongoing employment support. 

Because the EOR is already set up, this means they can onboard your employees without the delay and expense of incorporating your own legal entity.

The GEO employer of record takes care of all of these items for you:

  • Helps you draft an employment contract that meets local requirements
  • Registers your employee on their local payroll
  • Completes social security registration with required ID numbers
  • Ensures compliance with host country laws including tax withholding, making statutory contributions and sponsoring work permits (if needed)
  • Runs the monthly payroll and issues payslips
  • Handles any issues or questions that come up for the employee about benefits, leave and expense reimbursement
  • Adheres to notice and severance rules in the event of termination

Who uses a GEO?

The GEO model is used by any company that is expanding internationally, or wants to access a broader talent pool of remote workers.  Only companies with a firm commitment to a foreign market will consider going to the time and expense of setting up their own local entity, and the GEO alternative works for any size business and number of employees being hired.

Why would you use a GEO?

The question may come up of why a GEO service might be right for your company.  When you consider the other options for international employment, the GEO is by far the most cost-effective and compliant method for hiring overseas employees.

The GEO service is a perfect fit for you if:

  • You don’t have a local entity set up already in the country
  • Your company is just testing out a new foreign market
  • Compliance and cost are major factors for your HR strategy
  • You want to have global access to recruit top talent
  • Managing the risk of international employment is a priority

Pros and Cons of Using a GEO to Hire and Employee Overseas

Like any business strategy, using a GEO has pros and cons that have to be weighed against the other options available.

Pros

Many of the advantages of a GEO may already be apparent, but to summarize here are the pros:

  1. Time Saving

When you consider language and cultural barriers, steps in establishing a foreign entity, completing company registration and drafting employment contracts there is a real value in having the GEO take care of your foreign employment.  Most of these items are already complete, and the GEO is ready to take on the new hire without delay.

  1. Employer Relationship

The GEO offers a true, formal employer in the foreign country, not just a payroll provider.  The EOR is the actual legal employer of your new hires, and is in a position to offer local expertise and experience.  Your employees have access to a real-time resource that can support their administrative needs, regardless of the location of your home office.

  1. Decrease Costs

A GEO service can help manage the costs of hiring overseas employees, especially if you are entering multiple countries or building a remote team across regions.  Further, the GEO as a separate entity can help insulate your company from permanent establishment corporate taxation, which is often triggered when you set up a branch office for any reason.

  1. Reduce Risk and Meet Statutory Requirements

Your number one risk when hiring overseas is non-compliance with unfamiliar employment and tax laws, and the GEO ensures that you will be meeting all of the statutory requirements.  This becomes even more important when hiring local employees, who may be more familiar with their own country’s labor rights and protections than your HR department.

  1. Insurance

The GEO will make sure that you are providing the type of insurance that is required in the host country, including health coverage, professional liability and workers’ compensation.  They can also advise you on where there may be a need for dual or additional coverage.

Cons

No business solution is perfect for every company, and here are a few reasons a company might choose not to use a GEO:

1. Additional Expense

There is a cost to the GEO service and a fee is assessed based on the overall labor cost.  While the GEO fee is not excessive, some companies might prefer to use their resources to set up a long term entity and handle all employment compliance DIY.

2. Perceived Loss of Control

It may be difficult for some HR professionals to hand over the breadth of employment and payroll tasks to a third party in a foreign country, even when the GEO has the experience and expertise to offer.

3. Not in alignment with overall business strategy

Large multinationals are equipped to enter new markets and handle the expense of setting up an entity.  Their international business strategy and experience allow them to take a DIY employment approach with success, and they may not need local partners to assist.

Shield GEO Solution

As you consider the advantages that the GEO solution offers you,  you may want to join the many companies that are turning to Shield GEO to hire employees overseas.  With partners in most major markets and the support of regional account managers, Shield GEO is well prepared to make your international employment simple.

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

Looking for a better way to employ someone in a new country? Get in touch.

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