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Using a GEO to Send an Employee Overseas: The Pros and Cons

There are a number of reasons that your business may need to send an employee from your home office on a work assignment overseas.  For example, if your business is expanding into a new market, establishing business relationships or staffing an existing foreign operation, then you will need experienced employees in place to ensure success. 

Sometimes you can hire locals for certain positions, but upper management and technical roles will usually have to be filled by your expat employees, who are willing to embrace a foreign assignment.

Your primary task is to find a cost-effective and stable way to employ expats legally in the foreign country.

But the question is how do you accomplish this if you don’t have a legal entity in the country to run payroll and sponsor work permits?

For many multinationals, a GEO (Global Employment Organization) is the ideal solution for assigning staff abroad.  Compared to other options, it offers you the most cost-effective and quickest way to deploy your employees internationally.

What is a GEO?

The GEO is a third party to the employment relationship between your company and employees on assignment.  Through a local employer of record (EOR), the GEO becomes the employing entity in the country for purposes of running payroll, tax withholding and sponsoring work permits.

Your HR department and management will still control the work and productivity of your employees, but won’t have to worry about any administrative tasks in the country.  It is a way to essentially outsource the payroll and employment functions of your HR department for those staff on assignment.

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Why Use a GEO to Send an Employee Overseas?

The reason that you may want to use a GEO is because it saves you the time and expense of setting up a local entity, as well as the very real challenge of running a foreign payroll from your home office.  Unless your HR department is well versed in the foreign employment and tax rules, the risk of non-compliance can be quite high.

Here are the factors that may warrant the use of a GEO:

  • No legal entity in the foreign country
  • Concern about risk of non-compliance with local employment laws
  • Entering a new market for the first time
  • Assigning only a few employees for a short term project
  • No expertise in running foreign payrolls or tax laws

If any of these apply to you, it is worthwhile to consider the pros and cons of the very adaptable GEO model.

Pros and Cons of Using a GEO to Send an Employee Overseas

Pros

1.              Running a local payroll with an established legal entity

Because the EOR is already in place, this allows you to put your assigned staff on a local payroll right away.  Otherwise, it could take months to incorporate and register a branch office of your own.

2.              Accurate and timely tax withholding

One of the trickier aspects of assigning employees overseas is handling the tax requirements.  Any assignment of more than 30-60 days will require employee tax registration and withholding from the local payroll, as well as reporting and filing by your company.  The GEO service does all of this for you, and keeps you up to date on any regulatory changes.

3.              EOR can sponsor work permits for assigned employees

The EOR is a registered local corporate entity and as such can quickly sponsor and secure work permits and visas for your staff.  Without this advantage, you are limited to short term business visas while you are setting up your own entity, which can cause delays in initiating business activity.

4.              Reduced risk of non-compliance

Because the GEO has in country experts running payroll and administering employment, the risk of non-compliance is greatly reduced.  In a DIY approach, you would need to hire this expertise even if you have your own branch office.

5.              Integrating your HR policies to match up with host country requirements

One of the real headaches of assigning staff is the need to adapt your HR policies on termination, leave, allowances, benefits and severance.  All of these items must match up with host country statutory requirements, because your staff will be subject to those laws.  The GEO can make sure that you are setting the right policies for each country, as well as drafting a locally compliant employment contract.

 

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 of your assigned employees.  While the GEO fee is not excessive, some companies might prefer to use their own resources to set up an 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.

Or, you may be able to meet your objectives using short term business visas, and avoid foreign employment steps altogether.

Shield GEO Solution

Having reviewed the pros and cons of the GEO solution you may still be wondering if it is the right fit for your company. Shield GEO will provide you with an end-to-end international assignment service to take care of immigration, payroll and employment for your employees in their host country.  Our service begins as soon as you start planning the assignment, so we can have everything in place well ahead of time, and can ease the transition of your employees to their new work location abroad.  We will assist you in the major challenges of international expansion and minimize the risk of non-compliance and assignment failure.

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