What is a Global Employment Organization?

A Global Employment Organization (GEO) is an international solution for hiring employees abroad, without having a branch or subsidiary in the foreign location.  The GEO structure utilizes ‘employers of record’ in each country of employment, who are already set up and ready to onboard and payroll a new employee.  This streamlines the hiring process and ensures that employers are in compliance in the host country, where the GEO relies on their local partners and experts.

GEO Definition

The GEO is a third-party entity that, through its employer of record (EOR), provides an employment method that benefits both the employee and end-client.  The primary focus of the GEO is employment administration, which means the end-client still manages the daily work schedule and activity for the employee.  This includes setting the terms for their employment contract, compensation, position, duties and project timelines.

What the Global Employment Organization does:

• Arranges work permits and visas for expat employees
• Runs a local payroll through the EOR, which gives employees the confidence they will receive statutory employment benefits and protections
• Ensures that the employment contract meets local standards
• Advises the client on relevant employment laws such as notice, severance, termination and statutory leave
• Coordinates between the EOR, end client and employee through a dedicated regional account manager

Why Use a Global Employment Organization?

There are several good reasons why companies use a GEO solution, including:

• To avoid the time and expense of local incorporation and registration
• As a means to hire remote employees quickly with the assurance of local compliance
• To ensure that a local payroll is set up that meets all legal and regulatory standards in the host country
• Allowing the HR department to focus on managing employee work rather than complex administrative tasks abroad

History

Large multinationals have been entering foreign markets for decades, often needing to set up a branch or subsidiary for expansion and employment of expats or residents. However, smaller companies that simply want to explore a new market, make sales or seek out local expertise, may find this step cumbersome, leading them to find other options such as the GEO model.

The use of a GEO has expanded in recent years as HR departments are accessing a global talent pool with specialised skills or direct access to a foreign market.  This means that instead of sending employees on international assignment as in the past, a company can recruit and hire a skilled, local resident to fill the role.

While some management roles can still come from the home office, many technical, sales and administrative positions can be filled by locals who may be eager to work with a foreign company.  As remote teams grow, the GEO provides a modern solution for employment across multiple regions and countries.

Alternatives to Using a Global Employment Organization

A GEO is not the only option when it comes to hiring employees abroad, and it is worth reviewing the other choices a company will have.

• DIY Approach to Local Incorporation

Companies with a commitment to a foreign country and plan on hiring multiple staff, may choose to incorporate a local entity and manage the entire employment process DIY.

• Use of a Third-Party Company/ Partner

If a company has existing business relationships or partners in the foreign country, that third party may be willing to place the employee on their payroll. 

• Hire the Worker as an Independent Contractor

Hiring as a contractor avoids the entire employment issue, and means the contractor must handle all of the tax and contributions on their own as a self-employed.  The problem with this option is that some countries have fairly strict criteria when it comes to classifying contractors and could legally claim the worker as an employee after all.

• Pay the employee using a remote payroll from the home country

If a company just wants to put the employee on their own payroll at home, they might run into problems with foreign prohibitions against remote payrolls, lack of statutory contributions and failure to withhold local taxes.

Benefits of Using a Global Employment Organization

As hiring remote international employees expands in popularity, companies will want to evaluate the core benefits of using a GEO over the other options mentioned.

• Immigration & Work Permits

When a client is assigning employees from home, the GEO can sponsor work permits through the EOR as the legal employer.

• Tax Compliance

Tax calculation and withholding are all taken care of by the EOR, who are experienced with navigating local tax regulations.

• Does Not Require Local Incorporation

One of the chief benefits of the GEO solution is that the company does not need to incorporate their own entity in the foreign country, which can be time consuming and difficult to navigate.

• Payroll is Run in the Employee’s Country

By running a local payroll, the employee receives a payslip just like any other employee, along with required withholdings and contributions.

Summarizing GEOs

Ultimately, the choice to use a GEO will depend on several factors, such as the number of employees being hired, a company’s long-term commitment to the country, and the cost of setting up an entity vs. paying for the GEO service.  A company hiring several remote employees is more likely to use a GEO, while a multinational looking to establish an office in the country may only use the GEO as an interim solution while they complete the incorporation process.

The information in this article is subject to changes in local legislation.