A Globally Mobile Workforce and Evolving Hiring Practices

The irreversible shifts in the working patterns of employees is a lasting legacy from the Covid-19 pandemic. Unquestionably, employees have more control over their work schedules and where they do it. This is a lasting legacy of the Covid-19 pandemic. Employers have had to rethink their employment policies in order to retain and hire the best talent.
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The entity will provide services to group businesses, usually on a cost-plus model to comply with transfer pricing rules. It also gives greater control over and ring fences risk, while still allowing for agility and flexibility in the hiring and deployment of staff to remote locations. The centralization of the management allows for a consistent global approach to policies, remuneration, benefit provisions and performance management. A GEC allows for coordinated monitoring and standardised approaches to compliance. It is also possible to retain central control over finances and risk.
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The creation of a GEC is a complicated undertaking that involves both the creation of a new entity and the onboarding of employees. There are many regulatory, employment law, as well as immigration considerations. Payroll challenges are based on the location of employment duties. While these are not new issues or considerations, they all need to be considered when implementing a GEC.
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It is essential that a jurisdiction has a network of bilateral social security and double taxation agreements. Also, it is crucial that skilled local support staff is available to run the GEC (until a remote model is selected). The GEC approach does not provide a single solution for all employers who have globally mobile workers. While there are obvious benefits, it is recommended that appropriate due diligence is undertaken to assess the suitability for a business.Professional Employment OrganizationA PEO is an outsourced human resources solution used to manage employees working in locations where an organization may not have a legal presence
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A PEO does not actually employ an employee. Instead, it manages various HR and administrative functions, such as payroll and tax compliance. However, the PEO should be carefully considered to ensure that the PEO is culturally appropriate for the organization. It is possible that some staff managed by a third party may not be as integrated as those managed centrally. Management may also feel they don't have the same control over their employees. Employer, employee and PEO need to have a clear understanding of responsibilities and reporting lines. This can lead to a problem where any permanent establishment risk is still on the employer. However, this can be managed centrally using GC.
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Employer of Record. An EOR is similar in function to a PEO. However, the EOR will hold the employment contract at the place where the employee is working. An EOR, or employer of record, is an entity unrelated to the employee that will manage them and all their HR functions. This model is completely outsourced and can access a compliant structure.
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This allows for greater speed when moving to a new place by using a preexisting payroll. It also gives the employer local expertise to obtain any work permits or visas. However, the company must have a clear understanding of the responsibilities regarding giving instructions, reporting lines and performance management. Remote workers can also use it, even though there is not a corporate presence at the place where they are working. One thing to be aware of is that the EOR does not guarantee that the employee will create a permanent business establishment. This has led to an increase in freelancers being hired, either in-country or further afield.
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This could present interesting challenges to the hiring industry. The freelancer may be considered an employee depending on their relationship, the role and the work location. Unintended extra costs and obligations can be caused by this.
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It is important to establish enough detachment from the worker to allow the business to maintain the required control over the freelancer in order to manage output and performance. Is it possible for the freelancer to access company systems and IT? They would need to be covered by the existing HR policies. Non-compliance can lead to reputational damage and costly penalties for businesses. We recommend that hiring businesses carefully evaluate their options and do due diligence before engaging freelancers.
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There are many pitfalls to avoid. Professional guidance is recommended. Author InformationAndrew Kelly is a partner with BDO's global employer services team. He has been working in the expatriate tax services industry for more than 20 years. His primary focus is to advise individuals and companies on cross-border tax and financial implications of international assignments. He works closely with payroll, finance, and HR functions to ensure that all aspects of secondments are tax efficient and cohesive. Lee provides advice to clients regarding employment tax and social insurance issues related to international mobile employees. This includes business travelers, assignments, and hire moves.