Hiring remote employees can offer numerous benefits. Your candidate pool size is significantly increased, and individuals with specialized skills are now available to you. But with these advantages come additional administrative requirements, especially when hiring internationally.

Every country has its own set of employer regulations, and navigating those differences is something to leave to the experts. Knowing what kind of help you’ll need and why is the first step toward opening up your hiring pool to international employees. In most instances, you will need to engage either an employer of record (EOR) or a professional employer organization (PEO).

Enlisting an EOR or PEO is not only a good idea for minimizing your own compliance risks. Employees also receive protection by having an expert ensure they receive their rightful benefits and have their payroll correctly processed.

When Should My Business Use an EOR?

Using an EOR is essential when you are hiring employees in a country where you have no physical presence. Labeling the EOR as “essential” is not an exaggeration. This is an actual legal requirement.

Before being able to offer third-party services, an EOR will go through the process of setting up a location in various countries. After the registration has been completed, they can then hire employees on the behalf of other companies worldwide. Since they are established in the country of hire, their administration process is the same as any other employer in that country.

You could theoretically cut out the EOR by expanding your business overseas. Unless you intend to conduct operations in that country or hire a vast number of employees, hiring an EOR is more efficient. It reduces the overall cost, and you won’t have the hassle of dealing with employer regulations in a foreign country, either.

By engaging an EOR, you are also relieving yourself of a great deal of risk and liability. Since your international hires are technically the employees of the EOR, you are not responsible for any administrative oversight. Not only are administrative hiccups time-consuming, they can also be absurdly expensive. For example, not paying out required sick time in the U.K. can cost $3,000 or more per violation. Other violations in other countries can cost hundreds of thousands of dollars.

If you’ve heard of someone hiring an international worker without using an EOR, it is unlikely the worker was hired as an employee. Assuming the employer doesn’t have a physical presence in the country of hire, the worker was hired as a contractor.

You may think, “So can’t I just hire all my international workers as contractors and not have to deal with an EOR?” Unfortunately, taking a blanket approach to hiring remote workers might not be an option. Hiring an employee has very different and more robust legal requirements compared to hiring contractors. Depending on the country and job description, some positions may not be eligible to be filled with contractors.

If you try to skirt these rules and hire individuals as contractors against regulations, fines can be hefty. In Australia, contractor misclassification can cost an employer up to $66,000 per occurrence. So to avoid costly international compliance errors, it’s best to play it on the safe side.

When Should My Business Use a PEO?

A PEO is a great option when you want to offload HR tasks and taxation filing. These entities typically handle payroll and regular tax filing requirements. With a PEO, any employees being serviced are still employed by you rather than the PEO. This means you are ultimately liable for any erroneous tax filings and payments.

To use a PEO for international purposes, you must have an entity set up in the country where you’re hiring employees. It works especially well if you do have an entity set up but not the expertise to navigate employee administration. The administration aspect is especially important for taxation but can also include benefits and payroll functions.

Compared to EORs, PEOs are somewhat limited regarding the amount of guidance they can offer. They serve more as an administrator than a global expansion partner. An EOR can usually be relied upon to be involved in employee contracts to ensure international compliance. A PEO is more likely to enact the contract specifications you put in place rather than advising you on them.

A PEO may be able to handle payment for international contractors, just as an EOR can. So if your business typically hires remote contractors rather than employees, a PEO might serve your needs without an EOR. Make sure to assess both what you are required to have and also what would be most useful for your purposes.

How Can My Business Protect Its Employees?

Trying to handle international tax regulations on your own can put your employees at risk. Retirement plans can be dissolved or disallowed if not administered properly, or employees might find their insurance invalid when they need it. Payroll errors on income tax withholding can be an unpleasant experience for your workers, too.

By keeping your business in compliance, you are protecting both your own interests and those of your employees. With the taxation variances between countries, anyone other than an expert should consider enlisting the services of the third party to ensure smooth sailing.

How Can My Business Protect Its Employees?

Moreover, what method do you use for tax submission of freelance or remote workers? Do you know how to fill out and submit non-employee compensation (NEC) forms? Need to mention, that there is no way to neglect this matter. With the 1099-NEC maker, you can easily generate and download it with some company information and submit it to the authority. This way you can protect all your employees and this is also essential for your company’s reputation.