Hiring overseas: A guide for SMEs

Have you ever thought about hiring overseas? If the answer is something along the lines of, “yes, but we don’t have the expertise or resources to do it,” then you could be in for a pleasant surprise.

A growing number of small and medium enterprises (SMEs) are hiring employees from different parts of the world. And they have been able to do this, in large part, by leveraging new technologies and innovative legal arrangements.

In this article, we’re going to cover the main points that you need to understand if you want to take advantage of an overseas labour force.

When should SMEs hire overseas?

Small and medium-sized enterprises willing to hire candidates from other countries can expect a range of positive outcomes. Here’s a quick overview of the main benefits:

  • Access to a wider talent pool – With overseas hiring capabilities, you instantly gain access to a broader pool of candidates, each with unique skill-sets, experience, and relevant qualifications. This gives you a much better chance of finding the ideal person compared to a scenario in which you can only hire from your local area or within a single country,
  • Employees that can bridge cultural and linguistic divides – The business world is growing increasingly connected and globally intertwined. This is as true for small and medium companies as it is for large, multinational enterprises. And bridging cultural divides can be tricky. Hiring employees within another culture, that have an intuitive, experiential understanding of it, along with language skills, instantly solves this problem.
  • Lower salaries for skills in short supply in your native country – If the labour force in your country is marred by skills shortages, overseas employees can fill the gaps in the market, and will often cost significantly less to hire than native candidates.
As the world becomes more and more globalized, with seamless communication between companies and individuals from different countries and cultures, it’s important to keep in mind the competitive benefits of a remote, overseas team. By not taking advantage of the opportunities on offer, you could needlessly be giving your competitors an edge.

What are the three most common employment models?

SMEs that are eager to open up their hiring processes to international candidates should be aware of the main employment models through which this is possible.

Here’s an overview of the most common models:

  • Payroll – When you put an individual on your company’s payroll, you are employing them directly. Once an employment contract has been signed, you will usually have to meet a number of responsibilities related to healthcare, taxes, sick leave, and so on. If you intend to end their employment, you will have to give sufficient notice.
  • Contract – A “contractor” is a self-employed person who agrees to work for you for a specified period of time according to the stipulations of a predefined agreement. Freelancers are examples of contactors. A contractor has no long-term obligation to a company and, as such, is usually not entitled to additional benefits, such as healthcare and bonuses.
  • Global Professional Employment Organisation (PEO) – Also known as an “employer of record” (EOR), PEOs provide an efficient way for small and medium-sized businesses to employ people from other countries. Essentially, PEOs are separate organisations that hire individuals on your behalf, meaning that you don’t need to establish a different company in another country. In most cases, PEOs offer distinct advantages to payroll and contractor models.

Why are PEOs often the best fit for SMEs?

Let’s take a more in-depth look at some of the benefits of professional employment organisations, as this will be the most feasible route for most employers:

  • Removes the cost of setting up a company in another country – Setting up a new company in a foreign country can be a costly and time-consuming process. PEOs entirely remove the need to do this, in some cases completely and for the long-term.
  • Reduces admin work – Managing payroll for multiple overseas employees represents a significant bureaucratic burden. PEOs will handle most aspects of employee management for you.
  • Allows you to plan your company’s expansion into new countries – In some cases, professional employment organisations only provide a short-term solution. In Germany, for example, it’s only possible to use PEOs for a limited time (usually up to eighteen months). This “grace period” can be incredibly useful for setting up a new legal entity in another country.
  • PEOs sometimes offer a viable long-term option – Where PEOs are a sustainable long-term solution, you may want to find a solution that consolidates your PEO providers once you move past two or three employees in overseas locations.

Conclusion

If there’s one key takeaway from this post, it’s this: don’t be deterred from hiring overseas because you haven’t got access to the resources as large enterprises. With a well-formed strategy, it is entirely possible to employ candidates from other countries.

What’s more, by building a remote, overseas team in the right way, you will save money, bridge cultural divides, and have the opportunity to leverage a broad set of skills, experience, and qualifications.

As you move forward, keep in mind that professional employment organisations (PEOs) are usually the most feasible option for small companies.

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