Nicole Sahin, Founder and CEO at Globalization Partners
Any business with serious growth ambitions is likely to hit a pivotal point where the time is right to tap into new markets and revenue streams. For many, this will mean global expansion, hiring new people and learning about what it takes to succeed in different geographies. This can be exciting and daunting in equal measure – establishing a legal entity in another country, for instance, requires considerable planning, time and resources for a multitude of issues, from legal and HR to tax and compliance.
A recent survey of CFOs from organisations actively planning to expand internationally underlines the importance of these key issues, with regulatory/legal compliance (56%), tax structure (46%) and human capital/talent (38%) seen as the largest potential barriers to success. Any gaps in experience or resource has the potential to turn this into an overwhelming set of challenges for business leaders.
The consequences of getting things wrong can be extremely serious, and in the most extreme situations, it can put the entire international expansion process at risk. There are no guarantees, even for well established business with deep pockets.
The worry that opportunity will turn into risk, and risk will itself turn into failure is enough to stifle the ambitions of many businesses that have the potential for international success. And that’s completely understandable – any company that has spent years building sustainable domestic success can’t be criticised for taking a pragmatic view of international expansion if its leadership thinks the obstacles are too great.
The significant growth in demand for Employer of Record (EOR) solutions, however, is because the model allows companies the world over to break into new markets, hire the global remote talent they need with all the human resources, onboarding, paperwork, and legal compliance taken off their to-do list. Not only does this minimise a process which can typically take six months or longer if executed ‘in-house’, it also reduces risk and closely manages the costs of setting up a new business entity abroad.
This gives businesses the agility to manage the expansion process at their own pace, so whether they opt to test products and services in new markets or grow more quickly, they can do so without the management and compliance overhead of setting up on their own. With the option to focus purely on growth, the chances of long term success are considerably enhanced.
However, not all EORs are created equal, and it’s important to understand that there are generally two Employer of Record models. One is a fully-built, in-house model whereby a highly qualified legal, HR, and tax team have been put in place to efficiently meet the needs of customers. This model takes on the liability for ensuring things are handled properly and legally in each country.
There’s also the consolidator model. This is the model where an umbrella company selects third-party mom and pop shops in each country on behalf of its customers, and acts as an intermediary between the customer and the local in-country partner. This is known as the aggregator or consolidator Employer of Record model.
Our in-house model not only helps you manage your company while you’re building it, but it is a critical differentiator at the time when you exit, when every detail of your international contracts will be scrutinised.
Ultimately, using an EOR can be a differentiator for companies looking to hire the best talent since it can provide very attractive benefits. This may include things such as health insurance, medical and dental plans and tax-compliant bonus schemes that are tailored to each country and so forth. In turn, an EOR’s ability to demonstrate HR efficiency and compliance can favourably influence potential candidates with their decision-making process. This delivers huge levels of flexibility, allowing an organisation to react quickly and dynamically to market forces and potential opportunities.
The sooner businesses can focus on building a market presence, partnerships and a brand within a new territory, the more quickly they can get on a pathway to success. Whilst partnering with an EOR can remove barriers to growth, choosing an EOR requires careful consideration and the knowledge that quality matters. An EOR that was built from the ground up, by a team of world-class legal, tax and HR teams, is critical for successful expansion. After all, with the right partner by your side, anything is possible.