International employment options with EORs, PEOs, GEOs and more
As the market for skilled professionals becomes increasingly globalized, enterprises want to recruit the best talent, wherever it is to be found. While at the same time, an increasing number of knowledge-based workers are seeking international employment possibilities. They want to work for a business located anywhere, but do that work from a location of their own choosing.
In most cases though, employment law is applied at a country level. There’s simply no way for a firm in, say, Germany, or Singapore, to employ a person based in Spain. That person would need a different kind of contractual arrangement, – for example, trading as a limited company or as a self-employed person, who sends invoices to the parent company.
This might not be ideal, as it means that person is not accruing fair employee benefits where they live. It’s difficult to create parity between employees and freelancers. If two people in the same team are doing the same work, how can it be right if one of them can get paid to be off sick for a fortnight? Small wonder if their freelance colleague quits on the spot when they find out (as they’ve no contractual obligation to give notice!) Not ideal.
Also, there are business risks for the hirer to consider as well. It’s too easy to create an employment liability. Contract law is complicated, and can be implicit. Local tax authorities might see it as you effectively creating a branch of your business, if you’re hiring local people.
Then they can say you should have been retaining income tax, paying social security etc. Even corporation tax, on your accidental new business entity! Business law is different everywhere. Staying compliant and legal in lots of different countries is a business function in itself.
Can’t I hire freelancers, instead of using an EOR in Spain?
It’s also difficult sometimes to check that freelancers you are hiring in different places are fully compliant themselves, with local requirements. That is vital to protect you the hirer from accidental employment liabilities.
There have been many legal changes recently to protect freelancers who really should be classed as employees, such as low paid gig workers. But this adds to risk for hirers. Once again rules vary, depending on the conditions people work in, and by country level as well… Even the roles they carry out (for example, making directorial decisions or entering into contracts may mean they are legally NOT a freelancer, in some markets.)
Indeed, the only solution in the past before EORs in Spain existed was that the enterprise would open local branches. Yes, in every market where it wanted to hire. That’s typically expensive and onerous, and could also take months to accomplish. Worth doing if you need presence on the ground to grow an area of work, but hardly a reasonable solution to open a Spanish limited company just because one of your employees really wants to work for you but live in Spain.
Nowadays though that is not the only option, and the ‘Employer of Record’ (EOR) company is a solution which has arisen to bridge the gap. These offer businesses a way to employ people legally and compliantly wherever they choose to reside. It can even support them if they want to move around, perhaps taking advantage of different digital nomad visas, to adopt a remote slowmad lifestyle.
EORs and PEOs, what’s the difference?
They are typically described as Employers of Record (EORs), but you will also hear about Professional Employment Organisations (PEOs) or Global Employment Organisations (GEOs) as well.
For the person doing the work there may not be much difference, but for the hiring company, the distinctions are important.
PEOs typically handle HR functions for businesses which already have local entities. They’re more like the familiar model of employment agencies, where you might have hired temporary staff from in the past. They do benefits and payroll administration, but they do it on behalf of your business as the employer.
You will also hear about Global Employment Organisations (GEOs), who typically also provide relocation support, immigration assistance, and cultural training. They can be more focused on supporting really mobile workforces, where people need regular integration into new locations. GEOs may provide appropriate benefits and insurances, to support this kind of expat or diplomatic lifestyle. They may operate as PEOs or EORs locally, so you need to understand the distinction.
EORs, in Spain and elsewhere, are different
The main distinction from PEOs, is that EORs are the EMPLOYER of the person working for your business.
That means they not only help with the hiring and admin, they remain that person’s employer throughout their work on your behalf. You do not need to open a local branch, or any other business entity, in that country. And if you have people who want to move around, your EOR can transfer them from one branch of their own to another (they typically have lots of different branch entities themselves in different countries, to support this.)
This makes EORs in Spain a fast and affordable solution for businesses to ‘employ’ full time workers without legally forming a local entity. It’s the EOR that owns the local entities, (be careful to ensure this, when you choose a provider), and this makes it easy for hirers. It’s even cost-effective to employ a single person in a country.
It is the EOR’s job to ensure they remain legal compliant employers in every location where they operate. They have to be experts in local taxes, employment law, corporate law, and more – and that’s what the employer is paying for. They are essentially outsourcing a great deal of risk.
This means businesses can tap into a global talent pool, and hire and retain the very best. Being able to offer employees the ultimate perk to work from anywhere they want – like Spain!
Operating as an employee in Spain has many advantages too, compared with freelancing. You don’t have to worry about fluctuating income, managing your own tax and social security. And having an employment contract in your name helps with many things, like renting an apartment or getting free banking, even credit.
Obviously the day to day management and direction of the employee and their activities is entirely down to the hiring company. Usually this means just means being simply one of the team.
Which companies offer EORs in Spain?
If you think that an EOR might be a good solution for your business, or a business you want to work for, you can check out the following providers.
All of these offer bespoke services to meet your needs, for recruiting and managing employees in Spain:
Why doesn’t every hirer use EORs in Spain?
With more and more people wanting to work remotely, EORs sound like the perfect solution for business. Hire whoever you want, let them live wherever they choose… And outsource all the compliance risk that goes with them. For employees too, it’s a simple route to living the dream, starting a new life abroad, or travelling the world.
In reality, there are a number of reasons why this might not be the case.
For one thing, cost. Hiring through an EOR is be far cheaper and easier than opening a new local business entity – but, it will obviously cost more than hiring someone in your home country. Many businesses will choose to limit their hiring range, to save on costs of up to €500/month in local fees. (However the usual HR admin costs of being an employer must also be set against this.)
EORs remain new and not well known about. Please share this article with a potential employer! Many have yet to learn about the benefits that an EOR can provide to them. All those listed in the previous section will be glad to discuss their services and possibilities.
Furthermore, compliance and business law, at an international level, is complex. It’s not black and white.
An EOR won’t always be the best solution, for every business, in every scenario. And not every scenario has been tested in court yet.
One respected EOR, Boundless, does not offer services in Spain, because they do not consider that they can do in a fully legal way. They recommend using a local entity instead. Their interpretation of Spanish employment law is that EORs cannot be viable or compliant at present.
Are EORs the future for employment in a global world?
The only certainty is that right now, it’s complicated.
The technology, the connectivity, and the cultural desire, in a newly unlocked world of work, is to break down the boundaries and borders of countries and jurisdictions. But as ever, the legal and regulatory changes needed to enable that lag a long way behind, and are always the last to change.
EORs are one way to explore achieving the work-life balance you crave. Digital nomad visas are another.
For employers, services like Work From Anywhere Team can help assess the risks and terms and best approaches, for hiring internationally – depending on your own enterprise structure, location of entities constituted, and tax residency of the people who want to work for you.
We look forward to sharing more examples and use cases, as this exciting frontier in the future of work unlocks.