Remote Work: Employer of Record vs. direct hire with international payroll set-up

As companies expand into international markets, challenges quickly arise in recruiting and hiring staff. This is a well-known problem. When it comes to paying foreign taxes and social insurance or drawing up employment contracts under foreign law, experience shows that this can only be done with the support of specialized local partners.

It is important not to underestimate the effort involved in finding suitable partners abroad, especially since payroll accounting is usually a long-term commitment. Nowadays, many employees have a desire to work abroad permanently or relocate their jobs overseas. This has led to an increased focus on foreign domicile employment and overseas payroll.

As a result, "employers of record" are becoming more popular. These entities act as legal employers abroad, taking care of formal obligations such as registrations, issuing employment contracts according to foreign law, and handling payroll accounting including deductions for social insurance and taxes.

For employers with internationally active employees, a foreign "Employer of Record" can, therefore, be an interesting option, provided that one has thoroughly considered the advantages and disadvantages beforehand, which can vary significantly depending on the country.

Disadvantages of using an "employer of record" include the associated costs and limited control for the employer. Therefore, it is necessary to evaluate the specific situation and the company's philosophy to decide whether to opt for an "employer of record" or pursue direct employment despite the employee's foreign domicile. Each option has its pros and cons that need to be carefully considered.