Getting ready to expand your company into another country is exciting but can also be overwhelming. A key part of your ability to manage your global expansion successfully is how you choose and manage the different services—from employer of record (EoR) or entity set-up to HR and accounting—that you’ll need to start a business in that new country while staying compliant with local laws and requirements. This blog describes the most common global service providers that companies typically use: EoR, Corporate Secretarial Services, HR, payroll, accounting, and tax compliance. We explain the scope of each provider’s services and any constraints. We also explain how to determine when it makes more sense to transition from hiring a patchwork of different providers to a single end-to-end global expansion firm.
A-la-carte versus end-to-end: Use your global expansion strategy
One of the most important things to remember before you begin evaluating and hiring different global service providers is that you need to start with a growth strategy. Depending on how you’ll be expanding overseas, you’ll need to decide whether you want to hire different service providers to manage individual domains (e.g., payroll and HR) or whether you’ll need to hire a single global expansion partner that does it all.
While the answer is not always black and white, here are some general guidelines to help you decide which types of global expansion providers to hire.
Global expansion into a single country
If your company’s initial overseas expansion is limited (e.g., a few employees in a single country), you’re probably fine taking the a-la-carte approach and choosing different providers, each with a single area of expertise. Typically, we see companies hiring several vendor providers to tackle the various entity- and people-related facets of overseas hiring (for instance, a company might hire separate payroll, legal, accounting, and HR firms).
Global expansion into multiple countries
If, however, you’re expanding into more than one country, definitely consider hiring a single firm to handle all services across multiple countries on your behalf. That’s because hiring multiple providers in each country can leave you with a siloed approach that is costly and inefficient. Using the above example, imagine managing payroll, legal, accounting, and HR vendors across several countries. Not only would managing multiple vendors across countries result in cost and efficiency challenges for you, but this fragmented approach would also present your company with oversight, accountability, and communication issues. In fact, a recent case study highlights how one company ultimately transitioned to a single, end-to-end provider for just this reason.
For this reason, it’s important to consider your future plans for global expansion as well as your short-term goals before you bring on any global service providers.
How global expansion services are interconnected
Whether you’re hiring a general manager in Brazil to explore market opportunities or scaling up your sales team in Germany, at any given moment, you’ll need some combination of global services to make sure that you remain in compliance with that country’s unique employment and tax laws, and myriad other requirements.
As this graphic shows, all of those global expansion services are interconnected. For example, how you initially set up your entity will affect the accuracy of payroll taxes downstream. And, if those taxes are inaccurate, your accounting and bookkeeping will also be off.
Add to this the fact that, as your company’s activities in a particular country change, this can affect your tax status relative to permanent establishment (PE) as well as require you to use different global expansion services. For example, you might start in-country operations under an EoR approach to hire a resource in Brazil, a suitable way to do things as long as the local activity won’t trigger PE. Over time, however, you may commercially need or wish to scale up by hiring a sales team. Doing so may trigger PE, leading you to conclude it would be wise to terminate EoR and set up an entity, process a local payroll, pay corporate income taxes, and comply with local employment laws and collective bargaining agreements. All of these things involve different global expansion services (corporate secretarial services for entity set-up, HR, payroll, accounting, and legal).
If ongoing growth is part of your company’s global expansion strategy, it’s generally better to proactively plan for your expansion by hiring an end-to-end global services provider who can provide all services. Bringing on service partners in a piecemeal approach can cost you—both because it’s rarely cost-effective and because it often results in poor coordination between important activities that keep you compliant in each country.
EoR Providers: The easiest comprehensive solution for quick international hires
An Employer of Record (EoR) provider streamlines global expansion by handling HR, payroll, compliance, and legal requirements in any country in which your company has a presence. By taking on the administrative and legal burden of hiring employees on your behalf, an EOR minimizes your risk, reduces administrative burdens, and ensures compliance with local laws, allowing your growing business to focus on core business activities instead of building expertise and capacity to hire and manage employees in every country. A trusted EoR provider is a terrific option for companies taking small, first steps into global expansion with a limited headcount.
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Keep in mind, however, that none of these companies will be cost-effective if your headcount exceeds ten or if those employees’ activities trigger permanent establishment risk. If that’s the case, you’ll find yourself scrambling to find a service provider to help you set up a legal entity, etc.
Global Payroll Providers: Efficient solution for global payroll
Global payroll providers offer more limited services than EoR, focusing primarily on processing and managing employee payroll across various countries. In contrast, an EoR offers more comprehensive services, including HR management, legal and tax compliance, and employee benefits. With a global payroll provider, you simply feed them the specific employee information (e.g., you’ve hired three people in France and terminated an individual in Belgium), and they take care of putting everything into the backend to ensure that every employee gets an accurate payslip.
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Payroll and corporate secretarial services are linked, but the latter is often overlooked. Because these companies only take care of payroll, if you need to change your tax status and set up an entity (for example, let’s say you need to move from EoR to a legal entity in Brazil due to your growing headcount), you’ll need to scramble to find a corporate secretarial services provider to set up your entity for you quickly. In fact, we often get calls from global payroll providers to do exactly that. And, as you’re setting up your entity, you’ll need a global HR service provider who can commence hiring processes concurrently so that you’re operationally ready with minimal delays.
Global HR Service Providers: Critical back office support for employers
Global HR service providers range from comprehensive solutions that directly handle employee benefits, pensions, and health insurance (among other things) to benefits brokers who will help you find the right plan for your in-country employees. Typically, a good global HR service provider will help you manage HR operations by handling issues such as benefits and compliance with local laws and requirements. These providers will source, administer, and set up benefit plans in any country and are critical to your back-office support for employees.
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Different countries have extremely complex laws and requirements for how employees are treated and protected. Even the best global HR provider can’t draft a collective bargaining agreement for a local jurisdiction or advise you on union issues. Let’s go back to our Brazil example to examine what the hiring process might entail. Depending on which of Brazil’s states your employee is based in, there are differing statutory benefits, collective bargaining agreements, and more than 6,000 unions.
Your HR service provider won’t be able to advise you on which collective bargaining agreement you should categorize an employee. They also won’t be able to draft the required locally compliant dual-language employee agreement required prior to hiring. Further, because these issues also have consequences for other services (for example, payroll and entity set-up), finding an HR service provider who works effectively (communicating and coordinating) with your other providers can be difficult.
Global Accounting and Tax Service Providers: Streamlined Overseas Tax and Compliance Management
Global accounting and tax service providers typically provide compliance, tax, and advisory services for any country and jurisdiction in which you operate. They manage overseas tax issues, ensure adherence to local laws and regulations, handle financial reporting, and guide you on navigating the complex tax landscape overseas. But even seasoned global accounting and tax compliance experts have constraints when it comes to handling your books and accounting in different countries.
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Many global accounting and tax service providers have fairly siloed operations in each country. That means that while they do a fantastic job of managing your affairs in each country, they’re not necessarily set up to communicate and coordinate your accounting and tax obligations holistically across all of those countries. Further, because you’ll likely need different services in each country (for example, your accounting and tax obligations in Brazil might be fine under an EoR but might be very different for your entity in Germany), it becomes exponentially more difficult for you to manage the work of “one” firm in different countries.
How to avoid the siloed approach to global service providers
Trusted global service providers provide exceptional services for companies expanding globally. In fact, many of them are well-equipped to provide more than one type of service. And yet, none of these experts are capable of advising you on the full spectrum of services that your company may need during the lifecycle of your global expansion.
The biggest challenge our clients face is attempting to tackle each need piecemeal—hiring different types of global service providers as the need arises. We see clients who start with an EoR solution for their first hire in their first country, but eventually, they wind up with teams that span the globe. For this, they find themselves hiring disparate vendors for EoR, Corporate Secretarial, HR, payroll, accounting, and tax services.
This piecemeal approach creates silos for companies that make it difficult for them to have a holistic and accurate line of sight into all of their activities across each country. By hiring one siloed provider at a time, you may find yourself quickly losing the ability to understand and manage all of your global expansion providers. A better approach is to develop a holistic global expansion strategy that helps you think beyond today’s immediate needs.
To develop a more effective, comprehensive approach to your global expansion, first consult with a global expansion expert who can walk you through the full lifecycle of services you might need down the road and help you plan for them in advance. Better yet, hire an end-to-end global services provider like HSP, who can advise you on what you may need tomorrow and implement what’s needed for today.
HSP is an end-to-end global expansion solutions provider focused on helping companies scale their operations overseas effectively and efficiently. We are the only global expansion expert to offer growing companies a full suite of end-to-end solutions designed to help them scale to any size and in any country.
Our in-country experts have delivered the full spectrum of global expansion solutions—from EoR to entity set-up and management—across more than 100 countries (and counting). HSP brings full payroll, accounting, tax, legal, compliance, and HR services to corporate teams, integrating with in-house staff to guide and execute across every domain. Contact us today so that we can start delivering your custom solutions.
