Hiring abroad from a UK company. Has anyone used an EOR?

caffeinated_human

I’m involved in hiring for a UK company and we’re looking at bringing someone on who lives abroad. This would be our first proper hire outside the UK, so we want to decide which setup would be the best for this kind of hire.

The person would work remotely from their own country. It wouldn’t be a short freelance project. They’d have regular hours, report into our team, use our systems, and work mainly for us.

The setup I currently favour is using an employer of record, but we’ve never used one before. From what I understand, it means a third party employs the person locally and deals with payroll, tax, employment paperwork, leave, and the local rules, while the person works for our company.

At the moment, Globalization Partners is one of the providers we're considering. Their website helped me get a better sense of how the EOR model works, but I'm also interested in hearing from people who've actually used an EOR in practice rather than just reading about it.

Do you think an EOR is the best way to employ someone when the role is basically full-time employment?

Not asking for legal advice, of course. I know we’ll need proper advice before doing anything. But hey, if anyone has been through this, I’d be interested to hear what route you used, what went smoothly, and what you wish you’d checked earlier.

Woodstok2000

At a previous employer we did this - everything was very smooth apart from a lack of HR support from the EOR. They were little more than a shell company and really only processed payments. Our company was not set up to deal with local rules and regulations, employment law, holidays, working time directives etc and it became a bit of a nightmare. Lesson from that was make sure the EOR you are using provides full service support and advice as well as payroll.

caffeinated_human

https://forums.moneysavingexpert.com/discussion/comment/82061266#Comment_82061266

I will consider this for sure, thank you!

MyRealNameToo

EOR are not materially different from Umbrella Companies other than they are designed to deal with international issues rather than IR35.

You can get budget providers who really do nothing but the bare minimum and you get fuller service options, Globalization Partners are certainly normally at the fuller end of the market. The charges will be very much inline with where you are on the spectrum, have seen some providers at little over $100 a month for a single employee and premium providers at getting close to $1,000 a month. Obviously what you pay them will not just be the salary and fee but all the other local employment costs (eg equivalent of Employers NI, Apprenticeship levy etc)

I do know one firm that got a little unstuck as they basically had unlimited liability to the EOR and when their sole overseas employee took them to an employment tribunal the EOR clearly didnt put up much of a fight as it wasnt their money they were playing with

UKTaxHelper

The HR point above is the right practical warning. The one nobody has mentioned yet is the tax reason an EOR usually wins over the two alternatives you will be offered, and the one risk an EOR does not remove.

If you employ the person directly instead, you generally have to register as an employer in their country and run local payroll there. That is not a UK payroll question at all, and it is the expensive route. Your UK PAYE scheme does not extend to someone who lives and works wholly abroad, so this is not a case of just adding them to your existing payroll.

The other route people try is engaging them as a self employed contractor. On your own description, regular hours, reporting into your team, using your systems and working mainly for you, that is employment in substance almost anywhere in Europe. Most countries police false self employment harder than the UK does, and the liability for unpaid employer social security and payroll tax lands on the engaging company, with penalties and interest. Do not take that route to save money on this particular role.

The risk an EOR does not remove is permanent establishment. If your remote person does anything that looks like concluding contracts or habitually negotiating deals on your behalf, the tax authority in their country can argue your UK company has a taxable presence there, and a slice of your profit becomes taxable locally. An EOR is the legal employer for employment law and payroll, but it does not shield you from that argument. It is much less of a concern for a purely internal or delivery focused role than for anything client facing or sales related, so it is worth being clear which one this is before you sign.

On choosing between providers, the questions that actually matter are whether they employ the person on their own local entity or subcontract to a partner entity (subcontracting is where the HR gaps above come from), who carries the liability if the employment is challenged, what the notice and severance position is in that specific country, and whether the fee is a flat monthly amount or a percentage of salary. Ask for the local employment contract template before you commit, not after.