Global Hiring

The benefits of EORs for nonprofits

May 13, 2024

Nonprofit organizations seek to channel as much of their funding into the mission as possible, which means they need to maximize every dollar. One way to make hiring more cost-effective is with a global expansion for certain roles, such as performing administrative tasks. It also broadens the potential talent pool and can make the hiring process more inclusive without the need to open a separate legal entity. However, hiring in new countries also carries risk. Nonprofits can reduce both their overhead and risk by utilizing Employer of Record services.

Employers of Record, or EORs, assume all legal responsibilities for any staff hired internationally, and can also assist with obtaining visas for employees to legally work in other countries. EORs ensure compliance with local laws and regulations, and can manage human resource functions like hiring, onboarding, payroll, and administering benefits packages.

We’ll first take a look at some of the common challenges nonprofits face when hiring in other countries, and then how EORs can help.

Permanent Establishment Regulations and Additional Tax Liability

Permanent establishment (PE) risk refers to tax officials determining that your organization is operating from a fixed place of business within their country. If they rule that your nonprofit has PE, you run the risk of being subject to taxes moving forward — as well as being held liable for any back taxes they determine that you owe.

For nonprofits that are specifically charged to work across borders, such as International Non-Governmental Organizations (INGOs), the risk of triggering PE in multiple countries can be a thorny issue with quickly compounding expenses.

Unfortunately, registration as a nonprofit in one country doesn’t necessarily exempt your organization from PE-associated taxes in other countries. Local authorities are likely to evaluate the type of work performed, rather than the charitable goal of the work, when evaluating an organization’s PE status.

Furthermore, the standards for PE vary from country to country and authorities may determine your nonprofit qualifies under their country’s employment laws even without a physical office. Employment law in Canada, for example, determines PE based on the “principal place” where an organization performs its work.

Nonprofits that rely on their tax-exempt status to help navigate slim margins should consult with tax professionals to ensure they mitigate potential PE-related tax liabilities and the associated penalties.

Concurrent Compliance with Global Employment Laws

Understanding employment regulations in every country in which they operate is crucial for nonprofits. Local regulations can differ widely from one country to another, and it can be complex to stay compliant with local employment laws that govern everything from payroll taxes to paid leave to health insurance to workers’ compensation.

For example, in Germany employees who work a five-day workweek are entitled to at least 20 days of leave annually. Employees in Romania are also entitled to 20 days of annual leave, and in addition they have the right to take unpaid personal leave when necessary.

If your nonprofit operates in multiple countries, the rights and benefits employees are entitled to will depend on the specific country in which each employee works. Other local labor laws, like those governing workplace health and safety, are also likely to vary, and noncompliance carries the potential for fines.

Administering a Global Payroll

Fluctuating exchange rates and local employment laws governing pay and compensation present potential pitfalls for nonprofits that manage a global payroll. Some common challenges include:

  • Data security: Managing sensitive employee data across borders increases the risk of breaches, and if one occurs, it could prove costly for both your employees and your organization. Data privacy laws vary from country to country, and nonprofits that operate in the European Union (EU) are subject to the General Data Protection Regulation (GDPR), which outlines the strictest international data privacy regulations.
  • Currency fluctuations: Currency exchange rates fluctuate constantly and can complicate payroll calculations. Failure to accurately forecast discrepancies in exchange rates can result in significant financial losses and make it difficult for your nonprofit to make payroll.
  • Errors and fraud: Payroll errors, such as employees who are paid incorrectly or left on payroll after termination, and fraud (e.g., reimbursement requests for false expenses) can be more difficult to root out efficiently across a distributed workforce.

Ultimately, the effort required to pay a global workforce compliantly and accurately is substantial, and can result in fines if not administered correctly.

Ensuring Employees are Correctly Classified

Whether workers should be classified as full-time employees, part-time employees, or independent contractors can be difficult to determine even when operating in only one country.

Classification can become even more confusing when one set of talent is employed under contract while others work as at-will employees. Yet no matter the underlying reason, errors in how your nonprofit classifies employees can quickly lead to costly fines.

Still, concurrently employing staff of various classifications is common. For example, an INGO that offers free healthcare in a developing country might employ local physicians as independent contractors while relying on full-time staff for logistics. However, depending on the laws in that country, there are compliance risks of potential misclassification. For example, if officials in that country determine that the physicians should be classified as employees, not contractors, it could lead to financial penalties for your nonprofit.

Navigating Visas and Work Permits

A global strategy allows nonprofits to tap into a wider pool of top talent in new markets with diverse skills and experiences. For instance, an organization might want to recruit a water sanitation engineer from one country to tap into their expertise on a clear water project in another country.

On the other hand, nonprofits may also send members of their local staff to work on projects internationally. This can involve short-term assignments to scale a specific project or long-term placements to spearhead an initiative in a particular country.

In both cases, the nonprofit will need to apply for a visa so their employees can legally perform their work in a country where they don’t legally reside. The specifics of visa applications are dictated by the individual rules and regulations of the country where the employee will be working, and the process can be lengthy and cumbersome.

If an employee is found to be working in a country where they aren’t legally allowed to, it can be a costly headache for your organization.

Simplify Global Hiring with an EOR

Hiring international employees is complicated and exposes nonprofits to legal regulations and risks beyond the employment laws of their home country. When not managed correctly, the process can expose organizations to unnecessary costs.

From onboarding and benefits administration to payroll processing and employment contracts, EOR services help nonprofits navigate the complexity of employing international talent and offer peace of mind.

An Employer of Record partner can help:

  • Standardize compliance: EORs act as the legal employer for your international staff, handling all the heavy lifting — from onboarding new hires and offboarding departing staff, to contracts and payroll, to taxes and regulations, to benefits management. Their expertise ensures you operate compliantly in every country where you employ staff.
  • Make a locally delivered global impact: A deep understanding of local employment laws, cultural nuances, and currency regulations enables EORs to provide insights that support successful international hiring, including managing the visa application process.
  • Support mission-focused work: By outsourcing HR complexities, EORs free up your nonprofit’s staff from administrative burdens like managing legal compliance of contractor hires to focus on what matters most — achieving your organization’s mission.
  • Complete payroll and benefits administration: Global payroll services ensure all employees receive their salaries on time and in their local currency.

When you choose Remofirst as the employer of record for your nonprofit, we can help you hire compliantly in more than 180 countries. And with transparent pricing that starts at $199 per month, per employee, and $25 per person per month for contractors, you’ll be able to more easily budget staffing costs.

Book a demo today to learn more.