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Global Hiring: Discussing Benefits and Tax Burdens
Angelica Krauss
June 29, 2022

Global Hiring: Discussing Benefits and Tax Burdens

The concept of remote work was a foreign idea to most companies just a few years ago. That is no longer the case — after a few years of experiencing the benefits of remote work, many companies see global hiring as a cost-saving opportunity that they simply cannot pass up. In this article we review the upsides of global hiring and what the tax burden on labor looks like in different countries.

Upsides of Global Hiring

Expand to New Markets

Hiring internationally is an important part of global expansion. As your company grows, you may not have enough domestic employees to keep up with your growth, especially if new jobs require international relocation.

Team members based in other countries understand their local markets better, and speak the same native language as your new potential customers. Working with an Employer of Record (EOR) allows you to test international markets without having to establish a new entity in that country.

Save on Labor Costs

Having an internationally distributed workforce can lead to a decrease in employment costs, as hiring workers in other countries can often mean lower wages and less payroll tax. Since the U.S. dollar is the leading form of global currency, American companies can pay employees lower wages in U.S. dollars and they will still be making more money in a foreign market context. In many scenarios, this arrangement can benefit both employees and employers.

In addition to saving money on salaries, American employers are also able to save an additional ~8% in taxes paid to U.S. employees’ social security and Medicare contributions. These savings can enable companies to use that money to help their business grow in other areas.

Accessing Specialized Talent

Companies that rely on geographically-defined talent pools will lose out on huge hiring opportunities. They may find that the specific skills and assets they are looking for will not be found in the local areas where they have offices. Meanwhile, globally dispersed teams can always tap into the global talent pool to find the perfect match for their open positions (without having to worry about physical distance). This means that instead of choosing from a handful of qualified applicants, you have access to many more qualified candidates who are highly-skilled and eager to work for your company.

Increases in Productivity

Study after study has shown that remote workers are more productive than workers stuck in an office somewhere. In fact, the average remote worker puts in a total of 1.4 extra days worth of work per month compared to the average office worker. This means that remote workers are adding a total of 3 weeks worth of extra work per year!

Moreover, global workers don't have to spend nearly as many of their own resources to be able to go to work (gas, car, childcare, and more). Thus, they are more likely to stay with a company longer if they feel that their own budgets are being respected and that they can get work done without personal out-of-pocket expenses.

Tax Burdens on Labor

One thing to consider when hiring international employees is how the tax system works in those countries. You will be required to withhold taxes at different rates based on the country of the employees that you hire, which could be higher or lower than your incorporated location.

According to the Tax Foundation, these are some of the highest tax rates in OECD countries in terms of the expected percentage that an employer will contribute, meaning the taxes taken from the employer (not employee):

• France: 26.6%

• Czech Republic: 25.3%

• Estonia: 25.3%

• Italy: 24%

• Sweden: 23.9%

• Slovakia: 23.2%

• Spain: 23%

• Austria: 21.9%

• Belgium: 21.3%

• Greece: 19.7%

These countries all use their high tax rates to fund a vibrant social state, and they are all much higher than the average of 7.6% payroll taxes for a worker in the United States. It’s important to note that the actual employer burden can be higher when you factor in all contributions that may be required, these can vary based on the type of worker, their job duties, and the region in which they live. That said, these are some countries with an even lower employer tax burden on the average employer:

• Colombia: 0%

• Chile: 0%

• New Zealand: 0%

• Denmark: 0%

• Lithuania: 1.8%

• Israel: 5.3%

• Australia: 5.6%

• Switzerland: 6%

• Iceland: 6%

The actual employer burden can also be higher when you factor in all contributions that may be required, which will depend on your employee’s specific situation. Thus, you need to be prepared for the fact that there are a wide range of tax rates that you may need to calculate when hiring different employees. As long as you can keep that in mind, you will be in good shape.

Summary

There is so much opportunity to widen your talent pool and expand to new markets when hiring internationally. Where you choose to hire your next employees will depend heavily on your growth goals and company size. Make an informed decision and find out exactly what it will cost you to hire new employees in 150+ countries by reaching out to Remofirst.