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How an Employer of Record Affects You as an Employee

My first job working remotely was a case of fortuitousness – I had brunch with someone visiting town and casually mentioned I was looking into making better use of my journalism degree. The day after, my brunch date ended up offering me a job for their US-based company. I didn’t have to move for the job and could do it from my couch at home. However, I would have to register my own company, send an invoice once a month, and take care of my taxes.

Back then, remote work wasn’t a hot topic; no one talked about international remote employment, so I didn’t question that setup for a second. Instead, I looked for a lawyer and an accountant, paid for them to do everything necessary, and kept my worries of messing up the monthly admin private. I was already anxious because the job was a big leap in my career, in a field I knew very little of.

The worry eventually subsided, only to reappear again when I decided to take my remote job with me when I moved to Ireland. Registering a company would be much more expensive and require even more work each month, so I opted for an arguably easier setup as a sole trader. It was only later that I realised it came with a caveat – I needed to have multiple clients and issue multiple invoices instead of just one. “If you don’t, the Irish government will eventually see you as an employee of the US company and may fine them for misclassifying you as a contractor and not paying their employer taxes,” my Irish accountant told me.

I never raised this issue with my “employer” and went to solve the problem myself – I started doing some freelance on the side, on top of a full-time job. Eventually, I left that job, but the experience has stayed with me and was one of the biggest drivers for me to join Boundless.

Building an affordable solution for internationally remote employment would allow someone in my situation to say, “Hey, there is an alternative to independent contracting.” Offering such a solution has become paramount during the pandemic as many people have become even more accidentally remote than me, moving back to their home countries to be close to family and weather the storm.

In this article, I want to take you through the nuts and bolts of that solution for international employment that has what is known as an Employer of Record at its core. Whatever your circumstance, this article will help you understand what it will mean to you as an employee, how it will affect you month to month, and why it’s not anything to worry about (unlike doing your own taxes). Keep in mind that different Employer of Record providers may solve this slightly differently, so the tactics you will read below are from Boundless’s perspective.

What is an Employer of Record?

Employment is a complex business (it’s also completely different from managing your work and employee experience, but more on that in a minute). To employees, employment may seem relatively straightforward at the front end – sign a contract, get paid once a month, receive a payslip, take some time off when needed. Managing the back end is where the complexity begins.

I used to think that getting my salary was just a click of a bank transfer button. Since joining Boundless, I have found a new appreciation for the work that HR and payroll professionals do. People need to be paid on time, and correctly, after all! Beyond payroll, there are numerous employer obligations to keep up with, and a host of employee rights to extend and maintain. It’s a lot of work, but that is why companies have HR and People departments, led by C-level executives.

When a person is being employed in a different country, this process becomes a different beast altogether. The rules, regulations, taxes, registrations and everything else change, yet the need to comply with them doesn’t. Asking a small, medium and, sometimes, even an enterprise business, to go through all the motions for a couple of remote employees is unrealistic. At the outset, it seems to make complete business sense to want to skip all that and ask an employee to be an independent contractor. While it appears to be an “easy” way out, that is often an illusion. Not only is it ethically wrong to transfer all the admin burden onto workers, but it’s also risky, as my Irish accountant correctly pointed out.

Availing of an Employer of Record model is the middle ground – the company you work for does not have to labour through the motions of doing everything themselves, yet you do get the full employment you rightfully deserve. This happens through a shared responsibility for you as an employee, mandated by the agreement between two sides working together. The Employer of Record is simply an extra pair of hands in the process of employment. They own and operate a fully compliant organisation that acts as your legal local employer and takes care of everything related to your employment. It’s their job to understand what it takes for you to get the employment you deserve in exchange for your full time and attention. The Employer of Record registers you with the right authorities, runs your payroll, files and pays your taxes, provides you with a payslip, etc.

Everything related to your work and performance stays with the company you work for – they determine your projects, who you report to and how you grow in the organisation. They are responsible for your employee experience culturally; the Employer of Record is responsible for your employee experience legally. In many countries, this means guaranteed social security coverage, paid vacation, pension contributions, paid maternity/paternity leave, job protection, unemployment benefits if you lose your job, and much more.

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