Remaining compliant while hiring remote workers in Europe
Hire and onboard your remote employees across 31 European countries
As workers have quickly shifted their place of work from offices to their homes, Human Resources (HR) departments are facing new challenges as to how and where we work has completely evolved. When an employer has employees who reside outside of their own jurisdiction, they also become bound by the legislation in the country their teams reside. In this case, the challenge for HR departments is how they onboard employees in a country where they don’t have an office or legal entity. While remaining compliant with local employment and social security laws. In this article, we will focus on the European Economic Area (EEA). Fortunately, the EEA benefits from unique labour legislation that enables a European registered company to hire in any other member state without the need to establish a legal entity. Significant for remote teams distributed across Europe.
A company that has a legal entity in any EEA member state benefits from hiring power across all 30 EEA member states. That’s the EU 27 + Iceland, Liechtenstein & Norway. In addition to Switzerland. Facilitating the ability to reach talent, remotely, across all 31 member states. This is significant, as it enables a company to maintain the legal employer-employee as it would if they were hiring locally.
Stay informed of local employment, social security & tax legislation
When a company decides to recruit in another country, it prompts the need to be informed of local employment, social security and tax legislation in that country. Bringing considerable complexity to the role of HR departments. These laws will ultimately dictate the options that exist for the company to onboard any new workers in that country.
Whether a company decides to outsource the employment relationship, to onboard them as a direct employee, an independent contractor, or to establish a legal entity, they ought to do their research on what makes the most sense for them.
The complexities of hiring a remote team distributed across multiple jurisdictions
To better understand the complexities, we’ll break it down to take a closer look at how hiring across multiple jurisdictions can become complicated for HR departments.
For example, a company, registered in Ireland, has decided to open up their hiring to ¨remote anywhere¨ in Ireland. In this context, the company, registered in Ireland, is a registered employer in Ireland, and can easily hire remote employees who are also resident in Ireland. They would follow an almost identical process as that of a new office-based hire in terms of paying relevant charges such as taxes and social security contributions. With some additional considerations being made in terms of privacy & security, home-office equipment, and insurance.
Using the same Irish company as an example, they decide to open up hiring to ¨remote in Europe¨. Hiring across the European Economic Area is unique in that legislation exists to facilitate multi-country employment. This enables the company to maintain the same working hours amongst the team, while also accessing a much wider pool of diverse talent across these 31 countries.
They decide to make an offer to a candidate who is resident in Norway. This now opens up some questions for the company as they prepare to make their offer.
Classification of employment
Evaluating the classification of employment in a remote working environment
Classification of employment determines the level of security for a worker under national law in their country of residence. Employees enjoy protections such as unfair dismissal, accidents at work, and benefits such as minimum annual paid vacation days, sick pay, and paid maternity leave. Classification of employment has been scrutinised in the case against Uber, to determine if drivers were in fact, employees and as such entitled to employee benefits and protections. The case went in the favour of the drivers. This is significant for remote teams where misclassification of employees can be common.
Misclassification of employment for remote workers is generally a quick work around the fact that companies have no physical presence or legal entity in a country where their team members reside. It’s a quick, simple way of onboarding a worker, so work can start and they can pay them. In this case, the worker does not have protections and employee benefits, nor does the company need to pay social security contributions or taxes for the worker under this classification. Whereas, the independent contractor will often have to cover these costs for themselves. And in some countries these contributions can be quite high, and irrespective of what a worker earns. It’s these costs that are often recalled when an employee has been found to be misclassified as an independent contractor.
If the working relationship is in fact, that of an employer and employee. When making an offer of employment to a worker who is resident in a country in the EEA, a company can evaluate the options they have to hire this candidate:
1) Onboard as a direct employee of the company
2) Make an offer as an independent contractor, assuming the risk (if any) of misclassification depending on the country
3) Use a third party to outsource the onboarding process (Employer of Record)
4) Establish a legal entity
EEA is one single borderless region for companies hiring remotely
Technology has completely transformed how and where people work today. However, legislation has not been adapted to reflect this enormous shift in how we work which has been compared to as significant as the industrial revolution. Accelerated by the covid pandemic, we now have the capability to work entirely virtually. Creating valuable opportunities for companies to access and to recruit the best talent onto their team, irrespective of where they are geographically based.
The topic of how a company can onboard workers that are based outside their jurisdiction, requires a balance of risk, cost and IP protection. Coordination of EU Labour laws and social security protection for workers have been designed for the consideration of traditional work environments. Although some alterations in policy have been made on a national level, Companies and national governments must interpret existing laws for application to a remote working environment. There is no single solution. Companies will likely use a combination of solutions to balance risk, costs and business needs.
For companies that have an established legal entity in any EEA member state, they benefit from the ability to onboard employees right across the region. Not only does this enable them to access a huge pool of talent, whether that is technical, linguistic, or industry-specific expertise. But also maintain full control of the legal employment relationship and business Intellectual Property.
By reducing the complexities and high costs for companies to stay compliant when opening up their hiring across Europe, we facilitate compliant employee onboarding and fair employment opportunities across the region. Not only does this improve the accessibility of skills and expertise, but it also creates a fairer distribution of quality job opportunities to every rural corner of Europe.