How Employer of Record Can Simplify Life for Digital Nomads

Remote work allowed many employees to live their dream of working from anywhere. With remote work, they no longer have to commute to the office. Instead, they can work from home, a coffee shop, or another country altogether.

The digital nomad lifestyle has never been more accessible to everyone. However, it’s still most appropriate for freelancers, or independent contractors. Full-time employees might still struggle to switch to the digital nomad lifestyle.

Their employers likely understand the risks of having employees working from another country. Or, rather, the complexities of it. Each country has its own set of labor and tax laws businesses must follow and maintain compliance with if their employees work from there.

So, if you are a full-time employee who wants to work remotely from another country, here is what you need to know about Employer of Record services. When you understand what an EOR can help your employer with, you can pitch it to them to get closer to your dream of being able to choose the work location.

An EOR can solve many complexities your employer would face, making them hesitant to allow you to move and work remotely. It will significantly increase your chances of getting a green light for the digital nomad lifestyle from your employer. Here is what you should know about EOR and how it can assist digital nomads.

What is an Employer of Record, or EOR?

Employer of Record (EOR) is an organization that legally hires people living in a foreign country. The EOR serves as an employer “on paper”, and they handle all the legal obligations an employer has under the labor and tax laws in the country.

You still get your tasks from your employer, and they still manage your day-to-day work. The EOR handles the administrative tasks in the background, pays you the salary, and provides benefits you are entitled to by local laws. The EOR will charge your employer for your salary, taxes, benefits, and the EOR services.

Without an EOR, to provide you with salary and benefits in another country, your employer has to establish a presence there. Most countries require a legal presence to maintain compliance with local labor and tax laws. Establishing a presence in another country is a costly process. Navigating different labor laws is another complexity your employer likely doesn’t want to undertake.

However, if your employer has an EOR partner, it will simplify the process. It can also provide your employer with an opportunity to allow you, and other employers with the same wish, to work from another country. It is an excellent perk your employer might consider offering to retain their hard-working employees. Or, to attract top talent to your company.

Importance of staying compliant with tax and employment law as digital nomads

As remote work is becoming more prominent, it can be difficult to understand why it is important to stay in the same country as your employer. Especially so when you are already working from home.

The main difference between working from home and another country is that you are subject to different laws. For example, many countries forbid you from working while visiting on a tourist visa.

In most countries, you need a work visa or work permit to live and work there. To get it, you need an employment contract from a local employer.

Some countries offer digital nomad visas, that allow you to live and work in the country for a limited period. Still, it’s important to understand all the aspects of a digital nomad visa, especially taxes, social security, and benefits.

Employers and employees should understand the compliance matters when working abroad. For example, the employee may become subject to local income and social security taxes. Your employer will likely have to establish a presence in the new country. Or, they may risk creating a corporate permanent establishment in the new country.

There are also complexities of calculating and remitting different taxes from your salary. In some cases, both your employer and you may have to navigate double tax treaties and totalization agreements. All these nuances depend on the country issuing the digital nomad visa. They also vary significantly per country.

What if you are not compliant as a digital nomad?

Complying with all the relevant labor and employment laws is important as the retributions can be severe. Both employers and employees may face significant penalties and fees for non-compliance.

Digital nomads who are caught in violation of their visa may face additional bad outcomes. The most common one is deportation for those employees working without necessary visas and permits. They also might be blacklisted.

If found to be avoiding tax and other legal responsibilities, digital nomads may also face additional penalties. These could include paying back taxes and potential interest on their income. In most severe cases, the employees may be held personally liable, and even spend time in jail.

Where you can work as a Digital Nomad when your company uses an EOR

When your company uses an EOR, you can work from any country the EOR supports. Since the EOR will take on the role of employer, they manage the employer’s part of the visa process. Therefore, you can choose to work from any of the countries supported by a particular EOR.

The main reason you would go with an EOR is that their help with the visa process by acting as an employer would be invaluable. Still, here are some other benefits of finding the right EOR and pitching the idea to your employer.

How EORs Help Digital Nomads

A good EOR service will handle all the administrative tasks that complicate working remotely. This includes handling payroll, providing you with benefits, withholding tax, and other perks. Let’s discuss the benefits in more detail.

Simplified Payroll Management

One of the main EOR responsibilities is to ensure that everyone is paid, on time, in the relevant currency. They manage tax withholdings, social contributions, and compliance with local payroll regulations. Overall, they are handling administrative burdens for both employers and employees.

Navigating different currencies and legislation around payroll in multiple countries can be tricky. It is expected that your employer might be hesitant to approach it. However, payroll is simple with the right EOR. This aspect alone may persuade your employer to allow you to work remotely from another country.

Benefits Administration

One of the reasons why people prefer to work as salaried employees rather than as independent contractors is the benefits. Independent contractors are responsible for managing their taxes, and social contributions. They also have to calculate compensation for time off in their hourly wage. On the other hand, employees are entitled by law to annual leave, sick days, health insurance, and pension.

Meeting these benefits generally requires employers to establish a presence in the new country. This is a significant investment that may make your employer reconsider allowing you to work from abroad.

An EOR can assist you and your employer with providing your benefits. Hiring an EOR frees your employer from having to establish a presence in the new country to do so.

Legal Compliance and Risk Mitigation

When hiring in another country, compliance is the key. Even an inadvertent breach of local labor or employment laws can result in costly penalties and fees for the employer. Depending on the country, the employer might also face additional penalties.

The employee might face deportation, and getting blacklisted. They may also face penalties and fees. For example, employees might be required to pay back taxes. Or, they have to pay a percentage of the non-compliant revenue they have earned while working in another country.

One of the main benefits of going with an EOR is that they ensure compliance with local laws and regulations. They have the local expertise and knowledge to navigate the complexities of legal, tax, and employment issues. Hiring an EOR means reducing the risk of legal problems for both the employer and the employee.

Taxation and Social Security

Managing taxes and social security can be complex when working across borders. Each country has different tax rates, social security contributions, and filing requirements. These can be overwhelming for both the employer and the employee.

An EOR helps by handling tax filings and social security payments according to the local laws of the country where you are working. This ensures that you and your employer meet all tax obligations without the hassle of navigating unfamiliar tax systems. Not only will it give your employer peace of mind, but it will also help with avoiding unexpected tax issues.

Multi-Country Employment Solutions

If you plan to work from more than one country, an EOR can simplify the process. They are equipped to manage the requirements and regulations of each country you work in.

This flexibility allows you to move between countries with ease. It will help not burden your employer to re-establish new legal entities or understand different labor laws each time. With an EOR, you and your employer can focus on work, while an EOR handles the multi-country compliance and payroll management.

What to Pay Attention to When Choosing an EOR Service to Pitch to Your Employer

So, if you’re a digital nomad looking to live and work abroad as a salaried employee, pitching an EOR service to your employer can be a great way to handle legal and payroll issues. An EOR can help you stay compliant with local laws while making sure you get paid on time and receive the benefits you’re entitled to.

However, before suggesting an EOR to your employer, it might be good to understand what makes one EOR better than the other. In other words, it’s important to know what to look for. Here are key factors to consider when choosing the right EOR service.

Supported Countries

When picking an Employer of Record (EOR) service, the first thing to check is the list of countries they support. Make sure the EOR operates in the country or countries where you plan to work. Each country has different laws and requirements. The EOR must have experience and knowledge in those locations to ensure compliance and smooth operations.

Price

Cost is another crucial factor when selecting an EOR service. EORs charge different fees for their services, and these costs can vary widely depending on the country and the services included.

Look at what the EOR charges for setup, monthly management, and any additional fees. Compare these costs with your salary, and what your employer would be getting for the money to find the best value. Your employer may ask you to cover the EOR fees to work in another country, so it's important to understand your options.

Features Offered

Finally, consider the features and services the EOR offers. Some EORs only handle basic payroll and compliance. Others provide a full suite of services, including benefits management, tax filings, and HR support.

Make sure the EOR provides all the features you need, like visa assistance or comprehensive health benefits. You want to get the best support possible for your work abroad.

FAQ:

Can an EOR help digital nomads get work visas or permits?

Yes, an Employer of Record (EOR) can help digital nomads obtain work visas or permits in another country. The EOR acts as the legal employer and handles the necessary paperwork and compliance for securing the work visa, permit, or authorization. Laws and regulations may vary per country, so it’s important to consult with your EOR on whether they can assist you for a particular country.

How does an EOR ensure compliance for digital nomads working abroad?

An EOR ensures compliance by acting as the legal employer in the foreign country. They manage local employment laws, taxes, and regulations on behalf of the digital nomad’s employer. They stay updated with the legal requirements in each country and handle all administrative tasks. Essentially, they are reducing the risk of fines or legal issues for both the employer and the digital nomad.

What are the advantages of using an EOR for digital nomads compared to freelancing independently?

Generally, digital nomad life is perfect for freelancers and independent contractors, as they issue an invoice to the employer and manage their salary and benefits on their own. This approach may be great for many people, but others need more stability while they work abroad. Using an EOR allows digital nomads to maintain their full-time job with the employer, and earn salary and benefits while traveling.