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[Explainer] How an Employer of Record Affects You as an Employee

Posted onFebruary 24, 2021byIrina Dzhambazova
employer of record for employees

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.

Working remotely for a company in a different country, no longer needs to equal giving up an employee status in exchange for an independent contractor one. An Employer of Record can help!

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. 

Availing of an Employer of Record model spares the company you work from setting up in a new country and doing everything themselves, while you still get the full employment you rightfully deserve.

What is required of me?

After your employer decides to use Boundless's services, we will invite you to our platform to create a profile and provide a few necessary personal details. You are given access to the app through your personal email. We do this purposefully, so even after you no longer work for the same company, you will still have access to your data and documents. Afterwards, you sign your employment contract, and you are good to go.

But who is my contract with?

You sign an employment contract with both Boundless and the company you work for, which is now our client. The agreement, which is compliant with local regulations and often bilingual, outlines all employment basics - your role, salary, responsibilities, statutory time off, a probation period, severance pay, notice period, etc. 

The agreement will be permanent unless the country's regulations are such that it needs to be fixed term. That doesn't mean that your employment is fixed-term; it often means that a follow-up contract will be signed after the initial fixed term expires. Regardless of the timeline, the employment contract carries all the employment rights you are entitled to and can serve any external purposes (mortgages, bank loans, rental agreements, etc.).

The company you work for is responsible for your employee experience culturally; the Employer of Record is responsible for your employee experience legally.

What happens each month?

You do your work, and Boundless carries on with all of the behind the scenes HR and tax work that would be happening anyway. Every month, our payroll team carefully calculates your gross to net salary, applying all relevant taxes and allowances, as well as anything that may have changed since the previous month. We directly pay you your net salary, and we file and pay your taxes to your country’s tax authority.

We also prepare your payslip, which you can access through the Boundless platform. It's an important document, just like your contract, which you may need for a mortgage application for example. 

Unless you live in a country where employees are expected to file their taxes at the end of the year, Boundless will file all year-end tax documents for you, just like any other employer would. 

Is my data safe?

There is a limited but legally-required amount of personal information that you need to provide to your employer so that you can be compliantly employed. As your legal employer, Boundless is responsible for collecting and storing that data. Amongst other things, this includes your name, address, date of birth, bank details, tax details, marital status (for relevant tax breaks) and your work permit/visa if you live in a country where you need one. 

You fill out the information on the app yourself (not through email, which we highly discourage, as email is not a secure form of communication). Boundless is built on AWS, all data is hosted in Ireland, and is regulated by the EU GDPR data protection.

division of responsibilities between employer of record and company

How do I request time off or get my expenses paid?

While time off is a legal right you have, granted to you through your legal employment status, requesting it is something you do with the company you work for. As our client, we advise them on the local regulations and statutory limits for all forms of leave (holiday, maternity, parental, force majeure or any other form of leave). 

From then on, the company decides whether to extend any of the periods and what the internal process for requesting time off is, which they then communicate to you. If you are unsure what the policies of the organisation you work for are, the best thing is to check the internal handbook or ask someone from the HR/People Ops department. You can also ask us, and we will be happy to advise you on the statutory terms.

Similarly, with expenses or reimbursements, this is something that you clear with the company you work for first. After they have approved that, they let us know that some costs will be added to your salary in the following month's payroll. It’s then our responsibility that the additional reimbursement sum is added to your net salary and not taxed (unless they fall under a benefit-in-kind tax regulation).

So, how do benefits work then?

You get all statutory benefits that are mandated by your government automatically. Depending on the country you reside in, that is usually a mix of social security, time off, flexible working, training, etc. 

Then there are the fringe benefits, also known as perks or benefits in kind which the company you work for extends voluntarily. These will either be provided through selected local suppliers or as a monetary stipend. You may have to choose from a pool of options or find your vendor in the latter case. For example, if the company has a well-being budget, you might use it with your choice of studios and activities. You may not realise that while the cost of benefits-in-kind is covered, you still have to pay income and other relevant taxes on it in most countries. This is the case regardless if Boundless is involved in your employment or not.

When you are employed through Boundless, you get all statutory benefits that are mandated by your government such as social security, time off, flexible working, and more.

What if the government changes any of the rules?

Year on year, many legislative and tax changes happen in every country - there may be new laws around time off, a percentage change for pension contribution or a slight increase in income tax. None of these changes are anything you should worry about - it all falls under Boundless’s responsibility to monitor and account for. 

We work with local legal experts who update us on all legislative and tax changes multiple times a year. The only changes you need to inform us of are significant life events, such as marriage, a newborn child, or something else that may impact your payroll (because of existing tax breaks or allowances).

What happens when the job ends?

That will be determined by the circumstances of the employment loss. Is it a resignation, collective or individual redundancy, or a dismissal? Employment law outlines many end-of-employment aspects, and since you are legally employed, your employment is ruled by them. For example, in Ireland, employees who are made redundant are entitled to two weeks of pay for every year of service, plus a bonus week. So if an Irish employee is made redundant, they will receive redundancy pay according to their tenure. On the other hand, if that Ireland-based employee resigns, they need to give a specific notice, again, depending on their service length. Notice periods, in fact, are something almost every country’s employment legislation has. 

Notice periods had always been part of the jobs I had held before that first remote job, so when I resigned from it, I assumed I would work one there as well. It would allow me to finish up on my projects and say goodbye to collaborators I had worked with. What I learned instead is that when your working relationship comes with a contractor status, all assumptions fly out the window. My boss accepted my resignation, declaring that my "employment" was ending from the next day. He was within his own rights to do so; I was, after all, an independent contractor, besides, US employment law allows at-will employment. The mismatch in expectations left me without a steady income at the flick of a switch. Even if I wanted to, I couldn't apply for unemployment benefits, since I hadn't been properly employed. This should never be a place anyone finds themselves in. 

When employing someone in a different country, the rules, regulations, taxes, registrations and everything else change, yet the need to comply with them doesn't.

Want to ask anything more?

While I hope this has covered some of the basics and most common concerns of what the Employer of Record experience would be like for you as an employee, you may have further questions. If you do, feel free to reach out on Twitter or send us an email to ask@boundlesshq.com. If you feel confident in the setup and would like to explore the possibility of being employed this way, you can send this email to your boss and let them know that independent contracting isn't the only way.

The making available of information to you on this site by Boundless shall not create a legal, confidential or other relationship between you and Boundless and does not constitute the provision of legal, tax, commercial or other professional advice by Boundless. You acknowledge and agree that any information on this site has not been prepared with your specific circumstances in mind, may not be suitable for use in your business, and does not constitute advice intended for reliance. You assume all risk and liability that may result from any such reliance on the information and you should seek independent advice from a lawyer or tax professional in the relevant jurisdiction(s) before doing so.
Written by Irina Dzhambazova

Irina Dzhambazova is the editor of this publication and leads many of the marketing efforts behind Boundless. Previously she crafted stories at SaaStock and Dublin Globe and travelled the world capturing case studies of companies using the Kanban Method. Throughout this experience, she was almost always "the remote worker" and knows a thing or two about the potential and challenges of this way of working.

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