‘We’ll hire through a global employment partner, so we don’t need to worry about UK corporate taxes’
Employers operating across borders face the complexity of managing an international workforce. It’s therefore critical to understand the laws and regulations of different jurisdictions.
To manage the administration behind these arrangements, many businesses outsource the obligations in different countries to a Professional Employer Organisation ('PEO'), or an Employer of Record ('EoR'). These outsourced providers offer a range of services, which can involve directly employing an individual and assuming the obligations of an employer on behalf of the 'hiring company'.
While engaging a PEO or EoR can streamline processes, it may overlook critical considerations such as corporate permanent establishment issues.
For example, global employers often offer equity participation to their staff. These can range from options and direct share awards to virtual or phantom arrangements that replicate the benefits of an equity award.
Many share plans are designed to accommodate awards given by companies, whether to direct or group employees. In some cases, they will also be designed with a focus on a particular country or countries.
When a company uses a PEO or EoR model to hire individuals outside of its typical territories, it might end up providing incentives to someone who does not meet that definition of employee. This can lead to different tax, social security, accounting, and legal outcomes, such as accelerating the first tax point for an option being moved forward to the grant date instead of the exercise date.
Some countries require filings to be made to register the equity grant, but in the case of a PEO or EoR model, who should make this filing?
If you’re considering offering equity or other incentives via a PEO and EOR, you will need to understand whether this impacts the company’s obligations or requires any amendments to the existing plans.
Our multidisciplinary team specialises in navigating these complexities. We provide expert advice to ensure equity incentives are effectively implemented and understood by all stakeholders. From structuring incentives to managing compliance, we help businesses navigate the intricacies of global workforce management.
