How Digital Nomads Work Abroad Via an Employer of Record (EOR)
The shift to remote work in the last few years has gone from a focus on 'work from home to 'work from anywhere. Digital nomadism has become a new norm where remote workers can now choose to work from just about anywhere in the world.
According to Forbes, the number of American digital nomad workers rose 42% in 2021, from 10.9 million to 15.5 million.
Digital nomads usually spend long periods traveling in other countries while maintaining a home base or exploring to find new places to live.
Digital nomads are becoming a crucial part of the workforce since they provide access to independent, tech-savvy workers who are likely to fit your company's culture due to their lifestyle.
You'll also have people who can work outside normal hours and cover the responsibilities of missing workers. Working with digital nomads who live in low-cost areas can also save you salary costs.
Digital nomadism comes with its set of challenges. You have to adhere to specific country laws such as those on tax and payroll. When you’re hired via an Employer of Record (EOR) you can be sure your contract follows local employment and tax laws.
What is an EOR and How Does it Work?
An Employer of Record (EOR) is an organization that employs and pays employees on behalf of another company. The EOR acts as the legal employer in the country where a digital nomad is based if their employer does not have a legal entity in that country.
As a digital nomad, you would be employed by the local Employer of Record on your tax documents, which is essential when working in another country.
The EOR takes care of administrative duties and other employment obligations such as drafting employment contracts, processing employee taxes, international payroll and benefits and ensuring legal terminations.
Who can use an EOR?
There are several instances where an Employer of Record (EOR) can be used:
- A company wants to relocate some employees to work remotely in another country
- A remote worker wants to move abroad but their employer is only incorporated in their home country
- An online entrepreneur wants to live and work remotely abroad
- A digital nomad or freelancer wants to find tax residency abroad
Where You Can Work as a Digital Nomad When Your Company Uses an EOR?
A digital nomad visa gives you legal authority to work remotely in a foreign country for a specific period of time, usually at least 12 months.
Since 2020, many countries around the world have started their own digital nomad visa programs (listed here in Top 30 countries with Digital Nomad Visas), and more will join in the next few years.
Not everyone can get a digital nomad visa, the eligibility criteria for most of these visas include: must be 18+ years old, must prove minimum income, and must be able to work remotely.
Some EORs like Remofirst will help employees through the Visa application process and then onboard and pay them in local currency.
How to apply for a digital nomad visa
The documentation requirements for digital nomads vary from country to country and may include health insurance, a minimum amount of income, and a certain bank balance. Other requirements may include proof of income and background checks.
In most cases, you will apply for the visa online at the country's immigration department after fulfilling all the requirements. You can also apply for a digital nomad visa after arriving in the country using your tourist visa.
EORs for Digital Nomads
An EOR can handle nearly everything to do with working in a foreign country as a digital nomad. Some of the services that you can get from an EOR include:
1. Drafting of employment contracts
As a digital nomad, you should have employment contracts that are compliant with the labor and tax laws of the foreign country you are working in. Understanding and complying with the laws of different countries can be complicated when you’re not familiar with them.
A local EOR can help you draft a contract that meets all local regulations, including social security, employee benefits, and taxes. An EOR will also conduct employee onboarding for you, assisting you in drafting all the documentation needed to settle abroad such as contracts and signatures.
2. Sponsoring visa and work permits
An EOR can sponsor your visa and assist you in obtaining a work permit so that you can live and work legally in a foreign country. Their expertise can help you navigate the myriad of rules and regulations surrounding a digital nomad's immigration status abroad.
3. Making tax and social security payments
Errors in filing tax returns can cost you hundreds of dollars in legal suits. It can be time-saving and accurate to use the services of an EOR for this.
The employer who has hired digital nomads in other countries does not have to be closely familiar with obligations relating to employee benefits or tax withholdings — the EOR will help you accurately process all of your employees’ payrolls on time, collect all your tax documentation, and safely store all of your employees’ records for future reference.
4. Payroll processing and employee benefits
Payroll processing for your global remote team is a complex process due to the different payment methods, bank fees, and currency changes. Your EOR manages employee payments in accordance with your payroll schedule, including payroll taxes and deductions, and returns. Additionally, EORs can send pay slips and offer employee benefits based on where they live.
An EOR offers mandatory and optional benefits such as health insurance, social insurance, unemployment insurance, sick time, wellness programs, and pension plans to employees working around the world.
5. Guaranteed compliance
Misclassification of workers carries serious penalties, such as hefty fines or even jail time. With an EOR, you can avoid costly compliance mistakes by setting everything up according to each country’s local laws, preventing fines and lawsuits later on.
The EOR team also creates compliant contracts and employee classifications.
Benefits of an EOR for Digital Nomads
An EOR saves you the hassle of navigating a foreign legal system on your own. Some of the benefits of employing an EOR for digital nomads include:
- Spend less time and money - You do not have to hire legal counsel, train your HR staff on legal matters in multiple countries, or navigate complex processes in obtaining permits for your employees when you work with an EOR. You will have extra time saved to get to know your new employees and focus on building your business.
- Reduces compliance risk - Because an EOR does the work for you, you can hire freely without worrying about local regulations. An EOR also protects you from any compliance issues that may arise as they take full responsibility for any compliance issues.
- Embrace the benefit of flexible work - When digital nomads are hired via an Employer of Record, their employer benefits from increased time zone coverage which can help them expand their business globally.
Remofirst EOR Can Pay Digital Nomads Compliantly
When working as a digital nomad, all you need is a good internet connection and a laptop, and you're ready to travel the world while working from your favorite cities.
However, you do have to consider the legal implications of working remotely in a foreign country as each country has its own regulations.
Employees who are hired using an Employer of Record (EOR) like Remofirst can be hired and paid compliantly based on each country’s local laws.
