How do you handle benefits when hiring through an EOR?

[amanda22]

We’re starting to hire a few employees outside our home country, and one thing I’m still struggling to understand is employee benefits. We plan to use an EOR rather than opening entities straight away.

I’ve compared a few providers, and Globalization Partners is one we’ve been speaking with recently. I actually understand payroll and local employment side fairly well, but benefits get less clear when every country has different requirements and expectations. I don’t necessarily expect someone in Germany and someone in the UK to have identical benefits, but I also don’t want one package to feel noticeably worse just because of where the employee lives.

So, I have a question for employers already doing this, do you normally let the EOR recommend a standard local package and work from there, or do you set your own global minimum and then add whatever is required locally?

[Peter Gulia]

Globalization Partners’ advertising suggests that an aspect of their service is guidance about “international norms and practices[.]” https://www.globalization-partners.com/book-demo-lp/?utm_keyword=globalization%20partners&utm_device=c&utm_matchtype=e&msclkid=15028c2078481df198eee65f20427130&utm_source=bing&utm_medium=cpc&utm_campaign=usa__search__branded__%5Ben%5D&utm_term=globalization%20partners&utm_content=branded.

One imagines its competitors too offer suggestions about balancing business goals, including:

obeying each set of national and subnational requirements,

meeting any contract requirements the employer-of-record imposes,

setting compensation (including benefits) to attract the workers the service recipient wants, and

setting compensation (including benefits) to meet the service recipient’s budget.

Whether one seeks or eschews reasonable parity across nations might relate to one or more of those factors.

While my former and current clients have workers in many nations, none has used an employer-of-record service, so I lack the experience you’re seeking.

[Artie M]

In your facts it appears that the client has gone to the EOR and seen what they provide and is disheartened, mainly because the packages won’t be the same in each country.  Well, sorry, they just won’t be.  In certain jurisdictions certain benefits may be unavailable (insurers may not cover a low number of employees for certain benefits), the tax treatment might be untenable, benefits may be duplicative of government required benefits, or the EOR’s systems may not be able to administer the desired benefit.

The first thing to look at is the EOR package (default or other) for each of your jurisdictions.  A good EOR ordinarily knows mandatory local benefits and social contributions, what’s market in that jurisdiction, potential insurers, tax treatment, nondiscrimination or equality requirements and can its systems administer the benefits.

Meanwhile, the client should establish a limited set of global minimum benefit principles/framework.  This would be like standards of protection, not actual benefit designs. Eg, employees should receive employer-sponsored medical coverage or access to a national healthcare system that provides reasonably comprehensive local care. That works better than requiring every employee, for example, to receive the same US PPO coverage.  The idea is to have kind of a minimum that the client feels the employees must have no matter what jurisdiction—again, this minimum is not specific coverage—and is just a generalized standard.

So, look at the EOR’s standard local package(s) first, evaluate them against the client’s short global-minimum framework and local market data.  The EOR’s standard local package or default offering shouldn’t necessarily become the client’s benefit policy.

Then, for each jurisdiction, ask the EOR for specific local data/info, including what does local law or social insurance already provide, what’s automatically included, and what comparable employers provide.  Then ask the EOR to provide information as to what kind of supplements are available in that jurisdiction, either through the EOR or through insurers (tell them for this it doesn’t matter if the EOR can administer it, you just want to know what is available), how those supplements will be taxed (or even if they think a gross-up should be considered—beware of tax equalization), and now whether the EOR can administer it through payroll or insurance.

We usually like to put the information in tabular or matrix form.  This exercise generally reveals that some apparent disparities are justified or unavoidable. A US employee may receive expensive employer medical insurance, while an employee elsewhere has national healthcare plus a modest supplemental policy. The employer costs are different, but the employee protections may be reasonably comparable from an overall perspective.

One legal biggie--avoid providing the employees some kind of enforceable promise of “equal” or “equivalent” benefits unless the client itself has specifically defined, with advice of counsel, how equivalence will be measured.

Here is some language pulled just now from GitLab’s employee Benefit “handbook” online that illustrates their philosophy https://handbook.gitlab.com/handbook/total-rewards/benefits/general-and-entity-benefits/ 

• Global Baseline & Local Nuance:  GitLab’s goal is to provide a baseline of benefits for all team members globally... However, because benefits are highly dependent on local laws, statutory requirements, and market standards, specific plans and offerings will vary significantly by country.
• EOR & PEO Alignment:  For team members employed through our professional employer organizations (PEOs) or Employers of Record (EOR), benefits are primarily administered through the local employing entity's statutory and sponsored plans. GitLab reviews these programs to ensure they align with our global standards, but they are governed by local provider agreements.
• Supplemental Coverage: Where local statutory programs or EOR options fall short of our global philosophy, GitLab may offer company-sponsored supplemental allowances or stipends (such as wellness or remote-work allowances) to harmonize the team member experience, subject to local tax compliance.