Has anyone dealt with a third party Employer of Record for hiring residents of another country, such as the UK?

A prospect we have been working with is in the software industry and uses a third-party Employer of Record for a worker that they have in the United Kingdom.  This Employer of Record is the legal employer of this worker.  Our plans typically use the Non Resident alien exclusion.  I'm trying to determine if this arrangement would meet the Non Resident Alien with no US Source income exclusion and the question stops there.  If it doesn't, has it been anyone's experience that the arrangement holds up to the IRS standard that this worker is not actually the employee of the plan sponsor?

Is this person a US citizen or permanent resident (green card)?

The person is not a US citizen or even located in the US.  I am going to ask if this worker ever comes to the US to do any work, but it doesn't appear that he does.

It would help to get clarification on the relationship between the worker and the Employer of Record (EOR) and the relationship between the worker and the prospect.  Some EORs are independent companies and some are PEOs.  Under the PEO structure, the prospect could be a co-employer of the worker and the prospect should have provisions in the plan to specify if the worker meets the plan's eligibility requirements.  If the EOR is the worker's employer and the prospect is not, then the EOR may have a US retirement plan and the worker may be eligible in the EOR's plan. 

One possible indicator of the prospect/worker relationship is whether the prospect gets a tax deduction for the compensation paid to the worker, or the prospect only gets a business tax deduction for the fees it pays to the EOR.

On 3/22/2024 at 2:25 PM, jkharvey said:

The person is not a US citizen or even located in the US.

Then it would appear the statutory exclusion for non-resident aliens can be used provided such language is in the plan or, if not in currently, then amended in prior to this employee's otherwise entry date.