February 2024

Progressive companies increasingly recognize the value of global talent recruitment, tapping into diverse skills worldwide. However, the intricacies and corporate risks tied to managing international employees can be daunting. Recent studies indicate that historically, expanding teams internationally has incurred expenses of approximately USD 200,000 per country, coupled with an annual HR administrative cost of USD 90,000, and setup durations exceeding six months. Challenges encompass recruiting top talent, adhering to local regulations, providing training, and integrating teams globally. These factors, crucial for companies venturing beyond domestic boundaries, directly impact brand and revenue. Precision in navigating these challenges is crucial to avoid financial losses, reputational damage, and missed opportunities stemming from suboptimal hiring decisions abroad. This is where the concept of Employer of Record benefits plays a pivotal role. Let us understand this in depth below.

What is an Employer of Record?

An Employer of Record (EOR) serves as a strategic guide for global teams, streamlining onboarding and talent integration at both cost and scale. The EOR shoulders legal responsibility for the client’s entire HR spectrum, encompassing recruitment, global payroll services, compliance, compensation, employer of record benefits, and extensive HR services. While EOR solutions handle complex HR and compliance tasks and assume legal liability, the client organization retains operational control and employee management. An EOR enables agile and flexible expansion, mitigating HR pressures and costs. This empowers companies to concentrate on core business goals like driving growth, innovation, and competitive advantage, relying on EOR for specialized employee-related expertise.

How can an EOR help you Boost Your Global Talent Acquisition Strategy? 

There are several employer of record benefits when it comes to hiring and managing global talent, such as:

Navigating Complex International Employment Laws

One of the most significant challenges in global talent acquisition is ensuring compliance with the myriad of employment laws and regulations across different countries. An EOR acts as a local employer, handling legal and regulatory compliance matters on behalf of your company. This not only simplifies the process but also mitigates the risk of legal complications, ensuring that your global workforce adheres to local labor laws.

Accelerating Time-to-Hire

Partnering with an EOR can significantly reduce the time it takes to bring on board international talent. EORs are equipped with established infrastructures and local networks that expedite the hiring process. By leveraging their expertise, companies can tap into a pool of qualified candidates swiftly, ensuring that key positions are filled without unnecessary delays.

Mitigating Employment Risks

Managing a global workforce involves inherent risks related to employment contracts, tax compliance, and other regulatory nuances. EORs assume these responsibilities, shouldering the burden of potential risks associated with global employment. This allows your organization to focus on its core competencies, knowing that the EOR is adept at handling the complexities of international employment laws and minimizing risks.

Enhancing Payroll and Tax Management

The intricacies of managing payroll and taxation across various jurisdictions can be daunting. EORs, specializing in workforce management, streamline these processes by handling payroll, tax withholdings, and other financial aspects, ensuring accurate and timely payments. This not only reduces administrative burdens for your company but also ensures that employees are compensated by local regulations.

Flexibility and Scalability

One of the key advantages of leveraging EOR benefits is the flexibility and scalability it offers. Whether your company is establishing a presence in a new market or expanding an existing one, an EOR can quickly adapt to your changing needs. This agility allows businesses to scale their operations without the need for extensive administrative overhead or the complexities associated with establishing legal entities in each jurisdiction.

Case Study: How EOR helped to increase profitability with multinational teams

A multinational corporation specializing in software and internet services within the Consumer Electronics sector, aimed to review its compensation strategy for a specific specialized job function. The objective was to increase workforce size and retain top-tier talent within the organization by adopting a compensation strategy based on skills.

EOR conducted primary research, engaging industry stakeholders to gather pertinent data. Additionally, EOR conducted thorough secondary research, validating findings with Service Providers and startup peers. The collected data was analyzed to extract key trends, practices, and compensation ranges, employing the Career Framework approach for job and level mapping. The results were presented through dashboards, encompassing vital data points, enabling the client to strategize budgetary spending effectively. This empowered the client to redefine their compensation strategy, conduct successful job/level mapping, retain top talent, and prioritize critical skills and roles within the organization.

Ready to Elevate Your Talent Pool with Global Professionals?

In the current landscape, HR responsibilities have gained unprecedented importance. With globalization and the prevalence of hybrid workforces, candidates are exploring opportunities worldwide. While candidates have the luxury of being discerning, top talents remain in high demand. Additionally, employees seek a high quality of life and ethical alignment with their employers. To stay competitive, incorporating international recruitment into your toolkit is crucial.

Procloz, a technology-driven services company, focuses on hybrid teams and recruitment pipelines for global expansion. Prioritizing your team, we optimize the recruitment process, ensuring higher-quality candidates. Connect with us today to discover how we can streamline your HR functions and empower your team with international talent acquisition!

When you issue a paycheck to your employees, it’s not just them benefiting from the transaction. It’s necessary to withhold payroll taxes from the employee’s wages and remit them to the appropriate authorities, ensuring payroll tax compliance. For certain payroll taxes, it’s necessary to match what employees contribute. However, it’s crucial to note that not all payroll taxes are the same. But who’s responsible for these taxes – the employer, the employee, or both? Let’s find out more, starting from the basics of what is payroll tax, the expenses involved, the examples, and much more!

What is Payroll Tax?

Payroll tax is a mandatory levy imposed by governments on the wages and salaries paid by employers to their employees, playing a crucial role in Workforce Management. In simple words, a payroll tax is a form of tax cut off from an employee’s paycheck. 

Different payroll taxes are managed in various ways: some are subtracted from the employee’s pay, some are handled by the employer, and others are split evenly. Governments use these payroll taxes to fund diverse public programs, such as Social Security, Medicare, and unemployment benefits. Local governments often use these taxes for specific needs such as public transportation or infrastructure repairs. Some programs supported by payroll taxes aim to guarantee individuals a living wage after retirement. 

Now that you know what is payroll tax all about, let’s dive in to know more.

Who Pays Payroll Taxes?

In short, the answer to this question is that both employers and employees contribute to payroll taxes on wages, tips, and income. However, the intricacy lies in the details: certain payroll taxes are shared between employers and employees, while others are not.

Shared Payroll Taxes

Shared payroll taxes, specifically FICA taxes, involve equal contributions from both employers and employees. These mandatory payroll taxes in the U.S. encompass Social Security and Medicare taxes, serving as “insurance” to assist specific groups in the country. 

Social Security helps 

• retired adults, 
• individuals with disabilities, and 
• eligible spouses, children, or survivors. 

Meanwhile, Medicare is a health insurance program for those 

• aged 65 or older,
• those with qualifying disabilities under 65, and 
• individuals with end-stage renal disease. 

FICA Taxes

FICA (Federal Insurance Contributions Act) mandates that both employers and employees must contribute to the Medicare and Social Security programs. For the Social Security component of FICA taxes, the IRS sets a limit, requiring a 12.4% deduction from employee earnings. Employers cover half of this amount (6.2%), while employees are responsible for the remaining half. 

Social Security

Social Security taxes are a joint responsibility of employers and employees. Employers deduct Social Security taxes from employee wages and contribute an equal amount.

The flat rate for Social Security tax is 12.4%, with the employer and employee each responsible for 6.2%. This means you pay 6.2%, and the remaining 6.2% is withheld from employee wages.

It’s important to note that not all wages are subject to Social Security tax due to the Social Security wage base. Once an employee’s earnings reach the annual wage base, set at $168,600 for 2024, stop withholding (and matching) Social Security for that employee.

Medicare

Medicare tax is a joint responsibility for both employers and employees. Similar to Social Security, you are required to deduct Medicare from employee wages and match the employee’s contribution. The Medicare tax rate is 2.9%, divided equally between the employee and employer. The employer withholds 1.45% of employee wages and matches it with a 1.45% contribution.

While there isn’t a wage base for regular Medicare taxes, it’s important to be aware of an additional Medicare tax of 0.9%, which is solely the responsibility of the employee. Employers are obligated to withhold the additional tax from employees’ wages once they surpass the $200,000 threshold.

Employer Payroll Taxes

Employees and employers don’t share a joint responsibility for all payroll taxes, emphasizing the need for HR support. Some are exclusively borne by employers. The following payroll taxes fall under the sole responsibility of employers:

• Self-employment taxes
• Federal unemployment tax
• State unemployment tax

Self-Employment Taxes

Self-employment taxes are obligatory for self-employed individuals. Since there’s no employer to withhold FICA taxes from their earnings, self-employed individuals utilize self-employment taxes as a means to submit their Social Security and Medicare taxes.

The self-employment tax rate stands at 15.3%, with 12.4% for Social Security taxes and the remaining 2.9% covering Medicare.

Self-employed individuals need to monitor both the Social Security wage base and the additional Medicare tax, as these remain consistent with those applicable to employees.

Federal Unemployment Tax

Federal Unemployment Tax Act (FUTA) is an unemployment tax imposed on employers. The federal government relies on FUTA taxes to fund unemployment compensation for workers facing job loss.

The FUTA rate stands at 6%, applying to the initial $7,000 paid to an employee annually, known as the FUTA wage base. Consequently, the maximum FUTA amount per employee is $420 ($7,000 X 0.06). If payments surpass this, an excess has been paid.

Most employers qualify for a FUTA tax credit of up to 5.4%. However, businesses in credit reduction states experience a decrease in the FUTA tax credit amount.

State Unemployment Tax

The State Unemployment Tax (SUTA) finances unemployment programs, helping employees who involuntarily lose their jobs (playing a crucial role in financial management). Although unemployment taxes are generally employer-specific, a few exceptions exist. In Alaska, New Jersey, and Pennsylvania, employers are required to withhold money from employee wages.

SUTA tax is a percentage of employee wages, that varies across states. It goes by different names, such as State Unemployment Insurance (SUI) in California and Reemployment Tax in Florida.

Employee Payroll Taxes

Certain payroll taxes are the sole responsibility of the employees, such as federal, state, and local income taxes.

Federal Income Tax

Federal income tax is an employee-exclusive tax that must be deducted from their wages. It doesn’t have a fixed rate; instead, the withholding depends on factors like 

• pay frequency, 
• filing status, 
• annual income, and 
• the details provided in Form W-4. 

State Income Tax

The majority of states impose a state income tax, making it likely that you will need to withhold state income tax from employee wages. Certain states use a flat rate for the income tax and others, use tax brackets to determine the applicable rate for employees. 

Local Income Tax

Local income taxes play a role in financing community enhancement initiatives and educational projects. These taxes are applicable only in states with a state income tax, although not all states with state income tax implement local income taxes.

Local income tax rates differ among municipalities and may fall into several categories:

• Flat Tax Rate: A uniform rate applied across all income levels.
• Progressive Tax Rate: The tax rate rises with employee income.
• Flat Dollar Amount: All employees contribute the same fixed dollar amount, irrespective of their annual income.

It is essential to consult local regulations to ensure accurate withholding of the appropriate local income tax amount from employee wages.

The Takeaway

Now that you’ve got the lowdown on what is payroll tax and who handles which taxes, it’s like figuring out a teamwork routine. Employers do a lot of the heavy lifting – juggling withholding and matching contributions. Meanwhile, employees see a bit of their pay taken for Social Security, Medicare, and other taxes. It’s a tag team effort to keep things running smoothly and fund important programs. So, employers and employees, each playing their part, make sure the financial gears of society keep turning. 

With Procloz’s global payroll services, managing your payroll taxes gets easier than ever. Learn more about our services and book a demo now to see us in action!

In today’s digital age, businesses rely heavily on their IT infrastructure. When systems go down, even for a short period, it can have a devastating impact on productivity, revenue, and customer satisfaction. That’s why it’s essential to have a reliable IT management support system in place.

What is Proactive IT Management Support?

Proactive IT management support, incorporating business process management, is a strategic approach to IT that focuses on preventing problems before they occur. This means going beyond simply reacting to issues as they arise and instead taking steps to identify and address potential problems before they escalate.

How Does Proactive IT Management Support Reduce Downtime?

Every company faces downtime at some point, but not having IT for too long can lead to severe financial consequences. 

The specific expenses associated with downtime vary among companies, with one study revealing costs reaching up to $9,000 per minute. Business size is a significant factor influencing these costs. For relatively small companies, such as many in Indiana, downtime typically incurs expenses in the range of a few hundred dollars per minute. Conversely, large businesses may face costs in the tens of thousands of dollars per minute or even more. For instance, a 14-hour downtime experienced by Facebook in March 2019 resulted in a staggering cost of almost $90 million for the company.

There are several ways that proactive IT management support can help to reduce downtime:

• Regular monitoring and maintenance: Proactive IT support providers will regularly monitor your systems for potential problems. This includes things like disk space usage, CPU performance, and security vulnerabilities. By identifying and addressing these issues early, they can prevent them from causing downtime later.
• Patch management: Software updates and patches often contain important security fixes and bug fixes. Proactive IT support providers, including those involved in business process outsourcing, ensure that your systems are always up to date with the latest patches, which can help to prevent downtime caused by software vulnerabilities.
• Disaster recovery planning: Proactive IT support providers will help you develop a disaster recovery plan in case something goes wrong. This plan will outline the steps you need to take to get your systems back up and running as quickly as possible.

How Does Proactive IT Management Support Boost Productivity?

In addition to reducing downtime, proactive IT management support can also boost productivity in several ways:

• Reduced employee frustration: When employees are constantly dealing with IT problems, it can be very frustrating. Proactive IT management support can help to reduce the number of IT problems that employees experience, which can lead to increased employee satisfaction and productivity. 

“In a survey conducted by ITIC in 2018, 59 percent of participants identified human error as the leading cause of unplanned downtime in their respective organizations.””

• Improved access to technology: Proactive IT support providers can help to ensure that employees have the latest technology and tools they need to be productive. They can also help to troubleshoot any problems that employees are having with their technology.
• Peace of mind: Knowing that you have a reliable IT support system in place can give you peace of mind and allow you to focus on running your business.

The Cost-Effectiveness of Proactive IT Management Support

While proactive IT management support may seem like an additional expense, it can save you money in the long run. By preventing downtime and boosting productivity, proactive IT support can help you to improve your bottom line.

Choosing the Right IT Management Support Provider

When choosing an IT support provider, it’s important to find one that is a good fit for your business. Be sure to ask about the provider’s experience, services, and pricing, considering the inclusion of outsourcing HR support. You should also make sure that the provider has a good reputation and references.

Transform Your Business with Procloz 

Embracing proactive IT management support can help you to reduce downtime, boost productivity, and save money. To tap into these benefits, it’s essential to choose a provider that can seamlessly integrate proactive IT support strategies into your existing processes. Procloz is your partner in this endeavor. Procloz helps you unlock your full potential through its technology-driven solutions. Contact us today and explore our IT support services to understand our proactive approach to your specific challenges!