Access to international talent pools has become a cornerstone of success for startups. A significant 58% of firms are now embracing “borderless” hiring for technology functions, according to data from Gartner, marking a two-fold increase over pre-pandemic figures.
This surge highlights a pivotal shift in talent acquisition, offering startups a wealth of opportunities to tap into global expertise. However, navigating the complexities of international hiring can be daunting.
In this blog post, we compare options for global talent acquisition. We also offer insights for alleviating many of the pain points commonly associated with cross-border hiring.
Option #1: Employer-sponsored visas
Accessing talent pools abroad through employer-sponsored visas has been the go-to approach for startups seeking international expertise. Despite its legacy status, this route is increasingly fraught with challenges.
For instance, the H-1B visa program in the U.S., a popular avenue for hiring high-skilled foreign nationals, faces unprecedented constraints. The cap for 2024 was reached well before the conclusion of 2023, indicating a fiercely competitive environment for securing visas. Projections suggest the cap for 2025 may be reached even earlier in 2024, exacerbating difficulties faced by employers.
Employer-sponsored visas often restrict hiring to certain sectors. Employers may have to demonstrate an inability to find requisite skills within the local workforce. The process also entails extensive paperwork, red tape and relocation costs, further complicating international hiring and making it a costly affair.
Option #2: Setting up a legal entity in a new country
Rather than relying on employer-sponsored visas, startups may opt to establish a legal entity in a target country.
This approach offers greater control and flexibility, allowing startups to bypass visa restrictions and streamline the hiring process. However, setting up a company in a new country comes with its own set of challenges. This includes navigating foreign ownership restrictions, lengthy incorporation processes and unfamiliar legal and tax obligations. Oftentimes, a local director or shareholder is required, nudging startups to establish hasty partnerships. Additionally, cultural and language barriers may pose further complexities.
Despite these challenges, setting up in a new country can provide long-term strategic advantages, such as fostering a diverse and dynamic workforce. It’s important for startups to carefully weigh these against anticipated challenges when considering this option.
Option #3: Engaging independent contractors
Engaging independent contractors (ICs) offers startups a viable alternative to traditional employment models.
ICs provide specialized expertise on a project basis, granting access to talent without the overhead costs associated with full-time employees. However, misclassifying employees as ICs can lead to repercussions, including fines, intellectual property (IP) risks and permanent establishment. Moreover, regulatory landscapes surrounding IC engagement vary across jurisdictions.
Nonetheless, leveraging ICs can provide startups with flexibility and scalability, enabling them to adapt quickly to changing needs. However, it’s necessary for startups to deliberate the challenges of this hiring option. A cross-border HR services provider may be able to support IC engagement by serving as an Agent of Record.
Option #4: Hiring through an Employer of Record (EOR)
For startups seeking a compliant and efficient solution, partnering with an Employer of Record (EOR) offers a turnkey approach.
EORs assume the legal and administrative responsibilities of employing workers in foreign jurisdictions. This option essentially relieves startups of primary HR processes, including personal income tax reporting, payroll, compliance burdens and benefits administration. Startups can access international talent quickly and cost-effectively, without the need for extensive legal, financial and internal HR resources.
This approach is particularly advantageous for startups looking to establish a presence in multiple countries or scale operations globally. By putting HR processes in the hands of a competent EOR, a startup can focus on core business activities while enjoying the diversity of a global workforce.
Notably, an EOR provider may also provide other cross-border HR services and offer solutions that support entity setup, employer-sponsored visas and IC engagement.
| Reduce compliance risks | Reduces intellectual property theft | Alleviates international tax liability | Fast hiring and seamless HR management | |
| Employer-sponsored visa | ❌ | ✔ | ✔ | ❌ |
| Setting up a legal entity abroad | ❌ | ✔ | ❌ | ❌ |
| Engaging independent contractors (without an AOR) | ❌ | ❌ | ❌ | ❌ |
| Hiring through an Employer of Record (EOR) | ✔ | ✔ | ✔ | ✔ |
Join us for our webinar It’s a Small World: International Expansion for Startups on May 14 or download our comprehensive guide Roadmap to Global Growth for Startups. Reach out today if your startup is ready to expand into new markets around the world.