After more than two years of market volatility amid the COVID-19 pandemic, shockwaves to the global economy still remain and we may not be out of the woods yet. International Monetary Fund (IMF) head Kristalina Georgieva recently issued a warning that a global recession cannot be ruled out, citing widespread inflation, interest rate hikes, a slump in China’s economic activity and hard-hitting sanctions related to the Russia-Ukraine war.
As if these formidable challenges aren’t enough, businesses also face an ongoing labor crunch that has made it increasingly difficult to build teams and resume “normal” operations. For example, in the U.S., the ratio of job openings to job seekers stands at a staggering two to one. A recent CNBC CFO Council survey suggests businesses are still in hiring mode, with more than half (54%) saying their headcount will increase over the next year while only 18% expect staffing cuts.
Without an agile hiring strategy in place, businesses may not be in a strong position to adapt to down market conditions nor take advantage of eventual market upswings. However, there is a solution that can help businesses confront brooding market conditions.
“Traditionally, organizations think of the Employer of Record (EOR) hiring model when they are expanding internationally. This often happens in a bull market or when a company is in growth mode,” says Andrew Lindquist, a partner at GoGlobal USA. “However, the same solution can help companies navigate a down market and restructure through negative growth scenarios cost effectively.”
The following are a few ways an EOR hiring model can be used to drive down costs and maintain a competitive edge in a down market.
Reduce and restructure the global footprint
If global economic activity remains sluggish, many multinational companies (MNCs) will inevitably need to rethink and restructure their global footprint. The EOR hiring model has a key role to play in helping businesses make this pivot.
“By winding down or dissolving any unnecessary entities that are in decline, businesses can significantly reduce their overhead and become a little leaner,” Andrew says. “However, at the same time, they can apply the EOR model to retain key employees in these markets and scale operations as market conditions allow. This way, the restructured team can continue to serve clients, manage distributors or keep the company’s supply chain going.”
The aviation and travel services industry, which was directly impacted by the pandemic from the onset, is a prime example of how the EOR model has already been applied to quickly scale back against contracting market conditions. This is an industry where GoGlobal has directly supported clients and implemented agile EOR solutions.
Owing to lockdowns and travel restrictions, the industry took a quick crash landing in 2020. To simultaneously maintain operations and reduce costs, some international aviation companies were able to dissolve a portion of the business entities they had around the world. However, by partnering with an EOR, they were able to retain the necessary headcount across key markets to continue operations as needed.
Gain flexibility in hiring
Uncertain times call for flexibility. When a global downturn occurs, not all economies are impacted equally. For example, during the Great Recession of 2007-2009, the economies of some countries, such as Australia, never fell into a recession. Others, like South Korea, experienced a swift V-shaped recovery.
MNCs who can stay ahead of the global trade trends and target businesses in more favorable economies will gain a distinct competitive advantage in the global marketplace. However, expanding into a new market with a full-blown entity setup can be costly and eat up precious time.
“The EOR model allows organizations to be nimble, establish relationships and build the brand without immediately needing a legal footprint. Try before you buy, so to speak,” says Andrew. “Following the pandemic’s mass virtualization, the remote workforce has also proliferated worldwide. Companies now have global expansion opportunities knocking at their door and the EOR hiring model opens these doors to new possibilities – especially in a down market where hiring locally is proving to be costly and difficult.”
Hire where the talent is
Whether in a bull or bear market, having the right talent on board is essential for businesses that want to seize emerging opportunities.
“The pandemic and its resulting economic volatility have shifted the global talent market tremendously,” Andrew says. “A pre-pandemic talent strategy may not work today, especially with labor shortages, inflation, uncertainty and the uptick in remote work. The EOR hiring model greatly expands a company’s potential talent pool and enables them to engage workers anywhere in the world.”
This flexibility means companies can choose the best talent for value, which can potentially save them thousands of dollars. The EOR model also offers a quick, compliant, cost-effective service and makes hiring borderless and seamless – an ideal combination no matter what market conditions are.
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