The US workforce is rapidly becoming globalized. Baby Boomers are mostly washed out of the force with a few stalwarts gamely carrying on out of necessity or perhaps boredom. The younger crew has embraced remote work with a vengeance and in-office work has been considerably reduced. Indeed, the talent pool today consists of remote workers as the norm. And Lo! Employers have discovered that a “remote” worker can just as well be in another country as in the US! According to Elsie Boskamp of zippia.com, roughly 300,000 US jobs are outsourced each year. She notes also that the global outsourcing market is valued at $92.5 billion, with the US market bringing in $62 billion and that 66% of businesses in the US outsource at least one department, with the most typical being the IT department. We will touch on some of the key aspects of this phenomenon and give some pros and cons of this growing business model. You can determine if it is right for you to try.
We have all seen the effects of offshoring manufacturing processes previously done in the US. Companies readily relocated factories to other countries, such as China, as a means of staying competitive. The costs of US labor were just too high in comparison, and competition for market share is fierce. Now we are seeing more and more tasks traditionally performed by US in-office workers being performed remotely. And, as noted above, “remote” can be next door, or on the other side of the globe.
In an interesting article by Adam Hayes of Investopedia, he notes:
“The outsourcing of labor overseas is a natural result of the globalization of markets, and businesses’ drive to cut costs to maximize profits. If workers in countries such as India or China can do the same job for a fraction of the price that domestic labor demands, those jobs will be sent abroad.”
US firms supplementing their staff with international talent has some significant benefits. The employer can tap into a vast labor pool worldwide and find help otherwise unavailable or more expensive in the US. This flexibility improves the employer’s ability to stay competitive and profitable. There may be some advantages gained from the time-shifting phenomenon. Firms have found they can turn in a specific work request to a remote foreign work site and potentially have the results first thing in the morning. This benefit can greatly speed up the firm’s business processes. There are downsides of course. One big problem is that you may have little say in how the work is performed. A perhaps greater threat is that your intellectual property may be up for grabs. You may find your design or your idea being used by a foreign competitor!
So, how do you go about utilizing this potentially vast resource? Importantly, you must understand that the IRS has very specific guidelines for the use of foreign labor. First, the person working for you must be a citizen of another country, must reside abroad, and must perform the majority of the work outside the US. They are not your employees but have entered into a specific agreement for a designated project, for a set time duration, and with a skill set you need on an ad hoc basis. Once you have got the basic rules down, you can locate contractors who can potentially help you. Recruiters are more and more, developing connections with overseas entities which can provide a range of services to compete with US-based labor.
Sounds easy, right?
Just like sourcing labor in different states and jurisdictions within the US is fraught with pitfalls, utilizing foreign labor can be very onerous. You must comply with labor laws, tax regulations, and reporting requirements. The obvious answer is to partner with a third-party Employer-of-Record (EOR) service which is set up to service overseas accounts. A third-party EOR can protect you from misclassification, do the correct onboarding paperwork, and insulate you from liability.
In conclusion, don’t be discouraged from trying to help your clients with outsourced labor. This ever more common resource can be put to good use and answer the question: INTERNATIONAL CONTRACTORS … ARE THEY RIGHT FOR ME?