The Myth of International Umbrella

17 October 2023

The international recruitment market is as buoyant as ever – we’re helping more and more firms to hire workforces across Europe and further afield.

But while international recruitment can be highly lucrative, it also comes with a degree of complexity, especially around compliance.

Employment and tax laws naturally vary from country to country which makes it a minefield for recruitment businesses to navigate. But with the potential for heavy fines, criminal charges and damage to your reputation, you can’t afford to get it wrong.

To solve this headache, many recruitment firms search the market for an international umbrella company. However, the term is an anomaly – international umbrellas simply don’t exist. Why? Because the tax and employment rules vary from location to location, each placement must be managed on an individual basis.

Umbrella in the UK…
Here in the UK, recruitment businesses can refer workers to an umbrella company like Workwell Umbrella, which assesses the contractor, ensures umbrella is an appropriate working option, becomes the employer and processes payment. For recruitment businesses, this is an extremely simple way to work and a good umbrella gives you compliance assurance too.

Umbrella overseas…

Because the UK’s umbrella model is so simple for recruitment businesses, it’s often assumed that you can place workers overseas using an international umbrella model.

Unfortunately, working with overseas contractors is not so simple. If you were hoping that there would be an international umbrella company you could partner with to take care of payments to contractors wherever they are, we’re afraid you’ll be disappointed. International umbrella is a myth.

The challenge of ‘international umbrella’

It’s not possible to form an international umbrella company because there cannot be one entity acting as an umbrella company across multiple territories. This is because employment and tax rules vary from one country to another. Some countries are more contractor-friendly than others, depending on their skills needs, so the tax and employment rules are nuanced. This means it’s not possible to have a single solution that applies everywhere.

An international umbrella, if it did exist, would still have to work country-by-country, altering the approach according to the different tax and employment rules. A single entity wouldn’t solve the problem – because risk can be passed down to your agency, you would have a significant headache in managing the supply chain and ensuring compliance at every step.

Do other countries have umbrella-type models?

There may be in-country solutions similar to umbrella which can be used, depending on the country in question, but the practicalities are prohibitive. You’d need to manage multiple vendors and monitor a potentially lengthy PSL, as well as understand the complexities and compliance in the various localities where you operate, plus keep up-to-date with any changes. It’s difficult enough to do this in the UK with its changing legislative landscape, let alone overseas.

When you consider that the risk of engaging a contractor in a non-compliant manner can be passed down the supply chain to your recruitment agency, this scenario is unlikely to be an appealing way to grow your business. The compliance headache would potentially overtake the commercial opportunity.

The alternative to an international umbrella

The lack of international umbrella services need not put you off taking international placements, but it should encourage you to proceed with caution The good news is that, because of the compliance headaches, you’ll find there are fewer competitors.

It’s important to be aware of the differences in each country before you decide to place workers. Whilst it’s more involved and laborious, there’s no getting around the country-by-country approach. This underpins the need to partner with international contractor payroll specialists.

Workwell International can help

Our international payroll services team, which trades as 6CATS International, has been working in this area for almost 15 years so can advise you on the compliance aspects of placing workers throughout the world.

Whether you’re just considering expanding internationally or are already established and need to review your compliance procedures, our team can provide the support and guidance you need to do everything the way it should be done, country by country.

We operate in more than 80 countries and are always up-to-date with the latest international and in-country compliance changes. Our solutions are based on local legislation in the country of operation, and before finalising any solution our expert team carries out comprehensive research to understand laws, licensing requirements and available employment structures.

This approach assures you of the highest level of compliance and protection for every party in the contractual chain. You’ll find our services are the most reliable – indeed, when your contractors are using our solutions, we fully indemnify your recruitment business and end users from any tax compliance liability.

This enables you to expand overseas safely in the knowledge that you have complete compliance assurance.

Our service includes:

  • Dedicated contractor care consultants
  • Local tax compliance & invoicing
  • Legal employment compliance & immigration support
  • Insurance provision & contract administration
  • Tailored solutions

Please get in touch to find out more.

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