You trust your global Employer of Record (EoR) to offer complete expertise and transparency on labor requirements wherever you engage talent. But not every global EoR provider takes the time to understand individual market nuances. Others don’t fully communicate to clients about cost and compliance requirements.
Transparency and expertise are especially important when it comes to your social contributions (otherwise known as your employer burden) and value-added tax (VAT) requirements. When your global EoR provider offers you inaccurate quotes in your markets, it creates severe legal and financial risks for your company.
Continue reading to learn more about:
- Social contributions and VAT
- Three ways inaccurate burden quotes create challenges for your business
- How to ensure your global EoR partner provides reliable, trustworthy quotes
What Are Employer Burdens, Social Contributions, and VAT?
Employee salaries are not the only factor you must consider when calculating payroll costs. You must also take into account required employee costs, or social contributions, such as:
- Health insurance
- Social security
- Pension or retirement plans
- Paid time off
- Worker’s compensation
- Holiday bonuses such as 13th month pay
- Other benefits
These social contributions, or your employer burden, refer to your company’s actual, total cost for each employee hired. Employer burdens differ between markets, as each state or country has unique requirements for contributions to employee health insurance, social security, retirement plans, and more.
Your global Employer of Record partner is also responsible for providing you with accurate quotes on VAT requirements. Similar to a sales tax, VAT refers to incremental tax added to goods or services at each stage of their production life cycle. Each country sets its own VAT rate. In Europe, it can range from as high as 27% (Hungary) to as low as 17% (Luxembourg).
Because VAT and social contributions costs change from one country to the next, it’s essential that your global EoR partner provides you with accurate quotes. Inaccurate quotes give you a false idea of the cost to hire an employee or do business in a given market. As a result, you can’t accurately budget for that market, which creates complications for HR, finance, and other internal teams.
Three Reasons Global Employer of Record Partners Provide Inaccurate Quotes—And the Corresponding Risks
In a perfect world, you’d be able to trust your global EoR provider to be fully informed and transparent about burden and VAT costs. Unfortunately, some providers misquote clients on these costs, whether intentionally or unintentionally. The following are three common reasons global Employer of Record partners provide inaccurate quotes and how your company is negatively affected.
Providers want to appear low-cost: When global EoR providers pitch their services to prospective clients, they often try to compete on price. That’s why some providers do not include social burdens or VAT costs when offering quotes for their services. This results in providers revealing hidden fees only after you’ve signed contracts, forcing you to exceed your budget.
Providers mark up costs to increase profit: Some global EoR providers deliberately overcharge for social contributions or VAT rates to boost their bottom line. As a result, you end up paying not only for their services but also an excess burden and/or VAT amount, driving up your costs on multiple fronts. Meanwhile, taking time to double-check the quotes distracts your team from its core responsibilities while also duplicating the exact service you hired your provider to perform in the first place.
Providers don’t take a rigorous approach to determining burden requirements: Some global EoR providers simply don’t put enough time or effort into understanding burden requirements across markets. When providers misquote you for social contributions or VAT, you pay the wrong amount, putting you at risk of noncompliance with employment laws. Falling out of compliance leads to costly fines, legal fees, business interruptions, and reputational damage—a nightmare scenario for companies managing distributed workforces.
How to Ensure Your Global Employer of Record Partner Provides Accurate Quotes
Vetting global EoR providers is a lengthy and resource-intensive process. Companies often don’t have time to spend comparing or auditing multiple partners. Companies save time and maximize peace of mind by partnering with global EoR providers pre-vetted by third-party auditors.
Velocity Global, for example, recently enlisted a leading Big Four accounting firm to audit our employer burden calculators. The firm’s review of our top 25 countries revealed Velocity Global’s employer burden audit process is 99.63% accurate. The study confirms that Velocity Global’s employer burden quote accuracy is unsurpassed throughout the industry.
The high accuracy score also reflects the rigor and thoroughness with which Velocity Global approaches burden and VAT calculations. Our in-house and external experts take the following steps to maintain accuracy even as country conditions change:
- Updating our employer burden calculators continuously, so quotes remain consistently accurate
- Factoring in the calendar and tax years, depending on a country’s typical legislation cadence
- Leveraging regional resources, including local experts, to confirm current employer burden percentage
- Accounting for factors like collective bargaining agreement requirements, occupational risks, and type of employment contract
- Monitoring for legislation changes made outside the update cycle and adjusting our burden calculator accordingly
In addition to these steps, we continue to work with our third-party auditor to maintain accuracy and expertise in each market. Our primary goal is to ensure you’re being charged the right amount and staying compliant wherever you engage talent.
Work With the World Leader in Employer Burden Accuracy
Velocity Global is proud to set the industry standard for compliance and transparency on employer burden and VAT quotes. With unrivaled expertise in over 185 countries and all 50 United States, we’re here to give you full peace of mind across the globe. Reach out today to learn how your company can benefit from our unmatched commitment to accuracy.