Embracing the Rise of Digital Nomads: A Guide for Employers
Thanks to a dramatic increase in the number of countries now offering 'digital nomad visas', it's easier than ever for individuals to work for prolonged periods in different countries. But whilst embracing this trend can provide a wide array of benefits to employees and employers, it's essential to know the implications before rolling it out in your business. In this guide, we'll explore what employers need to know about hiring and managing employees who want to work overseas, and how an Employer of Record (EOR) can make doing so significantly easier.
The rise of digital nomadism
While the 'remote vs. office' debate rages on, there's no doubt that the pandemic has changed the world of work for good—with many employees now searching for ways to achieve the lifestyle they desire without compromising their careers. One result is the rise of the digital nomad: a worker who uses technology to perform their job while traveling from place to place. According to a recent study by MBO Partners, nearly 17 million Americans identified as digital nomads in 2022, up 131% from 2019. And while the ranks of digital nomads used to be dominated by freelancers and contractors, 66% now hold traditional employment.
Recognizing the potential economic benefits that these remote workers can bring, governments worldwide have started introducing 'digital nomad visas'. These allow visitors to work in a country whilst earning foreign income for extended periods, typically between 6 and 12 months. As of July 2023, over 50 countries, including Portugal and Bermuda, had programs like this in place.
A massive opportunity for businesses
Digital nomadism is not only being welcomed by governments—it's gaining popularity among employers, too. And understandably so: providing geographical flexibility to current and potential employees presents vast opportunities for companies to attract and retain top talent. According to Flexa, demand for jobs in companies offering ‘work from anywhere’ policies is increasing, making an openness to digital nomads a powerful acquisition tool. Allowing employees to work in a manner that suits them also makes them feel valued—enhancing morale, productivity, and retention.
But one that comes with its challenges
Naturally, there are several factors to consider before allowing new and existing employees to become digital nomads. For one thing, employment and tax regulations differ significantly from country to country. By allowing employees to work from multiple geographies at any time, you'll need to ensure you're compliant in every single one. For another, operating as a distributed team will require a thorough review of company policies and processes to ensure they reflect the new ways of working.
But none of these challenges are insurmountable—and with a clear plan, you can join the other forward-thinking companies already making the most of global talent. To help you do just that, below we've addressed some of the main questions that companies often have on the topic, as well as the options available to you.
How do I hire digital nomads?
Suppose you're looking to hire a digital nomad based in a country where your business doesn't already operate. In that case, you must either open an entity in that country or use an EOR to employ them on your behalf.
Opening a new entity can be costly and time-consuming (it can take as long as 20 weeks and cost more than $80,000), and it's often not worth it for a handful of employees. In these cases, partnering with an EOR is a much more efficient solution. While you'll still look after the day-to-day management of employees—including recruitment, compensation, duties, and termination—an EOR assumes all the risks and responsibilities as their legal employer. And you'll be up and running in a fraction of the time.
Alternatively, you could hire a digital nomad as an independent contractor rather than an employee. While an equally valid option, you must classify your workers correctly—as not doing so can get you in trouble with local authorities. Correct classification also ensures that everyone understands what benefits and protections they're entitled to.
Are there tax implications to hiring digital nomads?
In short, yes. Employers hiring digital nomads need to be familiar with the tax obligations of the countries that their digital nomads are traveling to. These obligations will vary between locations and will also depend on the amount of time that an employee spends there. Keeping on top of the rules (and any changes to them) can be a real challenge, so getting assistance from a tax expert or EOR with country-specific expertise can be hugely valuable in ensuring you're meeting all of the obligations you should be.
What other rules and regulations do I need to be aware of?
Employment laws vary significantly from country to country, and if you don't comply with them, you could land hefty penalties. Key concepts to bear in mind include:
Minimum wage requirements
Standard working hours
Leave entitlements (e.g., holiday, sick, parental)
Non-discrimination statutes
Termination procedures
Employment contracts
Intellectual property law
Data privacy laws
You must also ensure that all employees on your payroll possess the correct visas, and are legally allowed to work in the country they're in. Again, partnering with an EOR is the easiest way to ensure you remain compliant on all of the matters above.
How do I pay digital nomads?
How you compensate your digital nomads will depend on whether you're paying them as an independent contractor, employing them through your legal entity, or using an EOR to handle it.
Paying independent contractors is relatively straightforward as, in most cases, they're responsible for their taxes and are not entitled to employment benefits. You only need to pay their invoices, which you can do using your payment method of choice. Again, the critical thing to check is that you're classifying them correctly under a country's laws and treating them as such.
If you've decided to open a legal entity, you must choose which international payroll provider you want to use. You must also comply with local laws, tax obligations, and social contributions. The differences in requirements from country to country can make managing payments for distributed employees challenging, so effective communication and coordination with your finance department is vital here. You may also consider scaling the team to manage the additional workload.
As with tax obligations, if you opt to use an EOR, they will handle all payroll administration for you—from managing payroll to paying taxes—ensuring you're fully compliant at all stages.
What else do I need to consider?
Alongside the legal and tax implications of employing digital nomads, it's also important to consider the day-to-day impact this will have on your business. Before launching your new strategy, it's worth reviewing your existing workplace policies and ensuring they clearly outline any expectations and guidelines you need employees to follow. These might include topics like working hours, when in-person attendance is required, and any expenses you're happy to cover.
It's also a good opportunity to ensure you're providing the resources necessary for effective remote work, such as video conferencing software, collaboration tools, and project management systems.
How an EOR can help you hire and manage digital nomads
There's a lot to consider when opening your company to digital nomads. But getting an EOR to help manage the process can make everything much more manageable. There are three particular areas where an EOR will come in useful:
Entity Setup: Partnering with an EOR bypasses the need for your company to establish a separate entity in every country where you have employees, significantly reducing costs and enabling you to get set up in days rather than months.
Compliance: EORs assume all responsibility and liability as the legal employer in the countries your digital nomads are working from, ensuring you comply with all local employment regulations so you can rest assured that that side of things is taken care of.
Local knowledge: A good EOR will also be able to offer invaluable expertise: helping you get to grips with local culture and customs and keeping a finger on the pulse of notable changes that could affect your employees.
Hire and manage digital nomads with ease
Embracing the rise of digital nomadism offers employers reams of benefits. But ensuring that your strategy is effective and compliant can be challenging. The good news is that partnering with a well-regarded EOR can make the process infinitely easier—so you can enjoy all the benefits of a global team without any of the headaches.
Find out more about how Employer of Record services are transforming the future of work by downloading Atlas' Global Employer of Record Report: 2023.
In this, you'll learn about:
The Changing Dynamics of the Global Talent Landscape: Understand the forces driving change and how businesses can adapt.
The Rise of Remote and Hybrid Work Models: Discover the benefits and challenges of these models and how to manage them effectively.
The Role of Employer of Record (EOR) Services: Learn how EOR services can streamline your business operations and ensure compliance.
What’s Coming Next: Forecasting the major trends and technologies that will define the next 12 months.