As he announced that his company would be laying off 10% of its workforce, Shopify CEO Tobias Lütke could have been speaking for most post-pandemic tech companies when he said “it’s now clear that bet didn’t pay off.”
Throughout the pandemic, hiring in tech skyrocketed as a decade of explosive industry growth came to a head. Tech giants like Amazon, Microsoft, Alphabet and Meta collectively increased their workforces by about 875,000 employees. It was a similar story for early stage startups, where previously unseen amounts of venture capital saw many startups expand and scale at an unprecedented rate.
However, as we go through 2023, the scenario is vastly different. Although their headcounts still remain considerably higher than they did pre-pandemic, Alphabet, Amazon, Meta and Accenture have cut 12,000, 18,000, 21,000 and 19,000 jobs, respectively. Cuts and hiring freezes at small and midsize companies in the sector, meanwhile, are leaving many fighting for their future. In recent months, Irish unicorn Workhuman announced it was cutting 10% of its staff, London’s Pleo announced headcount cuts of 15%, and France’s most valuable startup, Back Market, began laying off 13% of its team.
This crunch has caught many businesses unaware. Now, hiring bosses must consider how they can future-proof their businesses and avoid being caught out again. The good news here is that the post-pandemic world of work offers numerous new routes for businesses to stay competitive.
The first is international recruitment. Across UK tech, there is currently a huge skills gap with one in five SMEs citing it as their key blocker to success in 2023. Searches for ‘skilled worker visas’ are through the roof. International recruitment not only provides an opportunity to plug that gap with the best and brightest talent, regardless of location, but also access to far more cost-effective regions in terms of salaries and benefits.
The second is global expansion. A recent HSBC poll of over 2,000 mid-market enterprises across 14 different markets found that two-thirds planned to expand internationally in the next 12 months. For businesses to stay truly competitive, scaling up must also be cross border.
There are, however, clear challenges with these approaches. International expansion, even when hiring just one or two people in a single country, is costly and complex. Not only do you need to pay for legal and administrative fees, but the ongoing costs associated with the entity can quickly add up. All the while, you also have to navigate the complexities of employment contracts, payroll services, taxes, social security and benefits to employees in their respective countries.
Furthermore, it’s a huge investment that involves a great deal of risk. It’s a big downpayment to set up an overseas entity only to close it down a few months later.
So how can efficiency-minded businesses reap these benefits without expending vast sums of capital and leaving themselves vulnerable in the future?
This is where the right technology comes in. Of course, innovations in remote-working and project management tech have made communicating with global teams easier, but the most impactful innovations have come in how we recruit, hire and manage those teams and how we build operations overseas.
Enter: An Employer of Record (EOR) platform.
Fast and flexible expansion
First, a brief explainer.
An EOR service provider manages the legal, HR, tax, and local compliance responsibilities of a company’s employees in any region or country where they don’t have a legal entity. It acts as the legal employer, hiring employees using its local business entities. As such, the EOR assumes the legal risks of an employer on their behalf, while they maintain control over their employees and operations.
As well as payroll and tax, an EOR service provider’s responsibilities can include visa, immigration and work permit sponsorship; local support for employment matters; and advice on required notice periods and termination rules. They can also provide data insights on employment trends in global markets, all of which takes away the lion’s share of work associated with global expansion.
EORs are nothing new. The difference today is that the technology is now in place so businesses can hire employees the world over and manage them from one platform.
The right technology
The best EOR providers are those that are built to prioritise employee and employer experience. For overseas employees, they not only allows them to be hired correctly and get paid in their own currency, on time and in a fully compliant way, but also to access, amongst other things, learning and development features; local employment guidance and visa and immigration support.
For employers, EOR centralises their entire people-operations so they can manage onboarding, payroll, benefits admin and more without having to deal with multiple third-part providers or platforms.
Partnering with an EOR service provider means that you can start hiring in new markets in a matter of weeks. This greatly reduces the time, costs, and complexities associated with setting up a formal entity in a new country. You also have a single point of contact and a transparent fee structure. This simplifies the process significantly and reduces cost, making it easier to scale up and down as demand requires.
And, perhaps most importantly, an EOR means you can dip your toe in multiple key markets easily without having to make a full investment in the region.
Lessons from past downturns have taught us that the route to success comes not from brutal cuts, but from growth via efficiency. One study from the Harvard Business Review of 40,000 businesses over two recessions found that “companies that master the delicate balance between cutting costs to survive today and investing to grow tomorrow do well after a recession”.
The right EOR platform can help businesses master that balance by allowing them to continue to expand in a sustainable and flexible way, putting them in a great position to future-proof their operations and prosper when the dust settles.
