Global HR refers to a collection of functions including payroll management, benefits administration, and compliance with local employment laws for companies hiring in more than one country. These companies often hire both employees and contractors, often using an employer of record, or EOR, to hire workers on their behalf in countries where the company does not own a legal entity.

Global HR may also include one-time services or consulting arrangements. For example, a company may hire a global HR provider to help with international recruiting or to design a strategy to attract more international software engineers. Because HR functions cover so many different areas, identifying the boundaries of global HR can be difficult. Many companies hiring in multiple countries use a global HR tech stack that includes an EOR, an applicant tracking system (ATS), and a human resources information system (HRIS).

Global HR software takes care of several complex processes for HR leaders and their teams. These tasks can include payroll automation, localization of benefits packages, management of legal compliance, tax withholding in multiple countries, and even management of employee stock option plans, or ESOPs. For businesses with employees in multiple locations, global HR software is essential to provide a good experience for employees while remaining compliant with the laws in every country where employees work.

HR teams using global HR software also get access to a global team of experts who can help them navigate difficult situations. For example, a company may hesitate to convert a contractor to an employee, even if they need to do so to remain compliant. In another case, a company terminating an employee may need assistance to ensure the employee is offboarded correctly under the laws of that employee’s country of residence. Global HR software provides internal HR teams with the resources and knowledge they require to make the right decisions and execute appropriately.

A business does not need to reach a certain size before outsourcing global HR services. In fact, smaller businesses are more likely to require the help of outsourced global HR because they lack the internal resources to manage the legal complexities of hiring abroad — but they still need access to international talent. Today’s employer of record services help businesses outsource international payroll and other functions on a per-person scale, allowing even the smallest teams to access a global talent pool.

Most businesses should consider outsourcing global HR to accelerate their ability to fill open roles. This is especially true for businesses hiring people in high-demand fields, such as software engineering. While the need for talent in many difficult roles continues to grow, businesses often cannot find enough local candidates to fill that need. Outsourcing global HR allows companies to access a much broader pool of talent immediately.

Global HR software options vary on the services they provide; the infrastructure they build; pricing; service and support; and local knowledge. Selecting the right global HR software for your business means understanding your specific needs and hiring locations, then selecting the software vendor with the best fit.

For example, when comparing employer of record services, businesses need to consider several factors. Does the EOR own its local entities or outsource services to a third party? Can the EOR handle stock options for international employees? How easy is the software to use, and how much can users do without needing to contact the provider for help? The right global HR software should help your company expand quickly, compliantly, and with confidence while providing a great experience for the employees who use it.

Some people use the abbreviations PEO and EOR interchangeably. However, there are several differences between a PEO and an EOR. Most notably, a PEO co-employs workers with another company, which means that company must own a legal entity to fulfill its end of the co-employment arrangement. With an EOR, the EOR hires the employee on behalf of the company, allowing the business to onboard employees in multiple locations without opening multiple entities.

If your company is looking to outsource global HR services, you most likely want to use an EOR unless you already have an established presence in the country in question. Even if you do plan to open your own entity in the future, working with an EOR now allows you to hire workers in the country immediately to be transferred to your own entity once it’s ready.

The cost of global HR services depends on which specific services you require. While many providers can be opaque about their pricing, working with a global HR company that offers a fair price guarantee can help you understand your bill and plan your budget with greater accuracy.

Contractor management services tend to be less expensive than full employer of record (EOR) services. Flat-rate fees are almost always a better deal than variable fees or percentage-based fees, which disincentivize companies from giving raises or promotions. When working with any global HR provider, be sure you are only paying for seats you actually use and not inactive contractors or empty employee seats.