Intro:
Offshore hiring is exploding in popularity. Businesses who hire offshore can save money, access a wider talent pool, and gain flexibility with headcount. However, varying employees agencies come with varying fees, compliance expenses, onboarding timelines, and technology investments. It's important to be aware of common fee structures before bringing on an agency.
Below, you’ll find a clear breakdown of all these costs with examples and advice guide your decision.
Why Businesses Choose Offshore Employees
Companies increasingly offshore talent, primarily for cost savings and specialized expertise.
The main benefits include:
- Lower labor costs
- Access to niche global talent
- 24-hour productivity through different time zones
- Easily scalable workforce
However, these benefits come with additional expenses that need careful consideration.
Understanding the True Costs of Offshore Hiring
1. Recruitment Agency Fees
Offshore employees agencies typically charge a fee of around 15% of an employee’s annual salary. Specialized roles (e.g., cloud architects, AI engineers) can cost even more.
For example, hiring a software developer from India who earns $30,000 a year may cost agency fees of $3,000 to $4,500.
When hiring contractors, however, agencies often charge fees between 30-40% of the contractors' monthly salary, paid in perpetuity. This is because of the shorter term nature of these roles.
2. Salaries and Employee Benefits
While offshore salaries are significantly lower than local wages, mandatory benefits can add costs.
Typical annual offshore salaries:
- India (software developers): $48,000
- Brazil (software developers): $60,000
- Eastern Europe (software developers): $70,000
Additional costs include mandatory benefits (like insurance and retirement), paid leave, and potential bonuses. These vary based on country, but are typically higher in Latin America.
3. Legal and Compliance Expenses
Compliance with local labor laws can involve:
- EOR (Employer of Record) Fees ($200-1,000/month, depending on region)
- Ongoing annual compliance audits/legal fees ($5,000–$10,000 annually)
- Statutory payroll taxes and contributions (e.g., India’s Provident Fund, typically 12–15% of salary)
Average Annual Costs per Offshore Employee
Here’s a practical estimate of annual costs per employee across popular offshore regions:
- India: $20,000–$35,000 per year
- Philippines: $15,000–$25,000 per year
- Eastern Europe: $30,000–$50,000 per year
Ways to Lower Offshore Hiring Costs
You can manage costs efficiently with these strategies:
- Hiring an agency
- Use an Employer of Record (EOR): Handles payroll and compliance without needing your own local entity.
- Automate HR processes: Reduces manual work and errors.
Platforms like Bolto can streamline these processes, helping you save time and money.
FAQs
What are offshore employees agency fees?
Offshore employees agencies typically charge a fixed fee of ~15% of a candidate's annual salary. This fee is usually only charged for the first year. Other fees charged by an offshore employees agency may include:
- EOR (Employer of Record) Fees
- Payroll and HR software Fees
- Candidate replacement Fees
What’s the typical annual cost of an offshore employee?
Annual costs range from $30,000 to $70,000 depending on the role and region.
Are offshore employee benefits mandatory?
Yes, in many countries, mandatory benefits can include insurance, retirement contributions, and paid leave. Keep in mind these benefits are not mandatory when hiring contractors.
What tools do I need to manage offshore teams effectively?
- A compliant EOR (Employer of Record)
- A global payroll processing platform
- A contractor management tool to manage employment contracts
Should I hire offshore employees through an agency or directly?
Agencies simplify compliance, speed up recruitment processes, and can even cut costs. When you compare a 20% fee to hiring a full time salaried recruiter and the time saved when sourcing, the advantage is clear.
Final Thoughts
Hiring offshore employees can be highly beneficial, but you need a clear picture of all costs involved. By understanding these factors and planning accordingly, you can reap the advantages of a global workforce efficiently and effectively.
Want an easier way to hire offshore talent?
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