Like the UK, many countries are facing the same shortage of highly skilled candidates. This has led to many recruitment agencies placing UK candidates with international clients in order to fill these specialist gaps – often at a higher margin. But with the increase in UK recruitment agencies moving into international markets, there lies one question…
Do I need an office or a recruitment company set-up overseas to place candidates internationally?
Technically no, but there are some important points to consider to ensure you make the correct decision for your growing recruitment agency:
- INVOICING CAN BE DONE FROM A UK ENTITY
Once an overseas placement has been made it has to be invoiced and this is very easy to raise from your UK entity and does not need to be done from an office/branch within the same country.
Please note that no VAT is chargeable to companies outside of the UK (as long as you quote the overseas companies VAT number) and it is advisable to speak to your bank about setting the correct currency to your account in order to reduce currency losses on transfers.
- SECURE OVERSEAS FUNDING FROM UK INVOICE FINANCE COMPANIES
If you are a recruitment company that is placing a contractor overseas there may be an option to apply for finance to pay the contractor before the client makes payment.
It’s good to know that there are many UK invoice finance companies who are willing to provide overseas funding on currency invoices. When you apply they will assess the risk in the same way they would as a UK placement, firstly checking the credit worthiness of the client and then the robustness of the contract. With that said, they will require the agency director to assume some reduction of the risk by taking a personal guarantee.
Please note it is harder and more expensive to arrange finance in another country, mainly because the directors and shareholders are not based in the country making it unviable to secure the debts funded.
- VISITING AND COMMUNICATING WITH CLIENTS
Even though you may not have consultants working within a placement country, it does not mean you cannot have a good working relationship with your clients. Using modern technology such as Skype and video conferencing and travelling to the countries for visits can ensure you sustain a good relationship with your clients.
Please note travel costs can be reclaimed through your business expenses. Additionally, with each trip you can find more opportunities to connect with multiple or even new clients which ultimately make these visits more worthwhile.
- AVOID DOUBLING UP ON OPERATIONAL COSTS
Setting up a company in another country can result in costs even if there are no employees being paid. These costs include accountants’ fees to complete tax returns and accounts, company insurances and banking fees.
Please note these extra costs are unnecessary as you can use a UK company to do same job, saving you money on acquiring these services abroad.
- SEEKING ADVICE AND MARKET RESEARCH IS IMPORTANT
It’s important to know there are some differences between placing a UK candidate and an overseas candidate, which is why it is advised to get as much help and advice before jumping in feet first. You should understand if there are withholding taxes that need to be taken into account and if these can be mitigated by double taxation agreements. You will also need to ensure that the contracts issued are correct and apply to the country rules to guarantee contractors are paid correctly and within terms.
Please note there are many UK based accountants who have experience in invoicing and accounting for overseas placements but to give you peace of mind you can always engage with overseas accountants to ensure the advice given in the UK is correct.
When is it time to open a recruitment agency abroad?
Although this list shows the reasons why you do not need to set up an office within another country, it is important to realise that you may need to eventually set up an office, branch or company in order to maximise a return long-term.
When you think it may be time to grow your branches abroad, you will need to look at acquiring office staff, an office space and the necessary equipment but more importantly you will need to consider the terms of paying staff under the countries PAYE tax rules. It is highly recommended before making this decision, that you:
- Have already successfully placed candidates via a UK entity first
- Consider all the commercial implications of your company e.g. management time & shared budgets across branches
- Forecast the profitable reasons of your company growing overseas
Reasons to choose TBOS as your UK entity for placing candidates overseas
TBOS have helped many recruitment agencies when it comes to funding and administering overseas placements. We have provided advice on legal and contractual obligations, options to avoid withholding taxes and ensured their currency accounts are correctly set-up before they make placements.
Additionally, TBOS can raise currency invoices and administer permanent and contract placements including managing currency payments and funding solutions. Using the TBOS Freedom model also allows recruitment agencies the opportunity for them to make compliant overseas contract placements in over 170+ countries in 15 different currencies.