Mitigating Hiring Risks With Employer of Record

The competitive job market today has turned hiring and top talent retention to be increasingly challenging for companies worldwide. High employee turnover – driven by factors such as poor work environments and unsatisfactory management – sent voluntary resignation rates surging, particularly during the “Great Resignation” period.

Many organisations grapple with these challenges; a report by Gallup found that employees are four times as likely to leave their job due to “Engagement and Culture” or “Wellbeing and Work-Life Balance” reasons, as compared with the number of people who primarily left for better “Pay or Benefits.”¹ This does not help when employee attrition rate, as reported by another survey done by Lever, a software company specialising in talent acquisition system suite, is at a worrisome figure whereby 2 in 5 employees plan to stay in their jobs for less than a year. This figure soared to higher numbers for Gen Z, with 65% of the younger generation workforce planning to work for less than a year in an organisation.²

Risks associated with hiring new employees

Hiring new employees can be complicated and obstructed by legal risks and challenges.

The primary obstacle that companies face when hiring new employees is compliance and legal challenges. Every country has specific labour laws, tax regulations, and employment standards, which businesses must follow. When companies fail to meet these legal requirements, costly penalties and lawsuits can follow suit. For example, incorrect worker classification (such as confusing independent contractors with full-time employees) or non-compliance with local tax obligations can jeopardise a company and put it at risk. Particularly when hiring in international markets, navigating complex visa and work permit regulations can be overwhelming, further amplifying compliance-related risks.

Another one of the hiring challenges is the risk of cultural or skills mismatches. A new hire who doesn’t align with the company’s culture or lacks the requisite skills can disrupt workplace harmony and reduce productivity. Employees who do not feel a sense of belonging or fit within the company’s ethos are more likely to disengage and, ultimately, leave the organisation. The hiring process might bring in someone with a strong resume, but if their working style, values, or communication skills don’t match the team, it can likely create friction and inefficiency.

Last but not least, the risk of financial cost from employee turnover is notable and cannot be ignored. Many studies have shown that replacing an employee can cost a company more – considering recruitment, training, and lost productivity. When an employee leaves within a short time after being hired, it creates a ripple effect of operational disruptions, requiring more resources to hire and train replacements. High turnover can drain financial resources and also negatively impacts team morale and company performance overall.

Negotiating a way out through these hiring obstacles or challenges can be tricky, however there can be an easier option for HR leaders to choose that can help them overcome these challenges.