Glossary
Global employment,
in plain English.
Clear definitions of the Employer of Record, payroll, benefits and compliance terms you meet when you hire abroad. No jargon, sources cited.
43 terms
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A
- Agent of Record (AOR)An Agent of Record (AOR) is a third party that contracts, classifies and pays independent contractors on your behalf, keeping the engagement compliant without converting the worker into an employee.
- AguinaldoAguinaldo is a mandatory year-end cash bonus paid to employees in Mexico and several other Latin American countries, equivalent to at least 15 days of salary under Mexican law.
- Annual leaveAnnual leave is the paid time off employees are legally entitled to take each year, separate from sick leave. Statutory minimums vary widely by country, from 20 days in the EU to no federal floor in the US.
B
C
- Co-employmentCo-employment is a contractual arrangement where a business and a Professional Employer Organisation share defined employer responsibilities, such as payroll, tax filing and benefits administration, for the same workforce.
- Collective bargaining agreement (CBA)A collective bargaining agreement (CBA) is a written contract negotiated between an employer (or employer group) and a trade union, setting the terms and conditions of employment for covered workers.
- Contractor managementContractor management is the end-to-end process of engaging, paying and staying legally compliant with independent contractors across one or more countries.
- Cost of employmentThe total amount an employer pays to employ one person: gross salary plus statutory contributions, mandatory and voluntary benefits, and any associated admin costs.
E
- Employee onboardingEmployee onboarding is the process of legally and operationally setting up a new hire, covering employment contracts, payroll enrolment, statutory benefits, and right-to-work verification.
- Employer of Record (EOR)An Employer of Record (EOR) is a third-party organisation that becomes the legal employer of your workers in a given country, handling payroll, tax, benefits and compliance whilst you direct their day-to-day work.
- Employer social contributionsEmployer social contributions are mandatory payments a company makes on top of an employee's gross salary to fund state programmes such as pensions, healthcare, and unemployment insurance.
- Employment contractAn employment contract is a legally binding agreement between an employer and an employee that sets out the terms of the working relationship, including pay, role, hours and termination rights.
- Entity establishmentEntity establishment is the process of registering a wholly owned legal subsidiary in a foreign country so you can employ staff directly, pay taxes locally, and operate as a resident employer.
- EOR vs PEOAn Employer of Record (EOR) becomes your workers' sole legal employer in a new country; a Professional Employer Organisation (PEO) shares employment responsibilities alongside your own existing legal entity.
F
- Fringe benefitsFringe benefits are non-wage compensation given on top of an employee's salary, ranging from private health insurance and company cars to gym memberships, some of which are taxable and some are not.
- FX markupAn FX markup is the margin a payroll provider adds above the mid-market exchange rate when converting your funding currency into your employees' local currencies, inflating the true cost of global employment.
G
- Global Employment Organisation (GEO)A Global Employment Organisation (GEO) is a third-party provider that employs workers in other countries on a company's behalf, handling payroll, contracts, tax, and compliance without requiring a local entity.
- Global payrollGlobal payroll is the process of calculating and paying workers across multiple countries in local currencies, whilst meeting each country's tax, social-security, and reporting rules.
- Gross-to-net payGross-to-net pay is the process of calculating an employee's take-home pay by subtracting income tax, social contributions, and other deductions from their gross (before-tax) salary.
I
- Independent contractor vs employeeAn independent contractor is self-employed and hired for specific work, while an employee works under an employer's direction, receives statutory benefits, and has payroll taxes withheld on their behalf.
- IR35IR35 is the UK's off-payroll working legislation, which requires medium and large businesses to assess whether contractors working through their own companies should be taxed as employees.
L
M
- Mid-market exchange rateThe mid-market exchange rate is the midpoint between the buy and sell prices of two currencies on global markets, and the fairest benchmark for any currency conversion.
- Minimum wageMinimum wage is the lowest hourly or monthly pay an employer can legally pay a worker, set by law in each country or region. Rates vary widely and are updated regularly.
- Multi-country payrollMulti-country payroll is the process of paying employees in two or more countries under a single framework, covering each jurisdiction's tax rules, contribution rates, currencies, and reporting obligations.
N
O
P
- Parental leaveParental leave is paid or unpaid time off work granted to employees around the birth or adoption of a child, covering maternity, paternity and shared leave entitlements set by law.
- Pay As You Earn (PAYE)Pay As You Earn (PAYE) is the system used in the UK and Ireland where employers deduct income tax and social insurance from employees' wages before paying them, then remit those amounts directly to the tax authority.
- Payroll cycleA payroll cycle is the recurring schedule on which a company pays its employees, such as weekly, biweekly, semi-monthly or monthly, determined by local labour law and employer policy.
- Payroll deductionsAmounts withheld from an employee's gross pay each pay period, covering mandatory statutory obligations such as income tax and social insurance, plus any voluntary amounts the employee has consented to.
- Pension contributionsPension contributions are the payments an employer and employee each make into a retirement savings scheme, either by law or under an employment contract.
- Permanent establishment (PE) riskPermanent establishment (PE) risk is the danger that a company's activity in a foreign country creates a taxable presence there, exposing it to local corporate tax obligations it did not plan for.
- Probation periodA probation period is a defined trial phase at the start of employment, during which either party can end the contract with shorter notice than usual, subject to local law.
- Professional Employer Organisation (PEO)A Professional Employer Organisation (PEO) is a firm that shares employment responsibilities with a client company through a co-employment contract, handling payroll, HR and benefits while the client retains day-to-day control of its workforce.
S
- Severance paySeverance pay is a payment made to an employee when their employment ends, typically covering termination without cause. Entitlements and calculation methods vary significantly by country and employment contract.
- Statutory benefitsStatutory benefits are the minimum entitlements employers must give every worker by law, covering things like paid leave, sick pay, and pension contributions. The exact rules differ country by country.
- Statutory sick payStatutory sick pay is the minimum sick pay an employer must legally provide to an employee who is off work due to illness, set by each country's government.
T
W
- Work permitA work permit is official government authorisation allowing a foreign national to work legally in a specific country, often tied to a particular employer, role, or duration.
- Worker misclassificationWorker misclassification happens when a business treats someone who meets the legal tests for employment as an independent contractor, exposing the business to back taxes, penalties and benefit claims.
- Works councilA works council is a formal body of employee representatives with legal rights to be informed and consulted before an employer makes decisions that affect the workforce.
Glossary
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