For any ambitious company, global expansion is a question of when not if. Diversification and new market prospects, as well as cheaper manufacturing and labor costs, are all advantages of expanding globally.
In almost every example of international growth, the company headquartered in one country (the ‘residence country’) must hire employees, agents, or contractors in the new country (the ‘target country’): This poses a number of difficulties.
We examine five such issues for international staffing in this post, as well as our international staffing solutions for each difficulty.
You must verify that your target country’s workforce has the necessary skills to support your business. There’s a chance that your target country’s operation will be lacking in:
Individuals having adequate knowledge of the enterprise to guarantee that activities in the target nation correspond with the organization’s overall aims; individuals on the ground in the target country with the abilities to function successfully in the local context. For example, employees who are fluent in the local language and are familiar with the country’s business practices.
Any skill shortfalls on the ground can be filled by transferring qualified personnel from headquarters to the target nation. In addition to the benefits to the target branch, it may help the company as a whole by providing a growth opportunity for employees searching for abroad assignments and a way for employees to share information in both ways.
Reliable staffing partners
A third party can bridge the gap between your organization’s demands and the resources available in the target nation. On behalf of your company, an International Professional Employer Organization (‘PEO’) can hire and manage local personnel. More information about this may be found here. Alternatively, specialized services such as payroll might be outsourced (with your enterprise remaining the employer of record).
Control and coordination
On the ground in the target nation, your firm may take many various forms: you could organize a subsidiary, employ franchising or licensing arrangements, or operate with local agents.
Regardless of the shape your target country branch takes, the head office must maintain some level of management and coordination of workers. This is necessary to verify that efforts in the target nation are in line with the company’s overall objectives. Keep in mind that the activities of the company’s employees, agents, or contractors in the target nation can have a significant influence on the company’s overall reputation.
Intra-group transfers, as described in the preceding answer, can be a suitable method for shifting workers from the resident nation to the target country.
To guarantee harmony between the head office and the target branch, pay attention to the legal structures. For these objectives, you might want to consider a tripartite agreement.
By having a ‘permanent establishment’ (or ‘PE’) in a target nation, your company increases its chances of incurring a corporation or turnover tax burden there. This is true, in general, if your company has a fixed location in the nation where it conducts business.
More specifically, the definition of a ‘dependent agent PE’ states that you can be taxed in that nation if you have agents with the capacity to complete or significantly facilitate transactions ‘in the name of the business, whether or whether they are employees.
Bilateral taxation agreements in force between the target nation and the dwelling country, as well as local legislation, will establish the particular tax responsibilities in any target country.
To reduce your tax liability, you should obtain expert advice and help on the optimal legal and business arrangements. It’s worth noting that having a permanent presence in the target nation may be advantageous in some situations. This will have to be decided on a case-by-case basis.
Salaries and employee benefits
Salaries, perks, and other payments (such as payments to contractors) must be tailored to the target country’s labor and contractor markets. You must additionally consider the following factors while deciding overall pay packages:
Employee contributions such as pensions/superannuation, health insurance, and workers’ compensation are all mandatory.
Benefits that are comparable to market standards and may exceed the legal minimum. The impact of major compensation variations between personnel from the enterprise’s resident nation (e.g., on an intra-group move) and local employees (for example, a country may have a legal minimum of four weeks annual leave, but five weeks may be the established standard); These distinctions can have a big influence on employee morale and retention in the local area.
To ensure that employment and contractor packages are adequately benchmarked, get professional help on salary, remuneration, and recruiting in your target market.
Intellectual property and non-compete clauses
It’s crucial to figure out if the outputs of the workforce belong to the employee or contractor in issue or to the company as a whole. In certain countries, this can be stipulated in the service/employment contract, while in others, employees’ rights to their own work products may be protected by law.
In addition, you may want to include a “non-compete” condition in your employee/contractor contracts. This means that during or after your connection, the employee or contractor cannot work for one of your competitors. These are enforceable in many nations where they safeguard a company’s ‘legitimate business interest.’ Otherwise, they may be considered an illegal ‘trade restriction.’ However, in some nations, similar provisions may be wholly prohibited, have very limited application, or be unenforceable in a court of law.
Find a reliable partner to assist you in your research on the target country’s intellectual property laws and non-compete agreements, as well as information on local customs. It’s important to remember that just because a given form of contractual clause is widespread in a target nation doesn’t guarantee it’s lawful.
Competent multinational staff will almost certainly be the most significant factor in your worldwide growth success. Overcoming skills, salary, tax, and compliance problems in a new target nation, on the other hand, is critical to success. Khawaja Manpower provides a variety of tried and true foreign employment options to guarantee a smooth transition.