Expanding internationally is an exciting prospect that allows you to reach new
markets and quickly grow revenue. But as you begin exploring expansion
throughout different countries, many hiring details, such as country-specific
laws and best practices, can be overwhelming to navigate.
You’ll need to consider employee compensation, benefits, taxes and payroll, as
well as how to protect your company’s intellectual property, in each market
you engage international staff, and each one of these considerations come with
its own set of challenges.
Let’s take a closer look at these key challenges, so you can avoid any
potential missteps as you hire international staff in unfamiliar markets.
Navigating international compensation and benefits
Every country has different laws and regulations that govern local employment,
and your HR team may not be familiar with managing the nuances.
If you want to ensure your international staff receive a competitive employee
agreement compliant with the local law that avoids co-employment issues
, be aware of
the following.
Benefit plan details. In the U.S. , offering medical benefits makes an employer more attractive, but
this isn’t always the case when expanding abroad. Many countries, including Canada , Austria , Australia and Denmark
,
have universal health care. These plans may cover a person’s medical needs, so
if you offer medical benefits as part of your compensation package, employees
may not realize the true value of the benefit. As a result, you aren’t fully
utilizing your compensation dollars in the best way.
Research what benefits are available to local employees in the area of your
international assignment so you can ensure compensation dollars generate greater impact.
Bonus plans may create challenges. Offering bonus plans for employees is
common in the U.S. As you expand to different countries, however, regulations
for this type of compensation structure can get murky.
If you operate in Germany , for example, there are equal-protection
laws in place. The details of these laws may affect your ability to offer
bonuses that are discretionary and performance-based. What’s more, the German
labor courts have latitude to determine bonus pay amounts.
The cost of compensation extends beyond salaries. Local laws and taxes
affect the total cost of employment. You might need to contribute to an
employee’s pension, severance pay and other benefits. Understanding these
details can help you forecast the true cost of employment and ensure that
you’re staying legally compliant.
Bargaining agreements play a role in compensation. Bargaining agreements
are common in many countries. These agreements, which dictate the working
conditions and details of employment, will play a role in developing
appropriate compensation. For example, roughly 60% of employees in the EU
are covered by a collective bargaining agreement . Countries
including Italy or Germany may have rules that relate to specific salary
requirements in various industries. The collective bargaining agreement may
dictate overtime pay in countries including Australia. As a result,
researching the collective bargaining agreements in the new country and your
chosen industry will play an important role in compensation details.
Understanding impacts of worker classification
There are two common types of worker classification, independent contractors and direct employees. But paying a person as an
independent contractor can be a slippery slope. If the employee’s work starts to look more
like that of an employee rather than a contractor, the organization is at risk
of misclassification and the resulting noncompliance fines and taxes.
Alternatively, if you decide to classify employees as direct hires, there are
many costs and a steep learning curve.
To protect your business and ensure the right type of worker for your
international staffing needs, make sure your HR team is well-versed in the
difference between independent contractors vs. employees .
Mitigating risk with IP protection and noncompete agreements
Another key area to consider is intellectual property protection. Laws vary
greatly by country in this area, and understanding intellectual property
protection laws in a new country will help mitigate risk and safeguard your
company’s future.
In the United States, when you hire an independent contractor, you might
require the person to sign an agreement that protects intellectual property
rights. Agreements like these, however, might not hold up legally in other
countries. In fact, in some countries, it’s against the law to require these
agreements, so remaining compliant is critical.
Reach out to local authorities and ask about intellectual property protection.
What type of agreements are legal? What laws apply to the work of independent
contractors, and how do they relate to IP rights?
Noncompete agreements are another area to explore. In the U.S., you can ask
employees to sign these types of agreements, but you might not have that
option in some countries. Explore what types of contracts are legal and what
protections you may put into place.
Avoiding challenges by using an employer of record
Not fully understanding local labor laws opens your company to potential risk.
You must understand payroll, local tax requirements and more, but you must
also understand any laws that affect how employees work. What are the laws
about overtime? How do they relate to compensation and payroll? You can invest
time in learning these requirements yourself, or you can partner with an employer of record (EOR) that enables you to offload these tasks.
Learn more about how our employer of record solution, Global Employment
Outsourcing, can support your international staffing needs in more than 165 countries.
Schedule a free consultation
Meet with one of our payroll experts to discuss your current business challenges and how our solutions can help.