Today’s businesses are expanding faster than ever and having a global workforce can be huge advantage. Currently 40% of US companies workforces are spread internationally due to easier outsourcing and global hiring methods. However, the complexities involved with overseas expansion can lead to mistakes that can hinder a company’s growth. In fact, mistakes and difficulties have led to global workforce retention being 50% lower than local, and this is concerning to companies that are planning to shift to a global structure. Although expansion can be problematic, many challenges can be avoided with an understanding of common mistakes.
- Payroll Complexities
One of the biggest mistakes a company can make is underestimating how complex payroll structure is. Managing employees in various countries means making sure you are maintaining payroll compliance for specific labor laws, regulations, and benefits. That means countless payrolls, various taxes, and a myriad of contributions all being paid at different times. This creates a multitude of openings for mistakes and errors to enter, and all this can be disastrous for a company that hasn’t set a structured process for handling these tasks. Therefore, it’s necessary to find a tool that can automate your payroll. Ridding your HR of manual processes is key to removing unnecessary errors.
- Employment Types
When its time to hire abroad, choosing the wrong employment method can be a serious liability. The goal is to find employment that is easy to manage, budget friendly, and can insure assets protection.
Direct employee – Used when a company has a local entity. The company is legally responsible for paying employees, including dealing with employee taxes, benefits, and insurance. Direct employment can pose a liability risk.
Professional Employer Organization (PEO) – This service is provided when a company does not have or does not want to directly hire local employees or commit to having a local entity. Suppliers providing this international employment service will hire the company’s employees to become their employer of record for tax and insurance purposes, thus outsourcing the client’s employee management tasks. Such tasks include benefits, workers compensation and payroll. The advantages of using a PEO are the compliance guarantees and the removal of liabilities, making it the recommended employment type.
Not factoring in all the nuances of a country, and choosing incorrectly, can be detrimental to a company’s work structure and business model. Thoughtful planning must be done to ensure a foreign workforce will be mutually beneficial to the local workforce. Cost is always a deciding factor, but location must only be determined once consideration into time zone, language, cultural differences have also been applied. Choosing the proper language and time zone will allow for alignment with the local entity, business partners, and future associates. Location decisions play a large roll in common culture within a company.
- Common Culture
Hiring employees who don’t share the same values or attitudes can damper company culture. The differences that exist between a foreign workforce and a local entity can impact a company’s cohesiveness if thoughtful hiring isn’t done. Whether it’s customs, communication, or hierarchy, finding a country with shared work methods and values can help minimize any misunderstandings that might negatively affect a business. A company should always make sure that they are hiring employees that will collaborate and bring cohesion amongst other teams to create a global dream team.
When creating a foreign workforce, ease of hiring will most likely be at the forefront, but ease of terminations should be as well. Complexity of termination of employment refers to the amount of time it takes to release an employee from your workforce. Termination of an employee can be drastically different depending on country, ranging from a week to a full year.
It is an important to know these laws so that your company can have maximum flexibility if problems arise.
These common mistakes lead to improper business structure, compliance errors, and unnecessary costs. Global workforces can be crucial for proper development and growth of a company but expanding without understanding every piece can lead to retention issues. Global expansion is webbing of intricacies and loosing control of a single facet can cause an unraveling.