International staffing is a necessary piece to your global expansion puzzle. Moving into a new market requires hiring local employees to effectively and efficiently assist with growth.
But global market expansion isn’t the only reason companies embrace international staffing. Today’s connected digital world has opened businesses up to global talent pools, allowing companies to recruit and hire the right people for the job—regardless of location.
While global hiring offers many benefits, it’s not safe from problems. Companies seeking to hire international staff must know how to navigate the challenges of engaging foreign markets and talent.
This guide discusses five key problems companies face with international staffing and suggested solutions to ensure success.
Problem #1: Compensation and Benefits for International Staff
Competitive compensation and benefits motivate employees and reduce churn. However, expectations and regulations around compensation and benefits differ from country to country.
Companies seeking to recruit international staff must consider factors like cost of living, local market rates, statutory benefits requirements, and common employee perks when putting together a compensation package to attract top talent in their target markets.
Global compensation packages should not only be competitive and fair but must also comply with country-specific employment laws, which govern factors like minimum wage, income taxes, statutory benefits, and pay equity.
Companies must also regularly review their global compensation strategy to ensure competitive practices and compliance with ever-changing employment laws.
Unfortunately, ensuring accurate compensation and benefits for international staff puts a lot of strain on HR teams if they don’t have the following:
- Time. HR teams need ample time to research and determine which employee benefits they must offer in which countries.
- Global expertise. HR teams must also be well-versed in international law to ensure their employee benefits packages are always compliant.
- Funds. HR teams need significant capital to engage and partner with local benefits providers in multiple countries.
Solution
Companies can take the stress and guesswork out of compensation and benefits for international staff by working with one dedicated global benefits partner, like an employer of record (EOR), that crafts and administers locally competitive and compliant rewards packages on your behalf.
Remove your international staffing woes and hire globally with speed and compliance by partnering with an EOR:
Problem #2: Global Tax Contributions
Just as tax laws vary between U.S. states, tax laws differ considerably between countries. These differences encompass income tax rates, employer withholding standards, payroll contributions, value-added tax (VAT), and corporate tax triggered by permanent establishment.
Expatriate employees add another layer of tax complications for companies that hire international staff. In some countries, expats may have to pay both domestic and local taxes.
Companies must also factor tax contributions in their labor burden calculations to ensure they stay on budget when growing their team. But calculating accurate contributions is challenging since payroll tax and social contributions differ between markets.
Failure to adhere to each market’s tax laws can incur hefty fines and reputational damage.
Solution
If you don’t have the time or resources to build a legal team that specializes in international tax law, you may consider working with a global tax expert who can provide accurate quotes on employer burden calculations and ensure you remain compliant with country-specific tax laws.
Problem #3: Intellectual Property Protection
Your intellectual property (IP) consists of many intangibles, such as patents, copyrights, trademarks, franchises, trade secrets, and digital assets. These IPs give your company its competitive edge, provide revenue streams, and even assist with your marketing strategy.
Unfortunately, every country approaches IP protection differently. While you may have clearly defined IP protection in one country, those protections don’t necessarily extend to other countries—putting you and your business at risk when expanding into new markets.
Companies must apply for IP protection in each country they do business in to protect vital information. They must also be cautious when engaging international contractors since they can argue that the work they complete belongs to them and not the company.
Keep in mind that your target country may be a signatory of an international IP treaty, such as the Berne Convention or TRIPS Agreement, which could protect your IP in that country.
Solution
Simple ways to ensure the protection of your IP include prioritizing IP registration as a first step when expanding into a new market, hiring full-time employees instead of contractors, and partnering with a local attorney in the country to ensure IP protection on your behalf.
Problem #4: Varying Labor Laws
Every country establishes its own set of labor laws to regulate business operations with the needs and rights of local talent. These laws differ from country to country and have varying levels of protection for employees.
For example, in the United States, employment relationships are considered “at will,” which means employers can terminate talent without reason or notice. In most other countries, however, professional relationships operate under indefinite contracts, which outline strict regulations around termination procedures to protect employees.
Other employment regulations that differ per country include but are not limited to:
- Visa and sponsorship requirements
- Collective bargaining agreements
- Overtime pay
- Severance pay
- Annual leave
- Probation policies
- Workers’ compensation
Failing to acknowledge and comply with local labor laws leads to severe penalties, from lawsuits and hefty fines to employee back pay, reputational damage, and even imprisonment.
Solution
To keep up with international labor laws, do your research and create a checklist of compliance requirements for your HR team. It’s also a good idea to periodically conduct a self-audit to ensure your team adheres to the latest labor laws in any specific jurisdiction.
Problem 5#: Worker Misclassification
When recruiting international staff, some companies may seek out contractors instead of employees. Hiring contractors allows companies to quickly test new markets while saving time and money since employers don’t need to onboard or provide benefits to contractors.
However, engaging contractors puts businesses at risk of worker misclassification. Each country has different regulations around classification, but it typically depends on factors like the talent’s financial relationship with the company and the degree of control they have over their work.
Employers may purposefully misclassify employees as contractors to avoid paying taxes, or they may misclassify their talent without realizing it. Either way, violation leads to employee back pay, hefty fines, and even imprisonment in some cases.
Solution
To avoid misclassification, draft clear and compliant contractor agreements. You can also establish a legal entity in your target markets to convert local contractors into employees. We lay out more solutions in our guide to avoiding misclassification risks.
Simplify International Staffing With an Employer of Record
You don’t have to let the challenges of international staffing keep you from fulfilling your global business goals. Instead, partner with an employer of record (EOR) to handle the complexities on your behalf so you can focus on finding the best talent for your business needs.
An EOR is an organization that serves as the legal employer of your international talent. Your EOR partner takes on all employer-related duties for you, including navigating labor laws, IP protection in new markets, and compliance with classification and tax regulations.
Other key solutions an employer of record provides are the following:
- Creates and manages locally compliant employment contracts
- Manages global payroll and tax withholdings
- Pays talent accurately and on time
- Administers statutory and supplemental benefits
- Ensures compliance with international employment laws
- Provides ongoing finance, legal, and HR support
Is an EOR the right solution for your international staffing woes? Download our free guideto learn how an EOR works, when it’s best to use an EOR, and more so you can make the smartest decision for your global hiring needs.
Or contact Velocity Global to learn how we can help you simplify everything related to international staffing and global expansion.
