The top 5 HR challenges you will face as you expand globally

by Janice Allen
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You want to grow your business by entering new markets. But how are you going to do it all if you have no experience in the new country you are looking for? You need to get everything right: recruiting, legal compliance, payroll, taxes, training and more. If you drop the ball on any of these points, the resulting penalties and delays could be fatal to your future in any country.

Your company should expect that rules and regulations are different than in your home country. It is imperative to prepare for the most common HR challenges associated with global expansion by investing time and resources in regulatory and compliance research. Here are the most common (and often overlooked) HR challenges with solutions to ease your entry into a foreign market.

1. Recruiting, Onboarding and Training

Before you can start work in a new country, arm yourself with the knowledge of labor laws related to hiring, compensation and anti-discrimination, to name a few. These laws can vary drastically from country to country.

In China, for example, companies are prohibited from hiring people women in physically demanding jobs such as mining, logging and high-altitude work. In Portugal, you should not fire employees not at all, because the country’s labor laws have no provision about termination, period. You can only offer generous severance pay and hope the employee agrees.

Companies should also research the labor market to ensure that the compensation package they offer complies with local laws. Other factors, such as allowed hours of work, overtime pay, and severance pay, should also be airtight to avoid legal hassles in the future. In Germany, for example maximum working hours in a week are capped at 48 hours, including overtime. This is clearly different from the US, where it is no upper limit about the hours worked in a week.

To navigate unfamiliar and often seemingly strange hiring and termination laws in a new country, companies often choose to outsource talent acquisition to a Professional Employer Organization (PEO) such as INS Global that is well versed in the laws of the country.

In addition to legal compliance, you also need to know the most appropriate recruitment channels in your target market: international or local job boards, social media platforms, print publications and others. For example, many Western companies that recruit in China increase their chances of hiring the best talent when they partner with a local PEO.

Even after onboarding, several factors can determine the employer-employee relationship: state and local laws, industry-specific regulations, union regulations, and collective bargaining agreements (CAOs).

Finally, in many countries, employees are expected to be trained in technical and soft skills. For example, many European companies in Belgium, France, Denmark, Luxembourg, the Netherlands and Sweden invest heavily in training their employees.

2. Compensation and Benefits

You need a business entity in the target country to process payroll for international employees. Or you can outsource activities to a PEO to legally handle payroll for your organization.

You should make every effort to understand local laws regarding the classification of employees as independent contractors. This may not be a legal option in the target country. And penalties for transgression can be severe, especially in the US. and Canada.

The compensation and benefits you offer must be competitive and in compliance with the law. For example the Philippines mandates paying all non-executive employees a 13th month’s salary or one month’s bonus salary. from Belgium government mandates an optional career break for employees with retention of compensation and a guarantee of return to work after the break.

Also stay up to date on vacation and health benefits, health insurance plans, savings plans, and cost of living allowances. For example, Bulgarian law provides offers 410 days of paid maternity leave.

Other benefits that are not required by law but are still expected may include components that you are not familiar with in your home country. For example, transport credits, various reimbursements and more. In Belgium, companies often provide heavily subsidized company cars to employees.

3. Taxes

Tax laws determine the business, property, and sales taxes that your organization must pay in the target country.

Processing income tax on behalf of employees, remitting the correct amount to the local government, and providing employee tax forms is essential. Payroll taxes may also include unemployment insurance, workers’ compensation, or other programs.

Stay on top of changing tax rules as they affect double or triple taxation agreements, repatriated tax rules, and more. South Korea introduced a robot tax reduced tax benefits for companies investing in automation in 2017.

4. Data Compliance

The General Data Protection Regulation (GDPR) in Europe is likely to trigger similar data privacy laws in the rest of the world. In fact, California has the California Consumer Privacy Act (CCPA) in 2018. Your organization must comply with all local laws when capturing, storing, or transferring employee information, such as bank information, medical information, and more.

The same goes for customer data, especially where the laws may differ from those in your own country. Penalties for failing to protect employee or customer data can be hefty and damage your company’s reputation for years to come. Google and Amazon had to pay $160 million in fines for tracking cookies without consent in France in 2020.

5. Communication and cultural adaptation

Understanding the linguistic and cultural makeup of the target country is essential if you plan to efficiently conduct recruitment, onboarding and training activities.

Collaboration and engagement in the workplace generally runs more smoothly if your HR department has facilities to facilitate communication between people who speak different languages. You can also work with a local PEO who has experience in similar services. Chinese, Spanish, Arabic, German and French are among the most spoken languages in the world and this naturally spills over into the global business landscape as well.

Adapting to cultural differences in the target market is also key to harmonious and productive international teams. Your HR department must be prepared to effectively deal with cross-cultural differences in etiquette, business relationships, work-life balance, and religious beliefs. For example, business transactions in Asia are more relationship-oriented than in the US or Europe.

Global expansion with a local partnership

Expanding to a new country can be daunting with the endless legal, cultural and behavioral challenges companies can face. Without a local entity in your target market and no track record in that region, it can seem almost impossible to unlock sustainable growth.

But due diligence and working with an experienced PEO can help streamline your entry into new international markets. You don’t have to handle the legal and HR challenges yourself. Instead, you can focus on business development, customer acquisition, supply chain development, and more.

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