By Globalization Partners
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Managing an international team is quickly becoming the norm. The idea of local-only businesses is in the past. This is true not only because the internet has made it incredibly easy for almost any company to start selling internationally, but because of the sudden standardization of remote work introduced by the Covid-19 pandemic.
You might already be managing an international team without realizing it: Are you confident that your remote employees haven’t taken advantage of the opportunity to travel and work from new locations? Maybe some of your teammates have adopted a nomadic lifestyle. Or perhaps some others have completely changed their original residence.
If you have designed an ambitious international expansion strategy to expand your market share, or if the remote work has dispersed your workforce beyond your headquarters, here’s a list of facts you must know to achieve success when managing an international team.
1. You might need to incorporate a new company in new countries.
If you plan to hire someone in a country other than where your company is headquartered, you may think it is as easy as putting your new employee on your payroll, right? Unfortunately, it is not that simple. To pay them and stay legal, you will need to make sure they are on a locally compliant employment contract, pay local benefits and taxes, and abide by local employment laws. You will have to incorporate a company in that new territory, open a local bank account, and do an annual audit.
So, you may have to ask yourself a challenging question: Are you willing to go through the legal, tax, financial, and regulatory responsibilities that come with registering any kind of employment entity for just a few, or maybe even only one employee?
2. Labor laws are very different in each country.
Labor law — including hiring and firing practices, benefits, statutory vacation pay, and pension schemes — vary considerably from country to country, so it’s essential to make sure that all employment contracts for new employees are legally compliant. That’s why organizations require country-specific legal counsel when engaging in the global marketplace.
Hiring international employees introduces a catalog of new filings, activities, and procedures for your HR staff. These include, but aren’t limited to, many global HR responsibilities:
- Remote training and onboarding
- Compliant and time-sensitive payroll
- Culturally-informed (and in some cases, government-mandated) employee benefits
- Proper employee/worker classifications
- Performance reviews
- International terminations (The U.S. is the only country in the world where “at-will employment” is an operating and lawful concept.)
3. Your new employees may be covered by a collective bargaining agreement.
In the U.S., only about six percent of workers in the private sector belong to a union. However, collective labor agreements are much more prevalent globally. For example, many workers in Sweden, France, and Brazil are covered by a collective labor agreement that sets baseline benefits that an employee must be provided. An employer may have to negotiate with a labor union if a covered employee must be terminated at some point.In the U.S., only about six percent of workers in the private sector belong to a union. Click To Tweet
Additionally, in certain countries, employers must provide employees with a mandated amount of advanced notice before terminating an employment relationship. Seniority-based notice periods are typically set by statute, though, in some cases may be negotiated by contract. More extended notice provisions can be used as a bargaining chip for an employer to lure high-value talent. But long notice periods can result in a significant payout if things don’t work out.
4. You may face unexpected, required payments.
Have you heard of a “13th-month bonus?” Many countries in Latin America, and some countries in Europe and Asia, require — either by law or by collective bargaining agreement — that employers pay employees a bonus equal to one month’s salary, usually at the at the end of the year. One famous example of this is the annual “aguinaldo” (Christmas bonus) in Mexico.
In a few other countries, employers are expected to pay a 14th-month bonus. Does all this mean that you need to become a worldwide labor encyclopedia? Not necessarily, but it would be beneficial to visit Globalpedia, the best up-to-date guide on labor laws, norms, and regulations.
5. You may be subjected to currency fluctuation and double taxation.
Currency conversion rates fluctuate and can affect your employee’s net pay. For example, if employees are paid in the currency of the country your company is located in, but their expenses are paid in their home country’s local currency, it is vital to have a currency exchange agreement. Another option is to set a fixed salary in their local currency to avoid these fluctuations.
As for international payments, taxes are another critical factor to consider. Your company may be subjected to a double taxation regime, meaning you may have to pay local taxes and taxes where your employees are located. To avoid this, you need to find out if there are any tax treaties between your country and the one you are hiring in.
The good news: You don’t have to do it alone.
Expanding your business to several in several countries is a great way to grow your market share. It can also mean happier employees that work from wherever they want. But doing it on your own could be risky.
Enter Globalization Partners: Our global Employer of Record (EOR) can help you quickly put your employees on our already-existing, locally compliant payroll. They are legally our employees, but they effectively work for you as they always have, no matter where they are. This is an ideal solution for employees moving back to their home country, or to a location where you don’t have a legal entity established.
You can now retain top talent, and we take on all responsibilities as the legal employer. Want to learn more about how to stay compliant while managing an international team? Check out our Global Hiring Handbook, and reach out to us if we can help.