By Globalization PartnersOctober 2020
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If your company is ready for a global business expansion, you may be asking, should we hire employees in different countries, or should we relocate employees to a new country? As we’ll see, there is no simple answer. You can arrive at a strategic decision, though, by considering some key factors.
We’re going to look at each of these factors and then consider some quick pros and cons of both relocating employees to the new country and hiring employees in the new country so you can make an informed decision that’s right for your business and helps you achieve your goals.
Your Goal for Global Expansion
First, you must get a clear vision of why you are expanding globally and into this new country specifically. What do you hope to accomplish, both in the short- and long-term? You can’t make informed decisions about transferring or hiring employees if you don’t have this big picture in mind.
Consider whether your primary aim is to accomplish any of the following goals or some other goal:
- Expand your brand recognition globally
- Gain access to new markets
- Develop a large client base in this new country
- Set up a manufacturing plant or a customer service call center in a more cost-effective location
- Establish a hub as a jumping-off point to expand to other nearby countries
- Gain access to a more skilled or qualified labor force
Understanding your goals can help you create a strategic game plan for your expansion, which includes whether it makes more sense to relocate or hire new employees or whether both options or a combination of both are valid to consider.
Employee Willingness and Suitability
One thing to think about early on is whether you have any current employees working for your company who are interested in moving to work in your new location. If your employees have families and lots of ties to their home country, they may not be interested in moving halfway across the world or even to a neighboring country.
However, you may find that you have employees who are excited by the possibility of making such a big move. Of course, it’s also important that these eager employees have the necessary skills and experience to help you expand your company globally. The main thing to note here is that you shouldn’t assume you have employees who are interested in a big move or are ready to take on that responsibility.
If you find you don’t have any or don’t have enough employees who are both willing and qualified, then your decision is made for you. It’s time to start the hiring process for residents in the new country. If you do have willing and qualified employees, then you should consider the remaining factors to help you decide whether to send them or hire locals.
Scale of Your Operations in the New Country
One factor to consider is the scale of your expansion endeavor. A global expansion can range from hiring one remote employee in a foreign country to opening up a fully-staffed subsidiary or branch office in the country. If you only need a few employees in a foreign country, then you may consider sending some of your current employees on assignment. In this scenario, it would also be perfectly acceptable to hire locals in the foreign country to work as your employees there.
However, if you need a large staff in the new country, you’ll likely want to plan on hiring locals. For instance, if you’re expanding into a new continent or region and want this new location to serve as a major hub for your business in that area, you’ll need a more robust staff.
You could still send a representative or two from your home country to help get operations running, but overall, you’ll likely want to hire residents of that country or foreign residents with a legal right to work there. This is a better long-term solution for keeping your business consistently staffed in that new country.
Cultural and Language Differences
You also have to consider any differences in language and culture in the country you’re expanding into compared to your company’s home country. You may be looking to expand into a country where most residents speak your language and the culture shares many similarities to your own, or you may be entering a new country where residents generally speak a language you are unfamiliar with and where the culture is very different from your own.
In either of these scenarios, there is a solid case for both sending your current employees to work as expatriates and choosing to instead hire residents in the foreign country. If you send current employees, you won’t have to navigate the complexities of communicating with job candidates who speak a foreign language. However, you’ll need to invest in language and culture training for your expat employees and allow plenty of time for transition for any employees who are moving.
If you hire locals, you may have a more effective inroad into the local community and can benefit from their ability to connect your business with other foreign-language speakers. You may want to look for applicants who are multilingual as this skill can set them up to be a valuable asset to your company as you expand globally. If your company operates in English, you can benefit from the fact that English is the most widely spoken language worldwide, and most of those speakers have a different native language.
Hiring local employees can also bring more diversity into your company. Employees with different cultural backgrounds may contribute new insights, especially in regards to your company’s global operations.
Importance of Company Expertise
Another thing to consider is whether you need the employees in the new country to be knowledgeable representatives of your company or whether it’s fine if they are simply knowledgeable in the relevant subjects but new to your company. The answer to this question will largely depend on what your operations will look like in the new country and what you need your employees there to do.
All new employees should go through training to help them understand how to perform well at their job and to get to know your company more broadly. However, a greater level of expertise comes with time, so more senior employees in your company will likely be more comfortable and confident in their jobs and be more knowledgeable representatives of your company.
If you need your employees in the new country to be well-versed in your industry as well as your company’s operations specifically, then you should consider relocating current employees. You can still hire some additional employees in the new country, but they should train under these experienced employees. You may eventually be able to send your original employees back to their home country once operations are up and running in the new country and your employees there have gained the necessary expertise.
Local Labor Force
Another thing to consider is what the local labor force looks like in the country you’re expanding into. Of course, you can’t account for every possible job candidate in the country, but it helps to consider trends within that country. Generally speaking, how educated is the labor force? What industries do they tend to specialize in?
In some cases, by hiring employees in a new country, you can tap into valuable talent and expertise that is relevant to your company. On the other hand, you may have trouble finding qualified candidates in the country, making it a better decision to relocate employees from your home country.
Learning about the local labor force requires some research. If you’re interested in business, tech, or data skills, you may want to consider Harvard Business Review’s study that ranked countries for each of these skillsets. Finland ranked first for business skills, Argentina ranked first for tech skills, and Israel ranked first for data skills.
You may also want to check for statistics regarding what degrees are most commonly conferred in a country. For instance, in the U.S., the most popular bachelor’s degrees are in the field of business. If you’re looking for professionals with a certain degree, find out how popular that degree program is in the country.
As with any business decision, you also need to consider the financial implications of each option. Both relocating employees and hiring new employees comes at a financial cost. Which option costs more will depend on your specific situation. Conduct an analysis of possible expenses involved with both options to determine whether one is more cost-effective for your organization.
In a global business expansion, relocating employees means taking on expenses to obtain visas, move employees and possibly their families to a new country, and get them established there. This may also include language and cultural training courses. You can avoid all of these costs when you hire local employees. However, hiring new employees involves other costs, such as staffing agency fees or an internal hiring committee’s paid working hours.
Another aspect of cost to consider is the salary and benefits employees will receive. Every location has its own economy, cost of living, and legal requirements that all play into the appropriate salary and benefits employees there should receive. If you’re relocating employees to work there permanently, then these costs will be similar among domestic and expatriate employees. However, if you’re considering sending employees on a temporary assignment, you may be able to keep them on your original payroll and abide by your home country’s legal requirements for compensation and taxes.
Timetable of Your Expansion
Another major factor to consider is the timetable you’re working in for your expansion. Both relocating employees and hiring new employees takes time, but one option may be quicker if you’re trying to get established in the new country as quickly as possible. The option that is faster in your situation will depend on all the steps involved in the relocation and the hiring process.
Generally, moving your existing employees is more of a “plug-and-play” option that may be quicker for many organizations than going through the process of hiring new employees — especially if you are sending employees on a temporary basis, meaning they do not need to get fully established and obtain the necessary visas to become long-term residents in the country.
To employ anyone long-term in the new country, however, you have to first establish a legal business entity. This can be quite time-consuming in some countries and involve a great deal of paperwork and red tape. Simply establishing your business isn’t enough, either. You also have to understand all the relevant employment laws of that country and make sure your human resources practices and payroll fall in line with these requirements.
The complexity, cost, and time involved with establishing your business in a new country and learning about unfamiliar regulations are why some companies choose to work with a professional employment organization (PEO) in the new country. A PEO can serve as your employer of record so you don’t have to establish your own legal entity and payroll in the new country. Instead, you can use the PEO’s existing company and local expertise to expedite your global expansion process.
A Quick Look at Pros and Cons
The right decision will depend upon all the factors above and possibly more, so the question of whether to relocate or hire new employees has no clear or obvious answer. That said, it may help to consider some potential advantages and disadvantages of each option if you’re still unsure.
Pros and Cons of Relocating Employees
Let’s start by looking at some possible pros of relocating employees internationally:
- They already have experience with your company and expertise in their role.
- They are familiar with your company headquarters and can help establish a branch or subsidiary that follows this model.
- You can forego the time and costs involved with the hiring process.
There are also some possible downsides to this option:
- Relocated employees may be unenthusiastic about the move or may struggle to adjust to their new home.
- It will take a long time for them to form local knowledge to help them operate effectively in the new country.
Pros and Cons of Hiring New Employees
Hiring employees in a new country also comes with some pros and cons. Let’s look first at some possible advantages:
- New hires are more likely to have local knowledge of the language and culture to help your company connect with that market and diversify your team.
- The country may be home to industry experts or talented individuals you want to add to your team.
- The cost of labor may be lower in the country than it is in your home country.
You may also run into some disadvantages with this option:
- New hires won’t have as much company knowledge and will need time to learn how to operate in their roles effectively.
- Hiring new employees involves time, costs, and training you may prefer to forego.
Simplify and Expedite Your Global Expansion With Globalization Partners
Whether you’re relocating employees long-term or hiring employees in a new country, you need to establish a branch or subsidiary of your business in the country and ensure you follow all the necessary employment laws. You can skip these major obstacles, though, by using Globalization Partners as your employer of record in the country.
With a presence in 187 countries, Globalization Partners is already established around the world and ready to take on all the responsibilities of legal compliance, payroll, and onboarding so you don’t have to. Your employees — whether relocated or new hires — still work for your company, but you can eliminate the confusion and complexity involved with managing their employment. Request a proposal online to get started.