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The Pros and Cons of Relocating Employees Internationally

Global Business Strategy
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The Pros and Cons of Relocating Employees Internationally

In our increasingly connected world, companies need to be globally savvy to thrive. International growth is possible — and profitable — for both large and small companies, but some shy away from the prospect.

Having an international growth plan can benefit your company in many ways, from opening new revenue pathways to boosting your global reputation. The first step is getting your foot in the door — and one way you can get started is through relocation assignments, which means sending your employees abroad. This strategy can be incredibly beneficial to companies that implement it correctly, but you have to be meticulous in your planning to ensure a smooth experience.

The benefits of relocating employees to another country

International growth is an excellent way to advance your company over the coming years, and relocating your employees is a perfect start if your company wants to invest in its team.

When you send employees abroad on relocation assignments, you’re working toward a global strategy that can catapult your company to the next level. Here are just a few of the many benefits of sending employees to another country.

Retaining and attracting top talent

Having a comprehensive relocation package can be a significant draw for new talent and an incentive for current employees. According to a recent survey, 59 percent of workers said they were more willing to relocate for work in 2021 than they were in previous years. Out of those, 31 percent stated they’d be willing to relocate internationally.

With many people interested in international travel, creating a competitive relocation strategy will make your company more attractive to new hires looking for work outside of the country.

If any of your current employees are interested in transferring, being able to provide these assignments in the future can help you retain this talent in the long term.

Familiarity with the business

Your employees already have an understanding of your company’s business model and mission. They have established relationships with the management team and human resources department, which could facilitate a reliable channel of communication between your home office and your host country. It could also provide your assignees with a source of personal and professional support, which is essential when moving abroad.

By sending established employees abroad, you’re ensuring your company’s global reputation is well-represented.

Familiarity with the business

If you are considering hiring local workers in the future, your assignees can promote brand familiarity in the host country.

Testing the waters in a new market

International relocation assignments are an excellent way to gradually build a business presence in other countries without committing to a full expansion right away.

You can test the waters by sending employees to your country of interest for a specific period of time. If the experiment is successful, you’ll have a solid foundation to build upon for future endeavors. On the other hand, while failure is never pleasant, your losses will be much smaller compared to if you had taken bigger steps, like establishing a local entity.

Cultural exposure

In our highly connected world, having the experience and knowledge to thrive in other cultures is essential to bolster business. That’s why the biggest benefit of relocation for both companies and employees is the ability to develop cultural competence beyond what a classroom can teach.

Successful assignees can gain the following skills from their international experiences:

  1.  Increased cultural literacy
  2.  Broader worldview
  3.  Proficiency in foreign languages
  4.  Extended professional network

Positive experiences can increase employee retention rates and generate more interest in international assignments, which is an ideal situation for both you and your teams.

The disadvantages of relocating employees internationally

Most of the disadvantages of international relocation stem from failing to properly determine the logistics of the operation. International relation can be challenging to navigate for those without experience, and the process of sending people across borders can be quite expensive. Any company interested in international relocation should carefully plan out a strategy before proceeding.

International relocation expenses

Depending on the distance traveled and each employee’s unique circumstances, international relocation costs can total anywhere from USD 2,000 to USD 100,000 — or more.

Even though the components of each relocation package can vary, you’ll typically be paying for a combination of the following:

  1.  Travel and moving: Providing the employee with personal transportation in addition to moving their belongings can get expensive. There’s also the cost of negotiating with service providers and customs brokers.
  2.  Legal requirements: Paperwork like work visas, immigration documentation, and passport renewals take time and money to process.
  3.  Family-related expenses: Long-term international relocation assignments can be difficult for employees with families. You may need to provide spousal assistance, children’s education, temporary housing, or even pet relocation.
  4.  Miscellaneous costs: Small expenses like language lessons, cultural training, and house hunting trips add to the overall expense.

A simple solution for most of these issues is to determine how much is appropriate for your employee to pay. As the employer, you have a responsibility to provide certain benefits. However, you can cut down on some costs by requiring your employee to contribute a small amount.

Mismanaged relocation

Relocation assignments fail for a number of reasons, including lack of communication, family dissatisfaction, and unrealistic expectations. Regardless of the cause, a poorly managed relocation can harm your business at home as well as abroad in the following ways:

  1. Reduced productivity: The stress and isolation caused by poorly managed relocation can hinder an assignee’s productivity, which can result in a lower return on investment (ROI).
  2. Loss of talent: Poorly crafted relocation packages are a turn-off to new hires and established workers alike. If you’re not careful about managing your relocation assignments, you may end up with employees leaving your company in search of better options.
  3. Damaged reputation: If high-profile employees leave after a failed relocation, your company might become the target of negative industry speculation.

Mismanaged relocation

You need to be careful in handling every step of the international relocation process. Ensure your assignees have everything they need to succeed in a new country before sending them abroad — conduct regular check-ins with your human resources department to monitor their progress.

Different jurisdictions

In general, local employment rules in the host country will take precedence over your home country’s laws.

For example, you want to make sure your employee does not end up accidentally paying social security contributions in both their host and home country. As the employer, you might need to provide a certificate of coverage or an A1 certificate if in the EU. These certificates normally only protect the employee for a specified period of time, so you will need to consider how social security will work for long-term relocations.

Tax rules from multiple jurisdictions may also apply to your assignee. As the employer, you need to consider whether you will offer tax support or protection for employees working abroad and on what terms.

Additionally, some jurisdictions may have collective agreements that automatically cover people living in the area, so research your assignee’s destination before making any moves.

Potential compliance issues

Noncompliance issues can happen with both expatriates and local employees. Keeping up to date with local labor laws can help avoid some legal issues, but others may require more in-depth solutions.

For example, it’s important to understand how to pay your employees while complying with local labor laws. Your first instinct might be to keep your assignees on your payroll at home. While this makes sense for assignments lasting only a few months, it won’t work for long-term jobs. You will need to connect those employees to a payroll system in the host country if you plan to keep them there for a year or more.

Working with an Employer of Record can help you sort out how to pay employees abroad without getting tangled up in local red tape.

Things you should consider before sending employees abroad

Remember that there is no one-size-fits-all solution to achieving the perfect employee relocation. In addition to weighing out the advantages and disadvantages of having an employee relocate to another country, you also need to consider the individual’s personal situation and the laws of the host country.

In general, the best way to approach an international relocation is to remain flexible and adjust as needed.

Cost-effective options

The costs of sending someone to another country add up quickly, but if you break down the overall costs, you can find places where you can save.

Affordable alternatives and options exist for most aspects of living abroad, including:

  1. Commuter arrangements: If your headquarters are in a well-connected region like the EU, it might be more affordable for you to allow your assignees to commute to work. You would only be responsible for legal paperwork, and your employee’s family would be able to remain in the same area.
  2. Limited reimbursements: Putting a cap on reimbursements can prevent your employees from misusing company funds while traveling or house hunting, which will save you money.
  3. Living contributions: Unless your competitors provide zero-cost housing arrangements, it’s best to negotiate a split arrangement. While creating your relocation package, make sure to establish how you and your assignees will split housing costs. You might pay for housing and other amenities at first to ensure secure footing and scale back once they reach stability.
  4. Cultural acclimation: Language learning and cultural training are necessities for those beginning life in a new country. Some providers offer multiple programs for different budgets, so if you want to extend this service to your employees, it might be best to offer one of the more cost-effective options.

Comprehensive benefits

It’s vital to provide good benefits for employees, especially those with families or other deep ties to their home country. When creating your international assignee’s benefits package, you should consider the following:

  1. Housing: In your home country, your employee may need assistance selling their home or breaking a lease. They may also need assistance in the host country with finding a place to live and signing a lease.
  2. Insurance and healthcare: Your workplace may already offer health insurance, but your employee might need to change their insurance when they move abroad. As a result, you may initially need to help them obtain coverage and other essential medical care like vaccinations and medications.
  3. Cultural training: Language classes and assimilation assistance is especially important if the host country speaks a language different from your own, or if the culture is noticeably contrasting. You could arrange for a translator or language and culture classes to ensure a successful transition.

Comprehensive benefits

It’s incredibly important to provide adequate benefits for employees with families. While the costs of these benefits can add up quickly, offering them can be the difference between a successful assignment and a failed one. Your employees should have access to everything they need to be successful in their new country.

Proper timing

You want to make sure you’re giving your assignees enough time to make a successful move before requiring them to begin working full-time.

For domestic relocations, employers offer anywhere from two weeks to one month for an employee to move and settle into their new location. An international relocation would inevitably take more time. Depending on how far the employee’s destination country is from your home location, you might be looking at a period of one to two months or more to get them settled.

Ensure you schedule sufficient time between the day your employee accepts the relocation offer and their first day of work in the new location.

Using an Employer of Record for international employee relocation

An Employer of Record is a third-party organization that handles your company’s human resources and payroll responsibilities. An Employer of Record is the legal employer of your international team members, assuming 100 percent of the responsibility for tax and compliance obligations.

The advantage of working with an Employer of Record is that you’ll be able to grow your business internationally without having to set up local entities or assume compliance-related risks. That’s why an Employer of Record is great for companies looking to enter new markets. You’ll be able to relocate your team members anywhere in the world while your Employer of Record handles the administrative back-end work.

If you choose to hire local employees, your Employer of Record can handle the onboarding process for you in only a few days while maintaining total compliance with local regulations. With an Employer of Record, you’ll be able to build your team quickly and easily without worrying about violating local laws.

Remember that while your Employer of Record is the employer on paper, your company is still in control of its employees and their work. The Employer of Record simply handles the technical side of hiring.

Grow your company abroad with Globalization Partners

Globalization Partners is here to help you with your international business ventures. We handle onboarding, manage local compliance obligations, and provide ongoing local support for your team so you can focus on growing your company. Put simply, we help you hire anywhere in the world and simplify your international relocations.

Request a proposal today to learn how Globalization Partners can make your international assignments easy.

Grow your company abroad with Globalization Partners

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