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Hiring International Employees: Tips for Expansion or Start-ups for Employing Staff Overseas

When your company is starting up or expanding overseas, one of the first challenges is hiring and managing quality employees. There are very real differences when you hire staff abroad, and this article will cover the topics to look out for as you recruit and onboard your employees.

International employees fall into three categories:

  • Expats that are sent on assignment from the home country
  • Foreign workers that reside in the new market and are hired to support local operations
  • Remote employees hired for their skills and ability to work independently

Regardless of which type of worker your company hires, there is one key point to remember for hiring international employees; you must run a local payroll and either incorporate a corporate entity or use a GEO service to be compliant.

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Consider Local Employment, Immigration and Payroll Laws  

Every country has its own laws for employment, immigration, taxation, pensions and benefits, and in some cases the rules are different for locals than for expats.  Even if the laws in your home country are more lenient, the host country rules will take precedence because you are running payroll there and your employees are entitled to all local worker protections and benefits.

Payroll and Compensation Compliance

While expat workers may be satisfied with compensation arrangements made in the home country, foreign workers will want to ensure that their local benefits and payroll conform to the laws of the host country. 

For example, unlike the US, countries such as Australia have a mandatory employer contribution to pension, so that has to be factored in to the cost of hiring.  Social security contributions may also be higher than you expect, like in France where the employer portion can be as a high as 50% of salary.

Immigration Compliance

If you are assigning expats abroad, work permits and visas will be required in almost every country.  The exception to this is when an EU resident travels to another EU country to work, then no permit is needed.

Sometimes there is a special work visa available between countries, such as the US and Canada, but most of the time your expat employee will need a standard work permit sponsored by a legal entity.  In the UK, a work permit for a non-EU citizen is only available if you have legal branch or entity in place.

Statutory Entitlement Compliance

Entitlements for overseas employees can include annual leave, sick leave, health insurance and severance upon termination.  In Singapore, maternity leave is a minimum of 12 weeks (16 weeks for locals with 50% government funded), while India mandates 12-26 weeks of fully paid leave.

China’s annual leave (for vacation) depends on how many years of service, but not just to the current employer, but cumulatively to all employers in China.  It starts at five days per year for service of 1-10 years, which is in sharp contrast to countries like the UK and Italy which offer four weeks of annual leave.

These wide differences in leave amounts can bring issues of balancing compensation between countries, as well as maintaining a comparable work load for all employees.

Be Aware of Cultural Practices and Language Barriers Overseas  

Whether your company is managing foreign workers or asking expats to integrate into a new country, both language and culture can present challenges.  For expats, some language ability will help smooth the transition, as well as cultural training in the business practices and social customs of the host country. 

Due to cultural differences, foreign workers may have different expectations from their employer or work duties, and contracts should be explained, and responsibilities outlined in the local language.

Identify Relevant Work Experience in Candidates

Some types of work experience may not be transferrable depending on the nature of the position, and you will have to assess the new employee’s skill set, and their ability to communicate and self-manage remotely.  Recruiting and interviewing takes on a new dimension of importance with foreign workers, with the added challenge of time differences and using virtual communication.

Probation and Termination Policy Compliance

Often, the rules governing probationary or trial work periods will be established by the laws of the host country, and are to protect the employer.  Those are often not mandatory, and for example in Netherlands can be waived if both employer and employee agree.

Termination of employees may have legal restrictions that are new for the human resources department that is accustomed to ‘at-will’ employment as is customary in the US, and local protections for workers may prevent termination in some situations, or offer long notice periods and severance pay.

As an example, Australia requires one month notice and severance to be paid if employed longer than one year.  France takes worker protections seriously and if you can show cause, the notice period is three months, with mandatory severance.  Germany uses an unusual formula for notice based on length of service by the employee.

Write Employment Contracts, Non-compete Agreements and Intellectual Property to Local Rules

Some countries do not have strict laws or guidelines on the use of proprietary information, or how a non-compete agreement will be adhered to, while others are more pro-business and allow for greater protection from employee misconduct.  All restrictive covenants should be in the employment contract, drafted to meet the local rules.

It is essential to determine how the employment relationship will be treated, and what protections or remedies may be if place if an employee decides to leave for another company.  Some countries such as Mexico prohibit non-compete clauses entirely, and in Spain they are simply not enforced by the courts, except for money damages.

In some cases, non-compete compensation may be required during the term of restriction.  For example, in the Czech Republic, it is equal to 100% of the original salary, but in Germany and Brazil the compensation is limited to 25% to 50% of wages.  Most countries use tests of ‘time and duration’ for the length and validity of non-competes.

Three Common Mistakes when Hiring Internationally

Trying to Run a Remote Payroll

It is tempting to simply pay a foreign or expat employee straight from your home payroll, but this may not be allowed in the destination.  The main problem is that foreign workers wont have access to the benefits and entitlements in your home country, and rely on the local payroll for contributions and tax withholding.

Overlooking Compliance Obligations

You cant ignore following local employment and labor laws, and doing so can result in fines, penalties and loss of goodwill for your business abroad.  If you are new to a country, outside expertise is likely needed to ensure compliance.

Using Home Country Policies that Conflict with Local Rules

Your company’s policies are designed to meet home country rules, but may not be valid or sufficient in foreign countries.  For example, if you don’t offer health insurance at home, that policy will conflict with required statutory coverage in some destinations.

Do you need more information about hiring international employees?

As you consider the many diverse challenges when hiring overseas employees, you might want more information such as:

How to integrate your corporate policies with foreign employment laws

Managing remote international employees and integrating them with your team

Structuring employment contracts so that they match up with local labor laws

These are the types of questions that we handle for our clients in all major markets, so they can focus on their business activity. For companies that are testing a market or are unwilling to run a foreign payroll DIY, we can provide a quick start at a reasonable cost, with no concerns about meeting local compliance standards.  We make international employment simple.

Looking to hire an employee overseas? Get in touch

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