Ten Questions HR Should Ask When Your Company Expands Internationally

Warren Heaps – Birches Group LLC

Companies are increasing the pace of international expansion, constantly seeking new opportunities and new markets.  One of the most commonly asked questions through our Ask the Experts feature and on other sites is how to prepare, from a human resources perspective, for international expansion.  It might be opening a new office, or just hiring one or two sales reps, but either way, there’s work to do.  If your company is expanding to a new country, what questions should you ask (and answer) as an international HR expert to help prepare your firm?

Here are ten questions that provide a good start:

  1. What type of entity will be established?  This is the first question you should ask.  Will there be a subsidiary or branch?  Is it a joint venture (JV)?  Exclusive distributor?  The answer to this question will impact almost everything you do, from hiring contracts to tax treatment.  And be sure to consider permanent establishment issues, too.  If you don’t know what is, consult with your corporate tax department.  They will know.
  2. Will the company be hiring employees in the local market directly?  There are many options to consider – direct hires, contractors, or third-party PEOs.  Each have advantages and disadvantages, and will also impact your costs and tax structure.  If you are establishing a JV or an Exclusive Distributor, can all the staff be employed by your partner in-country?  Even your expat GM?
  3. Can you find the talent you need in the local labor market?  If you decide to hire locally, is it feasible?  Have you checked the availability of talent for the skills you are seeking?  What’s the competition for talent?  Who are the dominant employers, and can you compete with them?  What is the typical recruitment process?  Are recruitment firms common?  What are the best universities for recruitment? Can you advertise for specific age or gender requirements (this is permitted in many countries)?  If yes, is it consistent with your overall corporate philosophy and standards to do so?
  4. Are there any positions to be filled by expatriates?  You’ve decided to hire mostly local staff, but there are still some key roles to be filled by expatriates.  Do you have an expatriate policy?  Are there special considerations in moving staff to the new location?  How difficult will it be to obtain visas and work permits?  Are nationals of certain countries favored over others?  What is the culture like?  Are nationals from particular countries more likely to assimilate and be more effective than others?  What payroll arrangements can be made, and what are withholding and reporting requirements for expatriates?  If you’re starting a JV, how will the costs of the expatriate employees be shared by the partner organizations?
  5. How is compensation structured?  Have you obtained a high quality salary survey of employers with whom you compete?  Have you examined the typical practices outlined for compensation?  What is offered besides basic salary?  Many countries have statutory and non-statutory allowances and in-kind benefits — be sure your survey has detailed information on these.  How are incentives structured?  Is it an individual-centric culture or more team-oriented?  Do you need to adapt your incentive structure to accommodate culture?
  6. What standard, statutory benefits provided?  You must be sure to provide all of the required allowances and benefits under the local labor law.  There could be requirements that apply to your expatriates, too, even if they are paid at home or headquarters.  Consult with a qualified payroll expert or accountant to be sure.  Be sure to include mandated employer contributions and social taxes in your costing exercise.
  7. Do employers provide additional, employer-sponsored benefits?  Your survey should provide this information.  You should also examine which insurers provide benefits, and if they are part of any existing pooling networks your company may have in place.  For pensions, make sure your finance department is directly involved, as pensions often give rise to financial reporting and other actuarial calculations that must be coordinated globally.
  8. Are individual employee contracts required?  You need a labor counsel familiar with contracting requirements for local staff and expatriates.  Don’t use your “usual” contracts or offer letters – they probably aren’t valid in the new country.
  9. To what extent are unions present in the market?  In some countries, every employee is covered by a union.  Some unions are organized by industry, and contracts apply to all companies in that industry and geographic area of the country.  Works Councils in Europe have an active role that must be considered when facilities are expanded or closed.  Your labor counsel should provide assistance here, too.
  10. What options exist for payroll services?  Can you outsource payroll, or should you run it yourself?  Compliance is critical with payroll, so relying on an outside expert is usually a good idea.

The list above gives you a good starting point.  Examine these questions, research the answers, analyze what you find, and you will be well positioned to take the lead as a strategic resource for your company as you expand internationally.

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