Blog Post: Global Expansion: Guidelines for Expanding Your Business Operations Globally

Today's organizations increasingly operate in global markets where employment issues, regulations, and labor practices vary extensively from one country to the next.  If the leaders of these foreign operations want to be successful in managing multiple, diverse branches of their business, they must understand workplace diversities, have a good understanding of the laws and regulations, and develop strong cross-cultural methods for handling them. 

However, before they can even begin to understand the complexities of cultural differences, they must first thoroughly investigate what governmental regulations exist in each country, familiarize themselves with the various tax implications of simply hiring employees verses opening an actual office, as well as what employment laws are within each region which, in some cases, might make it extremely difficult to terminate a poor performing worker.

To ensure that the required due-diligence is conducted in an efficient manner which allows the decision makers to sequentially determine whether the pro’s outweigh the con’s for each respective country, this Consultant has undertaken the following approach.

1.) Fact Finding and Research: Contact the appropriate governmental agencies/departments that can provide you with the necessary information, as well as other non-governmental online resources that can further assist you in making informed decisions; two resources that this Consultant has used recently include:
       a. The HRM International Guide – It contains extensive international HR links arranged               by country.
      b.  Bureau of International Labor Affairs: The Bureau of International Labor Affairs              carries out the international responsibilities of the Department of Labor under               direction of the Deputy Under Secretary for International Labor Affairs

2.) Reporting and Recommendations:  After reviewing and analyzing all of the data obtained for a specific country, extract the “numbers” and create a budget of what it will take to get up and running within each country for one-year.  These costs would include not only expenses pertaining to compliance but would also include the approximate wages, benefits, withholdings and taxes for each worker you intend to hire.
     a. Once a realistic budget has been established, it’s essential that you partner with the            CFO - to ensure that all parties are on the same page and in agreement (from a cost/            benefit perspective) that they want to move forward with the expansion efforts.
                i. Through the course of your research, you’ll learn of various “challenges” and/or                      facts about each country’s system (i.e. that it will take approximately one full                          year to obtain the required governmental approvals in France to set-up shop; or                    that in other countries an employer must give written notice several months                          before they intend to terminate the employment relationship); therefore,                      depending on the necessity to hire someone within a respective country, it’s the                    HR professionals role to balance the needs of the business and recommend                       logical sequence of which countries to pursue first, which countries (if at all                            possible) should be avoided altogether, and which countries are more user-                            friendly” and less of a tax burden than others.
    b. Be sure to include the different options that “might” be available within the given             country that would offset or change the cost estimates such as: how many workers you         intend to hire (some countries will allow you up to hire “X” number of employees before         you are obligated to adhere to all of the country’s employment regulations)

3.) Compliance Issues:  Obtain, fill-out and authorize payments for the necessary permits, licenses and any/all applications necessary within the respective country. 
     a. Be certain to note whether these documents need to be processed by the foreign             government prior to initiating the recruiting and hiring process, as well as whether the          government needs to be notified and/or approve of the actual employment contract or          offer of employment before any offers of employment are made.
     b. Some European and Asian countries require that the payment of wages be made to an          approved payroll service responsible for the various withholdings and establishing an             actual bank account for the employee where EFT’s are deposited.
                i.  In the case of some Latin and European countries, the employer (not the payroll                     service) is the one accountable for making separate payments to the different                       governmental agencies tasked with administering health care programs and/or                     collecting taxes.
      c.  Performance Issues are one of the biggest concerns and challenges a U.S. firm              might encounter when hiring employee’s in a foreign country since they’re more often            than not quite different from those in the states; therefore, it’s important to note              whether you can change an employee’s job duties, place them on a probationary               status and/or terminate them from employment should they fail to perform                              adequately.            
                i.  In many European countries, it’s a relatively complicated process to terminate                       an employee and usually requires that you have good reason to take this                       course of action and, more often then not, you’re required to give the employee                     proper notice (which could be up to six months or more – even in cases where
                    an employee may have stolen funds from the company).

4.) The Recruiting & Hiring Process: Within each country, the traditional or preferred methods of recruiting and hiring workers varies from one region of the globe to the next – particularly for U.S. organizations that don’t yet have a presence in the respective country.
       a.  In Europe and Latin American, many U.S. companies utilize referral programs, the                internet and even suppliers or customers to obtain a candidate pool; however, in                   most of Asia, it’s necessary that you engage the services of a third party agency/                recruiting firm.
                  i.  The recruitment firms in many foreign countries are more expensive than they                         are in the U.S. and in many Asian countries these agencies are seen as                            representing the employee – not the employer - even though the employer is                         the one paying the fees. 
                 ii.  These firms are also instrumental in helping to craft the employment offer, as                        well as determining the extent of the benefits package – particularly for                                 start up firms where stock options are often part of the employment offer.
                 iii.  The employment regulations vary extensively in much of Asia – particularly if                         you’re expansion efforts include communist countries like China and Korea                         where the government has complete oversight of who is hired, the terms of                           the employment contract and those benefits that the employer will be required                       to offer. 
                iv.  On the other hand, potential employees are quite eager to work for a U.S. firm                       in hopes that they will get to travel outside their Native land and even possibly                       seek transfer or promotional opportunities that would enable them to                                     emigrate to the U.S. or other industrialized nation.

What to do next?  This Consultant recommends that you utilize the HR management index hosted by Cornell University where there’s a significant amount of relevant information pertaining to a host of international HR topics. http://www.ilr.cornell.edu/library/research/eCornellGuides/humanResourcesManagement/selectionAndStaffing.html

This is a paid membership site hosted by Cornell University.  Their multinational clients call on their International Labor and Employment Law Practice for advice and project management on the following categories of multi-jurisdictional HR compliance matters such as:
>  Global codes of conduct, ethics codes, discrimination and diversity policies, and other              global HR policies and Corporate Social Responsibility offerings.
>  Global collective redundancies, reductions-in-force and restructurings
>  HR in international mergers and acquisitions (due diligence to post-merger integration).
>  Global compensation and equity offerings, including regional and global bonus and                 compensation plans.
>  Overseas independent contractors as de facto employees.
>  Global whistleblower hotlines compliant with Sarbanes-Oxley and local law.
>   EU and other data privacy laws (data law compliance as to cross-border HR data                    transmissions and global Human Resource Information Systems).
>  Global employee communications and language laws.
>  "Offshoring" and international outsourcing.
>   Global applicant background checks, screening and surveillance (video, computer).
>   Duty of care and managing exposure to employee personal injuries abroad (terrorism,          pandemics, dangerous assignments).
>   Employment litigation involving the global workplace (extraterritorial reach of US and          other countries' employment law, the US Alien Tort Claims Act, cross-jurisdictional                  employment law litigation).
>   Global collective employee strategies (union/works council strategy alignment, global         secondary [sympathy/solidarity] boycotts, response to international corporate                        Campaigns.
>  "Sweatshop" codes of conduct (strategy as to human rights allegations in third-world         direct and outsourced operations).
>   Expatriate arrangements (secondments, benefits, terminations, repatriation).
>   Global employment counsel (one-stop solution for local employment compliance and           and oversight counsel for regional and global issues).