As the world becomes a smaller place many businesses are now operating all around the globe in multiple locations which can present all manner of problems. The first and probably most important issue you need to address is how to manage your international workforce.
The following guide will aim to give you some advice on the main points you need to take into consideration when working internationally. This guide is mainly focused on providing some guidance on what you need to think about when setting up in a new location.
If you are establishing a presence in a new country, then you are most likely going to need to establish an entity there. Here is an article we have published about setting up an entity in Malaysia but if there is another location you are looking at please contact us and we can help with guides for those locations as well.
By setting up an entity in a new country, it reduces the risk of international regulation issues, improves the efficiency of global activities, provides local tax benefits and can facilitate your international hiring plans. However, one of the major challenges when setting up an entity is the cost and time it takes to set up. On average it costs around $15K-20K to create an international entity and takes 3-4 months, which sometimes isn’t a feasible option when you need to start operating straight away.
The process also is different in every single country, so it is essential that you know the requirements right from the outset. Some countries may require local Directors in order to set up, there may be specific quotas on the number of expats vs locals that you can hire and some countries may require a very strict due diligence process before allowing you to set up, which can take an extensive amount of time (time that you may not have).
First thing you need to consider when starting a new international venture is how are you going to staff it? Are you going to relocate existing employees or are you going to hire a whole new team of people already based in the location? Do you want full time employees, or can you hire contractors?
The answer to this will probably depend on the nature of your work. For example, if it’s a limited time project within the construction sector, then you may look to bring over a few existing employees and then supplement them with local contractors.
If it’s a long-term plan to develop presence in the region you will want to hire experts within that region and would hire them on a full-time basis rather than as a consultant.
If you are wanting to hire or relocate expats for your international venture, then you are going to need to obtain visas. Just like setting up entities this is different in every country. There are several factors you need to take into consideration when looking into obtaining visas:
1. Type of visa needed. Make sure you understand the different options available to you for visas. Some countries require long term resident permits, some countries allow shorter term work permits. Some countries have routes to get people in quickly and others only offer business visas to attend meetings. Depending on the nature of the work you will be doing you will need to make sure you get the correct type of visa. For example, in Malaysia you could get a full employment pass but you might only need a short term work permit, in which case you could get a Kemaman work permit which is cheaper and quicker. The type of visa you get may also be determined by the next factor.
2. How long does it take to get each type of visa in that country? You need to make sure you have enough time to complete this process and get your workers into the country when you need them. This differs for every country, for example in Saudi Arabia it can take 2 months to get everything ready for someone to mobilise. Whilst, in the UAE it is considerably less, it is possible to get your people mobilised in 2 weeks.
3. Local sponsorship. Do you need an established entity in order to obtain visas in that country? Most of the time the answer is yes but there are other options available if you don’t, we will come onto that later.
4. Required documents. Each country has different requirements in terms of documentation. For example, you may just need to provide a passport, but other countries may require far more. This could include education certificates, letters of invitation, police / criminal background checks, medical reports, and various application forms.
You will need to set up employment contracts with your international workforce. If they are employees these contracts will need to be set up in accordance with all of the local regulations. For example, you will need to know what statutory benefits people are entitled to in order to comply with the local labour legislation. You will need to have a thorough understanding of sick pay, annual leave, notice periods etc.
Statutory benefits will normally only come into play when hiring employees but depending on the country you may also need to provide certain items to contractors as well. A lot of this will be determined by the visa that your workers are employed on.
Taxation, another tricky process that is different in every country... Some, like the UAE are Tax free so this is easy. A lot of others have both income tax that the employee must pay as well as employer costs that you will need to pay. You need to make sure you are paying people compliantly to avoid any issues with tax rebates or fines for noncompliance.
You will also need to look carefully at whether your workers need to pay tax locally. For example, you may have rotational workers that do not spend enough time in the country to have to pay tax. They will then have tax liabilities in their home country so this must be considered when offering contracts and agreeing rates and salaries.
If the thought of setting up entities and understanding the intricacies of international payroll and taxation is sending you into a panic, then there is another option.
Outsourced workforce management is when you utilise the expertise of a partner company to take responsibility for work permits, visas, in country taxation, social security and payroll, as well as mobilisation and demobilisation support for your most important assets – your people.
This solution is ideal if you want to consolidate your recruitment requirements along with the ongoing management of your existing staff, 3rd party contractors and temporary employees, saving yourself time, energy and money along the way.
Click here to find out more about Outsourcing Workforce Management.
Above are just some of the things you need to think about when looking to manage an international workforce. It’s a delicate balancing act – of course you want to do things as cost effectively as possible, but you also need to make sure you get everything done correctly. If you have the wrong visas, if you aren’t employing people compliantly and if you haven’t got taxation sorted properly you are going to encounter problems.
Leap29 have global experience in helping companies manage international workforces, so if there is a particular country you have questions about please get in contact with us and we are happy to provide advice and guidance.