International PEO/Employer of Record: Managing International Employees
Managing a global workforce can be both rewarding and challenging in equal measure. One of the biggest challenges that companies face when expanding abroad is how best to manage their international employees.
Whether a company is looking to expand into a more developed economy in Europe, test a lucrative market in Latin America or source local talent in Singapore, there will be specific rules and regulations to follow and adhere to – and if misunderstood these can lead to significant business risk.
In this post, we highlight the key employment related factors HR managers and involved stakeholders should consider when expanding abroad and managing international staff.
Businesses can mitigate the risks associated with operating in unfamiliar countries in many ways. Firstly, businesses must follow local administration, and secondly, they must understand the employment laws and how to run a local payroll. Companies who don’t have the resources to do these should outsource this.
Staying compliant should be a major concern for businesses. Workers must be legal and compliant to work in the country.
Navigate Employment Rules and Employee Benefit Regulations
Generally speaking, being an employer in a foreign country can be very different from being an employer in your home country. Each country has its own nuances and employment practices when it comes to employment, taxes and employee benefits.
Type of worker?
When looking to grow their businesses, companies want to find the best talent for their company. Sometimes the best talent is a local worker but other times they may need to look overseas. With countries having very specific rules around locals and expats, companies should seek advice as to how best to engage.
Visas and Work Permits?
Does your new worker require a visa or work permit? If your business is expanding into Europe, and you are hiring a worker (from an EU country) they will not require a work visa or permit. EU citizens are free to work and live in other EU countries without the need for visas or work permits. However, for other countries and regions, visas and work permits are a requirement.
For example, in Latin America, expats will be required to have a visa and a work permit in order to work. When it comes to visas and work permits, it’s important to factor in time for this process – the visa application process is long so be prepared for waiting until your worker is on boarded.
Contracts differ in each country, so it’s important to know what can and cannot be added.
The working hours in one country is different from another. A few general rules do apply such as contracts must be in writing and in some countries need to be written in their local language. E.g. contracts in Brazil are written in Portuguese. There are no specific rules regarding the wording used for employment contracts. However, the important thing is the employee must understand the contract.
Statutory Employee Benefits?
In most countries’ statutory benefits include holiday leave, sick pay, maternity and paternity. However, in some counties additional benefits apply.
Like all benefits, sick pay varies from country to country. In some countries, there is no obligation for the employer to pay sick leave. However, in that case, sick pay is generally paid out by the state provided the worker has made sufficient social security contributions. These contributions provide the worker with benefits (a percentage of their salary) which compensates the worker for income loss during their absence from work.
In other countries, the employer is expected to pay the full sick leave or part of the sick leave with the remainder paid out by the state. The length of sick leave varies and can last from 3 days to over 3 months depending on the country.
Annual holiday leave can last anywhere from 6 to 30 days depending on the country. Most workers receive their standard salary during paid holiday leave.
However, in some countries, holiday pay bonus is mandatory and paid out once a year in addition to the worker’s salary. The amount of the holiday pay bonus varies in each country and can be calculated differently. For example, in Belgium a holiday pay bonus is one instalment equal to a full day’s salary whereas in the Nordics, the holiday pay bonus is a percentage of the gross salary. It’s important to factor that the holiday pay bonuses are normally paid out in May or June each year.
Maternity leave globally is longer than paternity leave. Depending on the country, maternity leave can last anywhere from 6 weeks right through to 1 year. Paternity leave varies across countries and can last from 3 days to 4 weeks.
Both maternity and paternity leave is generally paid by either the state or the employer depending on the country. It’s important to know what the statutory employee leave benefits are in the country you are expanding to.
Additional benefits such as 13th salary, meal vouchers and travel allowances are mandatory in some countries. In Brazil, the Christmas bonus (or 13th salary) is a mandatory benefit to employees, and the amount is equivalent to one month’s wage. Payments are made annually in two instalments. In Belgium, employers can offer monthly meal vouchers and employees earning less than €26,000 can also receive travel allowance.
Termination Costs and process?
International terminations can be simple or complex depending on the country.
In some countries, employers can terminate an employee with immediate notice. For other countries, terminations are very complex and should be discussed with local experts before any notice is issued. With France and the Netherlands, termination must be by mutual agreement only, and involves the employer communicating with external groups such as public authority or labour court. Terminations by mutual agreement can be a lengthy process.
Termination costs or severance pay varies across countries and depends on the employee’s length of employment and notice period given.
Using a global Employer of Record provider to manage International Employees
Managing a global workforce can be challenging. Many companies can find it confusing how to effectively manage their global workforce.
By using a global professional employer of record provider like Capital GES, you do not have the burden of understanding the local labour laws and regulations of the country where your worker is. Our EOR service ensures compliance from the on boarding of a worker right through to managing the whole employment relationship of the worker.
Capital GES offers an in–country employment solution, that provides a compliant and swift solution to employ workers in a location where you do not have an entity. Our team of in-country specialists are on-hand to provide the round-the-clock support.
If you are expanding your business abroad and want to employ someone in Europe, Latin America, South Africa or Singapore, contact us at firstname.lastname@example.org or via phone: +41 32 732 97 00 or +1 833 972 6346.