Hiring full stop is a hard task wherever you are in the world.
Hiring internationally is even more complex, with more that you’ll want to know and consider before signing on the dotted line. So, what do you need to know before hiring overseas that will get you on the right track to success?
Here, we will give you a helping hand with a few key steps you should take when entering a new country, from planning through to contracts, and how to keep updated with local laws and legislation.
Planning for a Successful First Hire
Hiring solution: Decide whether hiring with a legal entity is the best course of action.
There are a few solutions when it comes to hiring internationally, and some don’t require you to have a legal entity in the country or countries you’re hiring in. So now is the best time to decide which approach is right for you.
Take this example: If you plan on proceeding with the hiring process without a legal entity (like using an Employer of Record), you should look at your long-term plans, employee benefits, and HR requirements. Why? Because you might need a legal entity to help you sign up for pensions and specific benefits you wish to or have promised to provide for your global team. This is just one of many scenarios that you will want to consider when thinking about how to set up for payroll and onboarding in a new country!
Timelines: Recognise that countries typically have different timelines to first hire.
Most organisations, especially those looking to grow rapidly, make it a goal to hire workers as quickly as possible. Efficiency is important. As the saying goes, time is money. But not every country operates as quickly as we may hope or be used to – some have more red tape than others.
For example, compared to Canada and the United Kingdom, you might need more time to get everything in place to onboard and hire from countries like India, Japan, and Spain. This is why our team helps you plan ahead by designing solutions before making your first step in the hiring process.
Work culture: Be proactive in making remote workers feel that your company values them.
Because of the pandemic, there has been a bigger appreciation for people who do their jobs remotely. Some organisations create fun online events or put in place other mechanisms to make sure that team members get in touch regularly. Another option is to provide fair incentives and benefits which, realistically, can be much more appealing.
From experience, many organisations come to us with the intention of standardising benefits across the different countries they’re in. We wish it were as easy as it sounds. Unfortunately, in reality varying statutory benefits and implementation—such as 13th-month salaries, pensions, and holiday allowances—make that difficult to achieve. This is why the earlier you can get advice on what’s possible and what’s not, the better!
Many speak to us after finding their new international recruit and after promises have been made—but it’s best to set expectations early in the recruitment process (before hiring and onboarding) to make sure that employees feel that they are well taken care of and treated fairly despite the differences.
Employment Contracts
Your international employment contracts are extremely important documents. They form the basis of the employment relationship with your international remote teams.
A fundamental question of international hiring is, do I really need a locally compliant contract? The answer is a strong YES! Before starting the hiring procedure, you must prioritise building a locally compliant contract. It must be fully tailored to the local country where you are hiring.
Understanding the difference between an offer letter and an employment contract:
Terminology and documents vary from place to place. Like in the United States, where an offer letter is a short document that highlights the key terms of what the job position is about and who the company is. But outside the US, this is understood as an informal and non-binding piece of correspondence. It’s a way of communicating what the offer is, but it’s not legally binding and doesn’t have a specific format.
To protect you and your employees, remember that the relationship is not formalised until the employment contract is in place because this is a legally binding document.
Can a single employment contract template be used?
A question we often get asked is whether they can use the same employment contract template for everyone they hire internationally. The answer is yes and no. In some countries, it’s possible to take a contract and amend the document for the next employee. However, in other places, every single employment contract has to take into account the varying circumstances.
It’s important to understand that part of this international hiring landscape is that country to country varies. Sometimes it varies even from one hire to the next. If in doubt, get some advice to be sure.
Terms included in international contracts:
There are also lots of references to country-specific employment law. Some contracts include wording to do with collective bargaining agreements and terms that relate to the specific employee classification. Tax implications should be carefully considered and explained as well.
Things to consider when issuing stock/share-based compensation:
In many countries, if you issue stock or share options to employees under the parent company plan, the gain would often go through the payroll and be taxed as income. This is important for the employee because income taxes are typically higher than capital gains taxes.
For the employer, if it goes through the payroll, it’s likely to attract social cost of employment. Stock options are intended to be a non-cash reward, but the price can be pretty high. In countries like France, social costs can run to 40%.
Understanding these things might not change your choices, but it’s always helpful to understand them upfront so that you can at least budget and prepare. There’s a process in the UK where the employee can bear the social cost. In some situations, it can result in a tax and social security burden to the employee of up to 60%. This is because the employer is layering approximately 15% of their own costs onto the employee. For more information on this, we’re happy to help and provide more information.
Language requirements around the employee contract:
Lastly, you should also consider the language requirements in some countries. For example, non-English speaking countries allow English contracts, but others require that the local language be used. This is why we provide dual language contracts so that both parties can understand and agree with the terms.
The Effect of Legal Structures on Employment Costs
There are a lot of procedures that need to be followed, especially around terminations and bringing people on probationary periods. Most of the time, there are tribunals or government agencies that need to adjudicate in the case of terminations. You need to know where to go and what the notice periods are, as they depend on the employee’s length of service. The more you know before entering a country the better prepared you’l be in case anything needs to happen. You should also assess who the employment law favours in specific countries – employer or employee.
It’s also crucial to identify, if there are collective bargaining agreements in place, whether these are by the company, industry, regional, or municipal levels. You should be wary of specific terms in the employment contract that might feed into potential litigation or dispute. This is why you should ensure you have the right payroll, HR and legal support in place to advise on your potential liability in a certain country and what you can do in case things don’t go to plan.
Staying Informed on HR Law
HR teams are responsible for understanding hiring laws in the different countries they’re dealing with. This is incredibly hard and complex, especially when changes and updates are involved. The good news is that Cintra Global navigates the international HR landscape for you.
Basic steps to minimising risks:
Once you’ve decided to hire from a particular country, you should get professional advice ASAP.
Over the years, we’ve dealt with a lot of damage-limitation situations where things have been done the wrong way. For example, an employee from a certain department hires someone without first telling HR or Finance. Our team has to tidy things up quickly by preparing and putting a proper contract in place and registering payroll, and there is no allowance for bureaucratic and other delays. This is why we emphasise that whether it is a strategic move or an opportunistic hire, the best thing to do is to seek professional advice as soon as possible.
Choose the right service provider that meets your needs.
Cintra Global specialises in supporting organisations with global expansion plans with low to medium international headcount. We provide the expert support in multiple countries that you may not have within your HR or payroll team. However, when planning to hire hundreds of people from China and get into other large or complex situations, our services might not be best suited to your needs. This is why it is crucial that you choose a service provider who fits the purpose. Look for those with an expert understanding of the importance of employment contracts and statutory benefits.
Establishing compliance
If you’re engaging with service providers, make sure they have a good understanding of international compliance and can explain your compliance obligations. If they can’t, they’re probably not the best partner for you.
You must be sure that the company you’re working with understands the compliance landscape in a particular country, including everything from employment law to the payroll and stock option filing requirements. Addressing all these things together will help you minimise and manage the risks of employing people in other countries.
Are You Ready for Hiring Overseas?
When planning for a successful hire, there’s lots you’ll need and want to know about. Look at the timelines, work cultures, and legal entities. Next, when preparing employment contracts, research the various templates, terminology, language requirements, share-based compensation, and offer letters. Third, understand the different legal structures, such as the existence of collective bargaining agreements. Lastly, you have to be proactive in keeping yourself updated with international HR law.
If you find this overwhelming, there’s no need to worry. Our team is here to guide you every step of the way. Cintra Global will actively ensure that your global expansion goes as smoothly as possible.
Reach out to us today to get a quote.
