Operating overseas: Analyzing how companies deal with overseas personnel risks
Background
Recently, Slasify hosted a valuable session for companies on managing overseas human resources issues at the 2024 Human Resources Cloud Carnival, organized by HREC. The session, themed “Overseas Business: Analyzing How Companies Deal with Overseas Human Resources Risks,” aimed to offer actionable insights for companies’ 2024 organizational development plans. This guidance is intended to help companies navigate the complexities of managing overseas staff and develop flexible solutions to these challenges. Carlos, the CEO of Slasify, shared in-depth analyses of the five major challenges companies face when expanding internationally—administrative affairs, legal compliance, salary payment, language communication, and cultural differences—and offered strategies to address them.
Key highlights include:
Human Resources as the Vanguard of Corporate Globalization
At a strategic level, while companies may operate under various assumptions, talent consistently remains a crucial element. Effective personnel planning is especially critical in the initial stages of global expansion. Despite the complexities of cross-border operations, which cannot be simplified overnight, collaboration with partners can help mitigate challenges encountered in the globalisation process. Globalisation affords companies the opportunity to tap into a global talent pool, transcending regional limitations.
Globalisation Challenges
Expanding globally introduces several challenges, including cultural differences, communication barriers, regulatory compliance costs, and issues related to international compensation and benefits. Administrative expenses can significantly increase, and regulations, as well as compensation and benefits packages, can vary drastically from one country to another, necessitating thorough planning to navigate these variances.
Slasify was founded in Singapore in 2016, and in the past 8 years, we have dedicated ourselves to providing a comprehensive suite of overseas HR services. These include Employer of Record (EOR) services, global contractor, and global payroll. Slasify caters to companies at various stages of international market entry—from those making their first foray abroad to those with established presence in foreign markets—offering end-to-end services across more than 150 countries and supporting over 130 currencies.
Beyond operating our own entities, we have rigorously vetted over 120 high-quality global suppliers to ensure exceptional service quality, whether on our own platforms or through our partners. Slasify stands out not only as a supplier but also as a vital partner for companies going global. Our unique approach combines digital platforms with professional services; while our digital platforms efficiently handle highly standardised tasks to reduce costs, our professional service team provides comprehensive strategic support to enterprises.
Discussing Multinational Teams in the New Era
The landscape of modern multinational corporations has transformed dramatically compared to two or three decades ago. Previously, a multinational corporation might have had its headquarters in Beijing, a branch in New York, and another in Singapore, with infrequent communication between branches and each location functioning independently, often necessitating a large staff. However, the post-pandemic era has ushered in a new model for multinational teams. This model could see an American company with a small team of five in New York, three in Texas, and additional employees scattered across Mexico, Singapore, Thailand, and other locations. This shift highlights a trend towards decentralization, with increased frequency of communication between teams. From a management standpoint, this evolution has led to the prominence of regional management strategies, emphasizing the importance of accounting for time zone differences to ensure effective administration.
Three Principal Challenges: Administrative Affairs, Legal Compliance, and Salary Payment
The primary employer expenses are typically related to the social insurance systems of the countries where employees reside, with these systems varying based on each nation’s political framework, economic context, and historical developments. Consequently, companies looking to enter new markets must first gain a basic understanding of these systems. Despite the differences, the challenges can broadly be categorized into several key areas (refer to the table below for more details).
The first two parts primarily focus on insurance-related matters and are considered statutory requirements, typically encompassing social insurance, labor insurance, health insurance, unemployment insurance, housing, and retirement benefits among others. The calculation methods for these insurances may differ across regions. A prevalent approach is to levy a percentage-based fee, such as 3%, 5%, or 8% of an employee’s salary. Alternatively, some regions, like Taiwan, use a tiered system with fixed payment amounts for different salary ranges. These considerations are crucial for companies during the hiring process.
Optional items might include supplementary commercial insurance or an optional pension plan, which are also common practices in various countries. Regarding pension plans, some national schemes offer more than just retirement benefits, including additional plans usually provided by the government but not mandatory. However, if a majority of local businesses provide these optional benefits and your company does not, this could significantly reduce your competitiveness in attracting local talent.
Cost accrual should account for expenses such as severance compensation and entry physical examinations. From our experience, we recommend that companies anticipate high severance compensation costs in certain countries by distributing these costs monthly. This approach enhances clarity in cost control and risk management. Furthermore, additional employee benefits are generally consistent across borders.
When developing a comprehensive employment strategy, it’s imperative to consider all these factors.
Case Studies
1. Singapore: Known for its relatively short history, Singapore employs a simplified social insurance system, the CPF (Central Provident Fund), managed by the government. Employers make monthly contributions to their employees’ CPF accounts. This system, simpler compared to the complex insurance types and proportions in China, allows for straightforward employer operation. The government then allocates these funds to medical care, housing, etc., on a proportional basis. Singapore also imposes some minor taxes, but they are relatively insignificant.
2. United States: Characterised by its complex taxation system, the U.S. has various federal taxes, including Social Security, Medicare, and FUTA, alongside state-specific taxes such as SUTA. Companies must therefore be mindful of the state-specific policies where their employees reside. Optional benefits are crucial for competitive advantage in the U.S., where, for example, the high cost of medical insurance often leads companies to cover 50% to 100% of employee costs or provide additional plans for family members. These benefits should be clearly outlined in employment contracts. The 401K pension plan, while not mandatory, is commonly provided by employers.
Two Hidden Challenges: Language & Communication and Cultural Differences
In addition to the above, companies face hidden challenges such as language barriers and cultural differences. Particularly, cultural discrepancies can be a significant obstacle but are often underestimated. Neglecting these aspects can incur substantial costs. When entering a new market, it’s vital to address these challenges comprehensively. Here are some recommended practices:
| Things Not to Do | Things to Do |
| Don’t impose your management culture on overseas employees. Understand and respect their cultural norms. | Embrace team diversity and the principles of DEI, recognizing the benefits of diverse cultural perspectives. |
| Avoid creating a work environment based on mutual suspicion; excessive monitoring can backfire. | Prioritize legal compliance and adherence to regulations as a foundational aspect of your business operations. |
| Never underestimate the importance of legal compliance; overlooking this can lead to penalties and lawsuits. | Develop a comprehensive employment ecosystem in your target country, including insurance, training, and recruitment. |
| Respect privacy protection standards, which can be stringent, especially concerning employee data. | Invest in continuous cross-cultural training for both existing and new team members. |
| Be mindful of local cultural sensitivities to avoid offending regional customs. | Take proactive steps to address these challenges and lead by example. |
Case Studies
1. Case of Indonesian Employees: A company failed to account for the Islamic cultural background of its employees, scheduling meetings during prayer times and requiring the removal of headscarves, among other insensitive practices. Slasify’s Solution: To address this, Slasify recommends continuous cultural training, scheduling accommodations for worship times, offering multiple solutions to respect local practices, and ensuring local cultural sensitivities are observed.
2. Anti-Discrimination Cases in the United States: Issues of discrimination can vary in severity. Instances include companies implementing different welfare policies based on the type of work, making employees pay for bank transfer fees which lead to unequal treatment, discriminating against specific ethnic groups with consequential terminations, and probing into personal privacy unnecessarily during interviews. Slasify’s Solution: Slasify advises on providing essential knowledge and training to adhere to the core principles of DEI—Diversity, Equality, and Inclusion. This encompasses services ranging from employee onboarding to termination, aiming to prevent similar issues.
Finding the right partner for international expansion is easier than it seems! Slasify offers professional support to navigate cultural and regulatory challenges in global business ventures.
Traditionally, expanding internationally involves complex processes like local market research, entity establishment, regulatory compliance, and talent recruitment in the new country, often extending beyond 3 to 6 months. With Slasify, these global employment challenges can be addressed in as little as 5 days, significantly reducing market entry time and potential risks. Slasify offers various service packages to suit your needs.
Discover how Slasify‘s global HR solutions can streamline your international workforce management from anywhere in the world and ensure ensure compliance across borders. Book a free consultation today!
Slasify is a one-stop platform offering Global Payroll, Employer of Records (EOR), and HR Outsourcing functions for the remote working generation. Our dedication to Diversity, Equality, and Inclusivity (DEI) and a proven track record with Forbes Top 100 Companies make us your ultimate payroll partner. Join us on a global HR journey, where we cater to your needs across 150+ countries. Unlock HR solutions tailored to you – Book a free consultation today!
