Deploying international employees is a big step for any business, small or large. As companies look to explore the potential of new international markets, it’s important for them to understand the associated risks and best practices for deploying international employees.
The two driving forces for companies considering deploying international employees are:
- A company has identified a new country they would like to sell their products/services into and wants to build a local team
- A company has identified key talent in a new country that they believe will add value to their team
Deploying International Employees to New Markets
Many companies pursue international expansion in order to explore a new country and grow their market reach. In order to accomplish this, many companies look into establishing a legal entity before deploying international employees.
A company that plans to set up an entity has to prepare for the significant up-front investment of time and capital including; corporate entity set-up, local accounting services, legal assistance, leasing an office space, and recruitment agency fees; all before hiring a team and doing any business.
Companies that discover success when setting up an entity are those that are able to keep it up and running. Successful foreign entities are those that generate enough revenue to support themselves and recover from initial set up costs.
However, many companies do not see success when setting up an entity. Instead, they suffer from a lack of planning and do not generate enough revenue to continue operating in a country. If a company makes the decision to exit the country after setting up a legal entity, they can expect the time and cost associated with set-up to increase by a factor of three during tear down.
When a company ends operations in a country, they often face many liabilities, the most common of which is wrongful termination of international employees. For example, in Italy, employees are entitled to receive severance pay upon termination. This is calculated by adding the equivalent of the gross annual salary for each year of service divided by 13.5%.
Companies looking for a more flexible option for expansion can benefit from partnering with an International PEO (Professional Employer Organization) to explore a new country before deploying international employees.
International PEO acts as a stepping stone for companies and enables them to enter a new market quickly, without the need to set up an entity right away. This agile expansion option takes away initial uncertainty companies may face when expanding into new markets.
Taking Advantage of International Talent
International markets are ripe with talent that can help companies find global success. Once companies identify the right talent for their team in a new country, they can begin to grow a team locally by deploying international employees.
Many companies choose to employ overseas talent through an independent contractor relationship in order to avoid setting up an entity and still maintain a flexible approach. This employment relationship relies on the individual to remain compliant with local legislation, such as taxation and social security. However, this hiring option is very high-risk of being non-compliant with associated liabilities, namely employee misclassification.
Companies looking to onboard top talent compliantly will find success when utilizing an International PEO. As mentioned above, this agile expansion method ensures compliance with local labor laws for international employees. This solution empowers the new worker to feel more like an employee of your organization, rather than an outsourced contractor.
Maintain compliance when deploying international employees with the help of Velocity Global’s flagship International PEO solution. Our team of experts will help you maintain compliance as you build an international workforce. Contact us today to learn more!