Expanding internationally should be an exciting adventure for your company, not a daunting, trap-filled burden. We understand how you could see it as the latter if you’re starting to explore global expansion. There are many requirements, laws, and commitments related to expanding internationally, but it doesn’t have to be hard. Below we laid out the common risks associated with hiring employees and creating a subsidiary, but we also spelled out ways to simplify these tasks for a quicker, and less intimidating, turnaround.
Hiring Risks for International Employees and Contractors:
- Work-for-Hire contracts vary from country to country. For example, common law states (US, UK, and Australia) plus Japan recognize that the intellectual property belongs to the employer in the contract. For civil law countries like China and France, the IP belongs initially to the employee and there are specifications for each country revolving around these details that you must investigate before hire.
- If you run into an issue with your contractor agreements, including any IP disputes, the US government will not step in to help. This makes it increasingly important to nail down solid contracts that cover every detail, which is why you should work with an expert familiar with each country’s laws.
- Aside from contracts, every country has its set of labor laws and requirements, which include benefits, withholding requirements, paid time off obligations and termination standards. A trusted local national can assist your compliance issues.
- As mentioned in the previous risk, every country has its own set of termination requirements. Some markets have 45-day default termination periods where you cannot legally get rid of an employee until after that date. Determine these specifics in a solid contract to protect yourself.
- Taxes are complicated in the US, so you can be certain that it’s complicated overseas. You need to stay on top of tax codes if you hire international employees to manage their withholdings. If you have expats, they may have to pay local and domestic taxes as well.
You don’t have to start from scratch and tackle international hiring alone. There are international consultants that assist companies with compliance traps and ensure you’re successfully creating an overseas team.
Do Not Commit to a Foreign Subsidiary (If You Don’t Need To)
Creating a foreign subsidiary is a tremendous commitment that takes a substantial investment of time and money. On average, companies spend between $15-20K and three to four months setting up a subsidiary. They are also responsible for around $40K annually to manage each international employee.
Businesses are also responsible for tedious on-site requirements to sign documents. Plus, if you decide to stop operating in the country or get rid of an employee, good luck. Plan to multiply your initial cost and time by three because the termination process is extremely difficult.
Another major risk is losing out on top talent during startup. The amount of time involved in creating a foreign subsidiary is vast, and potential employees will probably not wait months until you can hire them.
Luckily, you can bypass these headaches with International PEO. Velocity Global’s International PEO solution allows companies to hire employees and operate anywhere in the world without establishing a legal entity. Other benefits of International PEO include:
- Start selling your products or services quickly
- Save more than 60% of the traditional startup costs
- Remain compliant in each of your target markets
- Do not miss out on top talent due to time constraints
- Easily exit out of the country if needed
For more information on International PEO, contact us today! Our team is available to answer your questions about expanding internationally.