Many of our clients who are looking to expand into a new country do not understand the implications of expat hiring versus looking for local national resources. It is often important to “import” the right resource from your domestic place of business into your target country. We call this “expat hiring” and it happens for different reasons; setting up operations, limited training/knowledge of a skill-set in country, or setting a foundation with trust built in. In 99% of the international expansion scenarios we see, it is harder to import an expat than hiring people who are already citizens of the country you are targeting.
Here are some of the factors you should take into consideration when thinking about an international expansion plan that includes expat hiring.
Lead Time for Expat Hiring
Many times companies don’t take all the processing time into consideration when importing an expat. The time varies wildly country to country but assume roughly 60-90 days to be safe.
Cost for Expat Hiring
There are hard and soft costs associated with importing an expatriate. Once again, it varies wildly from a country to country basis. It is safe to assume a $5000 USD hard cost in government fees and roughly the equivalent or less in soft costs to successfully transplant a resource.
Expat Visa Restrictions
Even with help from a firm like Velocity Global, there is always a possibility that your resource won’t get a visa. Once your resource has a visa, it is completely at the whim of the local government as to whether your resource keeps that privilege. Let’s be very clear too, visa’s are a privilege for expats, not a right.
Tax Implications for Expat Hiring
Tax equalization has to be taken into consideration for any employer of an expat. It’s very common to make sure that your resource does not feel any excess compensation burden due to the tax implications of being employed internationally. There is a cost associated with this to cover the tax burden of working in two countries.
Be familiar with the idea of tax totalization. ( Government treaties related to income and social security contributions). This can greatly affect the company’s tax situation in the two countries. HERE is a list of tax totalization treaties that the USA has.
Differentiation of Benefits
Expats are far more demanding about health care needs whereas local national will be fine with statutory health scheme of whatever country you are entering. Make sure you are familiar with the costs and implications of expat/international health insurance plans before moving forward with an expat.
Cultural Implications for Expats
Lastly, it is important to take into consideration the cultural implications of importing an expat. For example, a US sales guy might flounder in Japan; chances of offending are probably around 100% even if they are a ‘hotshot’ domestically.
If you need help figuring out the cost-benefit analysis of importing an expat in your target country, we can help. Feel free to reach out to our team of experts, we are always happy to help!