We understand that hiring in Asia, whether it’s local nationals or expatriates, is not an easy process. Once you find your potential candidates, getting all the way to onboarding them as employees can be tedious and complicated. There are many compliance and immigration issues involved but in this article. We want to help smooth out some of the bigger ticket issues while highlighting some perks.
Here are five things to know when hiring in Asia so your operations can be as smooth as possible:
1. Asia-Pacific is a massive region with a mix of developed and developing economies that do not have similar regulations YET (see 3 below).
While the diversity of these countries may serve as a good source of skilled and unskilled labor force, it is important to note that employment regulations are still a work in progress for most countries. Make sure you understand the labor law differences of each individual country. Do not assume that they will be similar in any way.
You can get a pretty good sense by searching Practical Law (a free service from Reuters) for things like, “China Employment” or “Thailand Employment” and there should be an up to date overview of labor law/employment law basics that can give you a general sense. At the end of the day, many times it makes sense to leverage a global expansion partner of some kind to ensure you are free of future risk.
2. The advantage of hiring employees and expats in the Asia-Pacific region is that it has the lowest employer contribution rates, therein lowering the cost of employment.
Generally, the more advanced the economy, the higher employer contributions will be. For instance, Myanmar, one of the last economic frontiers in the region, has one of the lowest employer contribution rates. It stands at three percent of the employee’s salary whereas Singapore’s employer contributions stand at seventeen percent. Hiring in Asia can save you money as an employer depending on your business model.
3. The Asia-Pacific region, especially the ASEAN bloc, is trying to harmonize their labor regulations to become a single market.
While many ASEAN countries offer plenty of unskilled and skilled workers, the movement of labor is still significantly restrained across the region. Without the free movement of labor, it is important that employers carefully assess the availability of local talent versus foreign talent. Importing and hiring expatriates almost certainly will result in higher employment costs considering things like work permits and tax equalization. If you can, you should consider local nationals first and if you need help identifying candidates, you can reach out to local recruiting agencies. This strategy will help you save time and money across the board.
4. Be compliant!
With so many potential candidates, coupled with different labor regulations, it is easy to lose track of compliance issues. Many companies choose to hire employees as foreign independent contractors as a stop-gap solution. But, are unaware of the risk from a tax burden, legal, and even intellectual property perspective. We recently put together a post detailing why you can not do this, take a look.
Understand the labor laws and have a proactive strategy for protecting your business from exposure.
5. Test your target Asian country first before creating a foreign subsidiary.
The total cost of setting up an entity in the Asia-Pacific countries can set you back financially before you start making profits or even know whether your model/strategy will work there. If you are just testing the market, use an International PEO service and save the costs while still being compliant.
If you’re looking for a general perspective of the overall business environment read this report by The World Bank Group.
Let us know if you have any other questions about hiring in Asia, we are happy to help!