Benefits admin for overseas employees: Don't let it scare you
Overseas expansion is a way for companies to stay competitive, but it requires HR teams to broaden their skillsets.
As the U.S. economy continues its rebound from the COVID-19 pandemic, recruiters are seeing a surge in new job listings across various industries. Companies are beginning to hire again, and as they do, new trends are beginning to emerge that show changing priorities in the workplace. Some of these mean new challenges for HR departments.
Businesses are putting continued emphasis on diversity, equity and inclusion as they grow their teams. They are taking various measures to address skills gaps among U.S. workers, and are increasingly relying on gig-economy workers to fill various niches. Many companies are also making work-from-home a permanent option.
Related: Does location still matter for talent management?
These trends point to increased international hiring, as that’s how companies can find skilled workers, boost diversity and take remote work to the next level in a global business environment. Overseas expansion is a way for companies to stay competitive, but it requires HR teams to broaden their skillsets.
Chief among the challenges is offering benefits to workers based in other countries, because benefits administration brings the HR professional into sudden contact with the varying laws, regulations and social customs in other parts of the world. Getting the benefits package wrong while hiring internationally not only exposes a company to fines and days of fruitless work, but it can also mean losing an opportunity to hire the best talent.
Despite the complexity of benefits administration in other countries, HR departments can handle the job with few problems. The first step in getting it right is being realistic about the challenges.
The challenges
U.S.-based companies often think in terms of extending the same benefits packages they offer in the U.S. to overseas workers, but HR teams who take this route will discover quickly that it doesn’t work. That’s because every country differs when it comes to statutory, mandatory, customary and supplemental benefits.
Statutory benefits are social benefits which are provided by the government (think Medicare), while mandatory benefits are those required by law but not provided by the government, falling under the employer’s jurisdiction. Supplemental benefits are additional perks while customary benefits are those that are considered the norm in a given country.
Each of these four types of benefits varies widely once a company starts hiring in overseas locations and putting together a benefits package without understanding them all—and how other countries and the local employees’ approach each of them—can lead to costly mistakes.
For example, negotiating a salary and benefits in Australia based on an understanding of the U.S. mandatory benefits and tax liabilities is a recipe for disaster. While in the U.S. an employer pays no franchise taxes on premiums in an employer health plan, in Australia an employer pays 47% tax on these premiums.
Holiday time off, which can be a mandatory or customary benefit, is another potential pitfall. Giving workers in a non-Christian country a week off at Christmas, while expecting them to work during a customary annual shutdown, makes little sense. For example, Chinese New Year brings a week-long shutdown to many Asian countries in February. Not following an appropriate schedule can expose a company to fines, social ostracization and even blacklisting.
Employers in the U.S. are generous with time off, sometimes even declining to keep track of how much is offered or taken. In other countries, mandatory time off is often based on seniority, and can be heavily influenced by labor unions, the government or local customs. Additionally, there are regulations to track all types of leave and their use.
Examples to do with supplemental benefits are too many to list, and unfamiliarity with local norms can easily mean missing out on the opportunity to hire the top candidate.
The country-by-country variations are far too much for an HR team to master quickly. That’s why many take steps to ensure that hiring teams in multiple international locations can be done with minimal friction and no mistakes.
How successful companies hire overseas
The first step for many HR directors is to pay for access to reports that can help a company navigate benefits administration and other issues in international hiring. These reports, however, can cost more than $10,000 per country, and the assistance they offer stops at the last page. That’s why many companies partner with a Professional Employer Organization (PEO) that has a local presence in countries around the world to help with international hiring and the administrative burden of global employees. Not only do PEOs eliminate the need for costly reports, they offer far more guidance.
PEOs can advise on whether or not to set up actual legal entities overseas, which is something every company needs to decide based on individual needs. These organizations have legal entities already established in different countries and can help transition you to your own legal entity if your company decides that is the right move.
And although benefits of all kinds vary by country, there are some common experiences. For example, the lower a company’s headcount is overseas, the harder it is to get decent group insurance coverage. PEOs don’t just have legal entities in various other countries, the better PEOs also have a sizable headcount in each of these jurisdictions. That means HR teams who work with PEOs to establish small overseas teams will have more coverage options to choose from.
International hiring and ongoing benefits management is also made easier when HR teams have access to a global Human Capital Management software. Global HCM systems not only handle every aspect of HR—including benefits administration–but also the legal compliance challenges that come with global employees.
Benefits administration is just one piece of the complex puzzle that international hiring brings to HR teams. But the benefits of hiring globally far outweigh the challenges. HR professionals do not have to do it alone, there are resources, technology and guidance available to ensure benefits translate across borders.
Gita Bhargava is the co-founder and chief operating officer of Global Upside Corporation (GUC), a conglomerate of brands offering the most comprehensive accounting, human resources, payroll, global expansion and HR technology solutions on the market.
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