Global Expansion: A Scary but Inevitable Truth for HR Professionals

ScaryWorldofHROutsourcingGlobal expansion is scary, very scary. It’s a potentially risky investment for an organization overall and particularly for Human Resource professionals, who are responsible for the organization’s most strategic and expensive resource — its people!

Decisions have to be made that could have unexpected consequences and what’s make it so scary, is trying to make those decisions without having reliable information, data and facts available to help make those decisions.

You May Not even Know “What You Don’t Know!” 

Now that’s a scary thought. “What Don’t I know?” Well, even the most savvy, shrewd Human Resource (HR) professionals who have spent their careers learning about HR laws and regulations in their home regions–and have become true HR knowledge experts in the UK, the European Union, all of the U.S. states and have even mastered the intricacies of the U.S. Affordable Care Act–will still not be prepared to navigate HR compliance issues on a global scale. Why is that?

Along with global tax planning, global HR is one of the most complex areas an organization can dive into. Every country has a completely different set of guidelines, have different filing requirements for both the organization itself and for its full-time and contingent labor. Some of these requirements are very strict with harsh, and often expensive penalties for non-compliance. Many countries have unreliable banking processes–often with minimum balance and reporting mandates– which make funding global payrolls and tax authorities frustrating and labor intensive. And that assumes that the HR professional even understands the country-specific payroll calculations, tax and social cost contributions, and has a resource in place to execute the payments.

Beyond the Basics

Beyond the basic HR functions such as recruitment, talent management, benefits, payroll and termination knowledge, global expansion also exposes the organization to a host of potential risks. If an Independent Contractor is generating revenue, it could trigger additional in-country taxes. If an Independent Contractor is being terminated, it must be executed according to country-specific laws and then if you throw a disgruntled worker or two into the mix–who enjoy various levels of protection by different governments, then it could be a very scary proposition for the HR professional.

On top of all that, all of this HR administration and these compliance-related tasks will have to be managed across different time zones, thereby working around the clock in some cases, calculating budgets in various currencies (which have rates that constantly fluctuate) and navigate all the cultural differences and employee expectations in any particular country. And if HR thinks they can just “go to a country’s government website to find accurate information about filings, statutory benefits and payroll deductions,” then they better learn the local language, because it probably won’t be available in their first language and if it is translated, its translation may be unreliable and scrutinized by local authorities.

Global Expansion Does Not Have to be Scary

Global expansion is inevitable. For most industries–at least those who want to prosper and remain competitive–expanding into international markets is not a question of whether or not to do, but a question of “when” to do it. For any HR professional who is ready to begin their global journey, or has already experienced some of these scary issues while exploring new countries, there is help out there. All of these fears can be alleviated by outsourcing their Global HR to a professional. You can learn more here about SafeGuard World International, a leading provider of global managed payroll, global employment outsourcing and international HR services.

Global expansion does not have to be scary. Learn more.

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The Holy Grail of “Big Data” for Finance & Payroll Professionals

global_payrollHistorically, options for administering global payroll included ERPs, legacy vendors and cobbled together solutions with disparate and incompatible systems. Those legacy payroll systems were expensive, decentralized, didn’t address local compliance, had poor reporting and analytics and they required multiple vendor contracts and high infrastructure investments.

Seven years ago, to solve these challenges, SafeGuard World International (SGWI) was established and created a solution using state-of the-art technology. The technology was built in the “cloud,” and SGWI joined other “cloud” leaders such as Salesforce.com, Workday and Cornerstone on Demand who were all building new technologies that would stand superior to their industry leaders who were still using older technology platforms. This new cloud-based technology was a game changer in the global payroll industry. Even Gartner recognized SGWI as a “disrupter” in the marketplace due to its growing market share winning Fortune 500 client business. It was this technology combined with SGWI’s “managed” approach to the process (vetting local payroll processors in 165 countries and taking responsibility for employee and tax payments in each country) and SGWI’s strong customer centric and passionate culture, that has contributed to its huge success.

A few of our major milestones include being the first global payroll company to sign a strategic partnership with Workday, the leader in enterprise-class, Software-as-a-Service (SaaS) solutions for managing global businesses. Today, SGWI has more shared clients and processes more payrolls for shared Workday clients than any other global payroll provider. Workday presented SGWI with their Global Payroll Cloud Partner of the Year at their 2014 Customer Conference, Workday Rising. SGWI was also the first global payroll provider to earn the newer SAS certification, SSAE 16.

When clients were asking for help with their global contingent labor, SGWI used its global HR experience to establish a Global Employment Outsourcing division. And later, started offering Human Capital Management (HCM), payroll and HR consulting solutions for growing businesses. The goal was to help both small organizations and large ones with small employee populations in any particular country offering everything from entity establishment to recruitment, in-country compliance consulting and of course, an HCM and payroll solution.

Due to an increasingly global workforce (projected to grow 18% between 2010 and 2030), only about $250Mil of the $5Bil potential market has been captured and SGWI has been investing in the technology, infrastructure and staffing required to take a significant share of that market.

SafeGuard World International serves the global employment needs for companies of all sizes, with large or small employee populations in mature and emerging international markets. A combined model of expertise in both global payroll and global employment outsourcing/contingent labor solutions is what differentiates SGWI from its competition. Clients have a mix of large and small employee populations in different countries, or are ready to test out new international markets and SGWI’s solutions manage all of their workers and provide comprehensive analytics of their total workforce costs, the holy grail of “big data” for finance and payroll professionals.

Keep Calm and Close your Talent Gap

It’s just so ironic how there are high unemployment rates in so many countries and at the same time, organizations aren’t able to find workers with the skills they need to fill specialized positions. So how can you keep calm and close those talent gaps?

One of the most effective ways to close your talent gap is to expand your search internationally. HR and hiring managers will have more candidates to choose from–not to mention some highly-skilled candidates–while finance may be able to benefit from lower-wage labor markets.

Before the age of the internet, it would have been quite difficult to engage a worker remotely but today, some estimates cite that one in five workers are telecommuting, a statistic that continues to grow. More and more business professionals are working virtually and having huge success so why not consider moving your vacancies from your home country into another country?

Well, I guess it’s not that simple is it. Even if you would be happy to engage an international worker, you really can’t do that legally if you don’t have a business entity in a particular country. Under some circumstances which depend on the nature of the worker’s tasks, you could theoretically engage a worker as an Independent Contractor, well, in some countries you can. But first you’d have to research the laws in that country and you’d have to research it thoroughly. If you relied on country-specific HR laws that you find on a Website, there’s a good chance that the information would be wrong or out of date and then you’d be putting your organization at risk of non-compliance.

This strategy of expanding a recruitment search outside of your home country sounds pretty complex after all and certainly not doing much to help you “keep calm.” But in reality, you can “keep calm” by employing one other simple strategy. It’s called Global Employment Outsourcing, or GEO. If you engage a service provider such as SafeGuard World International, they will engage an international worker on your company’s behalf. Your won’t need to establish a local business entity. You won’t need a local HR expert. And you can legally engage the worker for as little or as long as you need them.

So, you can keep calm and close your talent gaps afterall.

 

Why your Independent Contractor may be the Devil in Disguise

 

devil

The use of Independent Contractors is on the rise, a seemingly attractive option for SMEs looking to go global and for MNCs who are expanding into new countries where they don’t have business entities or HR departments. Seems simple enough: find a worker, draw up a contract and compensate them accordingly. No big deal.

Well, it can be a big deal if the process is not managed properly, and there could be huge consequences for the hiring organization.

Here’s why your Independent Contractor (IC) may be the devil in disguise:

  • He or she works in a country where the rules say that the IC is responsible for filing and paying their employment taxes locally, as opposed to the hiring organization. What if the IC doesn’t make the payments? In that case, the hiring organization would not only be responsible for making the payments retroactively, but may also be subject to penalties, which are often twice what the original taxes were.
  • HR regulations are different for ICs than they are for workers who are deemed to be “de facto” employees; classifying the worker correctly is critical and every country has its own definitions. Often it’s defined by whether they work traditional business hours or on a project basis, whether they use their own equipment, if they are bearing any of the financial risks, etc. This classification will ultimately determine who is responsible for paying the taxes: the hiring organization or the worker. The challenge is understanding the classifications in each country and this is not the kind of information that can easily be found just by searching the internet, at least not “reliable” information. It needs to be researched thoroughly for each individual country.
  • Let’s say an organization has been engaged with an IC in a particular country for several months and is now ready to establish a business entity in  that country. This may involve a parent/subsidiary or partner relationship and thereby, triggers the need for an audit of the company’s financials. If the IC has not been managed according to all of the HR rules and regulations of that particular country, an audit may put the organization at risk for non-compliance and subject to fees. If, for example, an audit reveals that the worker is in fact deemed to be a de facto employee, then the hiring manager may have to comply with additional payroll obligations e.g., benefits, paid time off, etc.
  • If an IC is generating revenue for the hiring organization in any particular country then the organization may be at risk of Permanent Establishment and may be required to pay corporate taxes.  What makes the global IC arrangement particularly “devilish” is that foreign entities tend to be particularly vulnerable when it comes to tax audits and HR compliance, than a local business would be.
  • The real devil may come out when the IC relationship is terminated, especially if the worker is disgruntled. They may take their knowledge to a competitor, refuse to hand over their contacts , or they could sue the hiring organization. This can be quite risky for the hiring organization because the majority of HR laws around the world are designed to protect the well being of workers.

Many organizations find these risks too much to bear and ultimately choose to outsource their global workers to a Global Employment Outsourcing company. That solution mitigates their global HR risks and frees up their time so they can focus on their core business and their global growth strategies.

 

 

Image credit: <a href=’http://www.123rf.com/photo_9519668_disguise.html’>sorad / 123RF Stock Photo</a>

Are Shrinking Wage Gaps Creating an even NEWER Normal for HR?

Shrinking Wages

Cost pressures combined with skill gaps and an educated global workforce have all been contributing to a surge in global recruitment outside corporate HQ locations. This strategy has become less of a nice to have and more of a strategic imperative; a new normal.

But now there’s a newer normal. Definitive research from respectable analyst organizations are proving that wage gaps across mature, emerging and newly emerging markets are shrinking. This is not surprising but it’s interesting to consider how quickly these gaps are shrinking. They are closing up quickly enough that they will have a direct and significant impact on global business within the next two decades.

Countries that have traditionally offered lower wages e.g., China, India, etc., are experiencing a shrinking wage gap compared to the U.S., U.K. and other mature markets. They will slowly and steadily transform from labor markets to consumer buying markets.

This creates a newer normal for organizations overall, but let’s consider how it will impact HR and recruitment.

Migration of Manufacturing

Shrinking wage gaps may mean migrating manufacturing facilities from one country to another, a huge undertaking. Internal managers will have to be relocated to set it up, local workers will have to be hired and trained, finance may have to set up local entities and HR will need to manage the recruitment, as well the ongoing HR and payroll. On top of that, managing payroll for a manufacturing staff is always a tricky endeavor with various labor types, collective bargaining agreements, etc., especially in a country where HR is not accustomed to the local regulations.

New Buying Markets

As countries such as India and China become larger consumers and more countries enter into the buying market, new opportunities will open up for organizations to sell their products and services in a growing list of countries. That’s wonderful but who’s going to do the selling? Sales and marketing staff will have to be engaged, which means more recruitment for the HR folks; recruitment in countries they’ve never dealt with before, where they don’t have an entity or an HR department. What makes this even more challenging are the markets in scope. Take Africa, for example, an emerging region that may offer wage advantages for the organization, but it’s also a region with complex and often unclear HR regulations.

Impacts on HR Regulations

A third and important impact all of this will have on HR involves international HR compliance. Global HR professionals already know how complex it is now, how difficult it is to source country-specific regulations, how they have little confidence in the accuracy of the regulations and how challenging it is to stay up to date on new regulations. That all aside, consider this. As the emerging markets move up the buying ladder and younger emerging markets take a few more steps up the ladder, global economic forces will drive even more HR regulations. Countries will be protecting and nurturing their own economies and these efforts will inevitably drive changes to their HR laws, taxes, social costs, etc.

It may sound daunting but it’s actually quite exciting. Revolutionary technologies and experienced global outsourcing service providers will be there to help HR and their organizations remain competitive in a global economy and thrive in a “newer” normal.

Global Growth is a Strategic Imperative, Despite the HR Challenges

timeforexpansion

While doing some reading about small and medium sized enterprises (SME’s) and their global strategies, I came across two contradictory themes. Most SMEs have a distinct desire to be global. In fact, they know they have to be if they want to remain competitive, but they are just running into too many obstacles. To me, this is completely contradictory because the obstacles they are facing are not difficult to overcome.

With roughly three quarters of the world’s purchasing power residing outside of America’s borders (according to U.S. government statistics), you’d think that every SME would be implementing a global business strategy. But surprisingly, one survey conducted by the NFIB studied external impediments to small business growth and found that 72% of small business owners would like to expand by adding employees within the next five years, but various impediments are currently standing in their way e.g., uncertainty, lack of skilled workers and regulatory obstacles.

Barclay’s report, Guidance to Navigate Global Waters, who surveyed SMEs in the UK stated that:

  • Businesses that export grow by almost a third in just two years
  • Almost a third of SMEs see a positive impact on their bottom line within just six months of expanding into international markets
  • An average of 336,000 more people are being employed across the UK as a result of businesses exporting or selling to overseas customers

The NFIB report also stated that 61% of their respondents reported a lack of skilled employees as an impediment to their growth. They said they would hire at least one additional employee at the current market wage rate in the next six months if they could find people with appropriate skills. While there is a global war on talent, there’s also a whole new pool of candidates available to work virtually from anywhere in the world. And not just any workers, highly-skilled workers!

This means that technology companies can legally engage programmers in India or sales managers in the UK, and non profits can engage temporary workers to help organize humanitarian projects in Africa and pharmaceutical companies can hire contingent laborers in Japan or Brazil. The possibilities are endless. Finding the right talent shouldn’t be an impediment to growth.

Another finding from the NFIB report was the 63% of respondents who said they had a current investment or project impacted by a regulatory matter, and one quarter of them cancelled the project and abandoned the investment altogether. It seems that regulatory issues are huge impediments to their global growth.  Well, I say, don’t let the bullies win! Understanding global risks and local requirements isn’t easy, but it’s not impossible. And once they are overcome, the rewards for opening up a business to a whole new world of buyers, are well worth the effort.

Global growth is in fact a strategic imperative. It just strikes me as odd when there are HRO solutions available to manage global workers and international HR risks. All these SMEs have to do is outsource the HR function and boom, they are global.

 

Source: http://www.nfib.com/research-foundation/surveys/growth-study

Global Payroll is not a Myth. It’s a Journey.

Global HR FootprintThere’s been a lot of chatter lately about whether or not it’s truly possible to have a globally consistent, fully-compliant global payroll system. Some would argue that its sheer complexity makes it almost impossible to administer an automated and effective  multinational payroll solution.

Yes, it’s true that it is highly complex but it’s not a myth. It’s a journey. It’s a journey that begins with a strategic road map and makes stops across every country in scope.

So what are some of the key steps in the journey?

The first step begins with an analysis of the organization’s global footprint. This includes a country-by-country review of where the company has, or doesn’t have, established business entities as well as identifying the number of payroll entities in each of those countries. And then, a  legal evaluation of existing contractors working in those countries. This analysis will drive the strategic road map.

The next step in the journey is a visit to a cloud, which is the hot technology platform that can be integrated into existing HCMs, accounting and Vendor Management software systems, unifying all the data. The next involves compliance and partnering with a managed service provider who has a global supply chain of vetted HR and payroll companies who are experts on in-country compliance.

Another step is related to global contractors/contingent workers, and having the ability to legally engage new workers in countries where the organization does not have business entities. This can be achieved with a solution called Global Employment Outsourcing, where  a service provider becomes the employer of record on behalf of the hiring organization. It’s completely compliant from an HR perspective which mitigates risk for the organization while giving them new tools to support their global growth.

The total solution has to take a holistic approach, beyond the global HR and payroll department, including finance, technology and risk management and equally important, engagement with regional and local HR teams.

Global payroll is complicated but with the proper planning across a company’s global organization, challenges can be overcome and fragmented processes can be transformed into a standardized system of record.