January 01, 2022
1. Freelancers, full-time hires or local entities? - Developing a global expansion strategy
2. Establishing a team to drive your global expansion
3. Legal requirements: Global expansion mandates global compliance
4. Meeting taxation and finance requirements
5. From HR to payroll - Organizational readiness
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In an increasingly global world, organizations have no choice but to embrace the option of international business expansion in order to stay competitive. With competitors tapping into foreign talent pools and bringing their products to new markets, no business can afford to stay behind. What’s more, modern technologies such as asynchronous communication tools make it increasingly easy to work with a globally distributed team.
However, it would be wrong to see global expansion only as an exciting venture. Behind all the promising business opportunities, there is a whole list of aspects and challenges businesses need to think about when deciding to go global. In fact, the tasks related to international business expansion are so numerous and diverse that the situation can quickly become overwhelming. Global expansion managers, HR and legal teams are facing a myriad of open to-do lists which seem to grow longer every day.
To help you and your team with your global expansion project, we have prepared a detailed overview of the different aspects organizations need to keep in mind when preparing for international expansion. At the end of the article, you can also download our free global expansion checklist.
The aim of international expansion is generally the same for all types of organizations: They want to launch new markets, grow their customer base and drive business growth. However, when it comes to global expansion strategies, there is no one-size-fits-all solution.
Depending on their knowledge about the new market and the stage of their global expansion project, companies can either decide to engage a team of local freelancers to “test the waters”, hire full-time employees via an Employer of Record (EOR) or go all-in by setting up a local legal entity. In order to help decide which strategy is right for your business, you can ask yourself several questions such as:
Do you want to commit to the market in the long-term?
What business activities are planned in the new market?
Will you need a team of local full-time employees? If yes, how many will you need?
For detailed information on whether to hire remote employees via EOR or set up a foreign legal entity, check out our related blog article.
Planning and running an international expansion project certainly is no one-man job but requires a whole team of experienced executives and reliable local partners who can offer advice whenever needed. To start off, businesses have to decide if they want to relocate some of their headquarter executives to supervise the launch of the new market or if they want to use interim executives until they can start recruiting permanent management staff for the new entity.
In any case, organizations should start early to create a network of local experts who cover all their geographies and can provide guidance throughout the expansion process.
No matter which strategy you choose for your global expansion, there is no way around learning about local laws and regulations. This mainly concerns labour and employment laws, but there are also other legal aspects you should keep in mind when planning your global expansion. Here are the main legal barriers to overcome.
Every country is different with regard to the rules and regulations that govern employment relationships. Working hours, leave requirements and regulations for employment contracts vary greatly between countries and termination procedures are also quite different between jurisdictions.
Interested in hiring talent in a particular country? Check our Global Hiring Guide for country-specific information on employment laws and regulations all over the world.
To make things even more complicated, workers unions and collective agreements can have a significant impact on individual employment terms. What’s more, you will also have to think about health and safety requirements in the workplace. And if your new employees will be working remotely, you should check for remote work laws and necessary home office assessments as well.
Alternatively, you can hire full-time talent in any new market with an Employer of Record, which will not only ensure total compliance but also solve payroll issues. Learn more about Lano’s global hiring solution here.
Another compliance hurdle you might want to think about is employee misclassification. For companies that intend to start working with local freelancers in order to gain a better understanding of a foreign market, classifying contractors correctly is crucial as misclassification penalties can be quite hefty. Every country has its own rules with regard to the classification of workers, so you should make sure to check the local regulations.
Need help managing your global team of freelancers and contractors? With Lano, you can easily manage and pay your globally distributed team. And thanks to our country-specific onboarding checklists and smart contracts, you don’t need to worry about compliance.
In many countries, employers are not only obligated to make contributions to social security on behalf of their workers, but they also have to take out professional insurances to protect their company from potential claims. This includes workers compensation and professional indemnity. There may also be the need to apply for special professional licenses to be legally allowed to operate a business in a certain industry. Trademark registration and intellectual property regulations are yet another aspect to think about.
No matter what the nature of your business is, as soon as you handle someone else’s data - be it customer-related data or payroll data for your globally distributed team - you are responsible to ensure that the data remains private. Given that operating globally involves shifting large sets of data between different jurisdictions, you have to comply with the data protection requirements imposed by every single jurisdiction.
What’s more, the minute you intend to transfer customer data out of one geography and into another, your clients most likely have to give their consent which means you have to update your confidentiality and consent agreements.
In some cases, you may want to send some trusted senior executives to your new offices to supervise the launch of your new market and quickly build up local operations. While this may not be a big deal within certain regions such as the European Union, visa requirements and immigration laws can quickly become a real pain in the neck when relocating staff to other parts of the world. So make sure to check which permits your employees need to be legally allowed to work in a foreign jurisdiction.
The legal entity type should be chosen very carefully to make sure it aligns with your business goals and objectives. In most cases, the choice is between a local branch, a representative office and a full-fledged subsidiary which all come with their own pros and cons for the parent company.
The decision on which one works best for your business depends on many different factors such as the nature of the business activities you want to engage in and the financial requirements. When it comes to the actual set-up process, the two main aspects to consider are the expected timeline for the incorporation process and additional governance requirements - e.g. whether it is mandatory to appoint one or several local directors.
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One of the biggest compliance challenges companies face when going global is taxation, both in terms of corporate taxation and tax rules regarding payroll processing. As rules and regulations vary between countries, multinational organizations need to either have dedicated in-house finance, accounting and payroll teams, or work with a network of trusted experts in each jurisdiction.
The different local entity forms all come with separate corporate tax implications. Knowing what taxes your business is expected to pay and what the deadlines for tax filing and reporting are is crucial to avoid financial penalties which will have a negative impact on your expansion project.
As mentioned beforehand, entering new markets also implies having to learn about local payroll taxes and regulations. In most countries, employers are responsible for withholding their employees’ income tax and for making social security contributions on their behalf. Unless you decide to outsource payroll management to a local payroll provider, your payroll team has to prepare by learning about the new tax and benefits system.
Many countries mandate employers to pay employee wages and social security contributions from a local bank account - this may even be necessary if you contract a payroll provider who, in this case, won’t be able to provide fund management services. When operating across international borders, you may also want to think about ways to facilitate cross-border payments without having to pay excruciating fees and compare exchange rates all the time.
One easy solution for cost-effective international payments are digital wallets like the Lano Wallet which allows you to pay freelancers and employees in over 180 countries all over the world, with free local payments in over 50 currencies.
Companies that want to go global need to start thinking global. This means that internal policies, workflows and organizational structures have to be adapted to efficiently operate on a global level. Instead of focusing on just one single geography, you have to prepare to roll out your strategies across multiple geographies.
With a globally distributed team, it is not easy to find the right balance between offering localized benefits packages which meet legal requirements and cultural expectations and a global benefits package which rewards each employee in the same way and creates a sense of belonging among team members. Companies striving for a global presence should start early with developing a benefits strategy which sets the guidelines as to how to approach benefits management in new markets.
To put together a benefits package that will not only comply with legal requirements but which will also attract the best talent available, it’s best to consult with local experts or hire via a local EOR provider and combine the local package with some employee perks offered to all team members regardless of their location.
Read more about managing benefits for a globally distributed team in our related blog post.
Having in-country partners who take care of your local payroll needs in each geography is a good solution to ensure compliance, avoid fines and save time and money. However, as soon as your business operations spread across multiple countries, outsourcing payroll to local partners isn't enough anymore. With multiple data streams coming in from the different providers, it’s not easy to maintain data visibility and transparency without wasting time on manual data entry tasks.
International expansion requires businesses to rethink their payroll strategy. One possible approach to managing global payroll is to consolidate all your payroll providers in one single system which automates data flows and presents payroll data for your entire global team on one single screen.
Find out more about how you can simplify your global payroll with Lano on our payroll solution page.
Expanding your business to new markets is a task that should involve every company department, from finance to legal to HR. For the latter, going global means that they have to develop new hiring strategies. This involves preparing to conduct remote job interviews, increase cultural competence and create a smooth onboarding process.
Check out our blog post on HR challenges for managing a remote team for more information on what HR teams need to prepare for when their organization goes global.
Global expansion comes with many different challenges that need to be dealt with. With an endless list of things to think about, it’s easy for global expansion managers, HR professionals and legal teams to lose track at some point in the process and overlook an important aspect which can quickly turn into a costly compliance error. When expanding internationally, businesses should therefore make sure to have local experts on hand who can offer guidance and support.
With Lano, international organizations get access to a smart platform providing them with everything they need to manage and pay international contractors, compliantly hire full-time talent all over the world and consolidate their global payroll. We’re here to support businesses at every stage of their global expansion journey.
Backed up by a network of trusted Employer of Record and payroll partners covering over 150 countries, we have all your global employment and payroll needs covered. Get in touch with us today to discuss how we can help you make your global expansion project a full success.
In the meantime, check out the global expansion checklist we have prepared to help you stay on track. Get your free copy now and start ticking off the items as you go global.
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