October 07, 2021
📢 Introducing Lano 2.0!Global Employment just got a whole lot easier
📢 Introducing Lano 2.0!
Global Employment just got a whole lot easier
Expanding globally means having to rethink normal processes linked to the running of a business and adapt them to a global scale. This includes various aspects such as internal communication, onboarding processes and also payroll. While business leaders and decision makers mainly focus on how to implement a global payroll solution, one crucial part of employee compensation often gets overlooked: the administration of global employee benefits.
Managing benefits for a globally distributed team is very challenging. Every single country has its own legal requirements, cultural practices and expectations when it comes to employee perks. The burden on HR teams is enormous: They need to find a way to compliantly administer benefits for the whole team and simultaneously keep both employees and stakeholders happy.
In this article, we will look at why global benefits administration is so challenging, which perks you should offer your global team, and what options there are to make global benefits management a success.
No matter whether your remote team is distributed all over the world or whether your entire workforce is located in one single country, employee benefits play a very important role when it comes to employee engagement, job satisfaction and motivation. Offering employees a generous benefits package is a sign of appreciation and recognition of their contribution to the business’s success. In fact, 92 percent of employees declare benefits an important factor with regard to job satisfaction.
What’s more, employee perks are a decisive factor for attracting and retaining the best talent which becomes even more important when tapping into a global talent pool. As a survey conducted by Glassdoor reveals, 63 percent of people looking for a new job pay attention to the offered benefits package when considering a job opportunity.
There are numerous benefits and perks companies can offer their distributed workforce as part of their compensation package. Basically, they can be divided into two different categories: benefits which are legally required and benefits which are granted to employees as additional perks.
Common employee benefits which are standard in most countries around the world include:
Leave: paid vacation days, sick leave, paternity leave, maternity leave, parental leave, paid time-off on public holidays
Pension: retirement plans or similar funds
Insurance: disability insurance, health insurance
Please note: While these benefits are part of a standard employee benefits package which is required by law in some countries, they are only optional - though expected - in other countries. For instance, in Canada and the US, legal requirements for employee benefits are quite slack but it is common practice for companies to offer compensation packages including health, dental or life insurance policies.
In addition to these standard employee benefits, there are numerous other ways to reward employees by offering:
Meal and transport vouchers
Childcare and other family-related benefits
Company retreats and corporate social events
Employee trainings for professional development
Flexible work arrangements
Mental health and well-being benefits
Annual or performance-based bonuses
Student loan assistance
Of course, it’s possible to add many more items to this list as businesses are free to decide what benefits to offer their global teams. However, deciding which compensation package to offer isn’t as straightforward as it may seem.
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Global expansion always comes with numerous challenges. Be it the challenge of running global payroll, the challenge of deciding where to expand or the multiple compliance challenges along the way. As it happens, administering benefits for an international team also represents a big challenge in itself.
When designing a global benefits package, HR needs to juggle different expectations and requirements which include compliance, employee expectations, competitiveness and cost awareness. In a nutshell: The benefits package needs to match local standards in every single geography, be fair to all your employees and be competitive without making your corporate expenses go through the roof.
As mentioned before, each country has its own regulations and requirements when it comes to employee benefits. Having remote employees in several countries around the globe means having to meet the legal requirements imposed by each jurisdiction as well as meet cultural expectations. The latter may include bonuses which are traditionally paid on certain occasions in the year - one example is the 13th month salary - meal vouchers or transport allowances. Needless to say that the more geographies you operate in, the more difficult and complex benefits administration becomes.
However, legal requirements and cultural practices are not the only thing to keep in mind. With a globally distributed team, factors such as fairness and transparency become increasingly important. Of course, benefits standards vary from country to country but team members located in jurisdictions where standards are low might feel less valued if their benefits package is a lot smaller than the one offered to their international team mates. Companies that aspire to be truly global should think along the lines of “one company, one global team, one benefit package” and find a common baseline.
Offering standard benefits might ensure compliance and fulfill basic employee expectations, but it is definitely not enough to attract the top talent you want for your global business. In order to be able to compete with other local - and global - companies that tap into the same talent pool usually requires you to offer compensation packages that are above the usual average. Especially when hiring in foreign markets, this can become quite tricky as organizations often lack insights into local standards and practices. Usually, a lot of time and effort is necessary to research local markets and learn about expectations and customs.
Last but not least - in fact, given that keeping expenses low is crucial for any company department, this might even be the most important factor to consider - the benefits package for your globally distributed team needs to be reasonable against your business’s bottom line. From a financial point of view, it’s almost impossible to bridge the gap between benefits standards across geographies without considerably increasing costs.
Let’s have a quick look at the following example: A company has a distributed team of remote employees based in Germany, India, the US and China. All of these countries have different annual leave regulations. In China for instance, the minimum annual leave required by law is five days. Employees in India are used to receiving at least 15 paid vacation days per year. US federal law doesn’t provide for any paid time off - in practice, however, employees receive between one and three weeks of paid leave per year - while German labor law makes it compulsory to give employees at least 20 days off per year - in fact, most companies even offer between 25 and 30 days.
So, what strategy will you choose to organize benefits for your international team? Will you create a common standard for everyone - which means having to offer the highest legally required minimum of paid days off in order to ensure compliance across all geographies but at the same time simplifies administration? Or will you keep annual leave localized - which will keep your CFO happy but increase the administrative burden on your HR team to coordinate the different leave policies?
As illustrated in our example, there are two possible ways to administer employee benefits for a global team that is distributed all over the world. Similar to deciding on how to set salaries for a remote workforce, multinational companies can either opt for a global approach, i.e. one global standard which is rolled out across all the different hiring locations, or a local approach when setting up a benefits package. Both approaches have their pros and cons as we have seen before.
That’s why most multinational organizations decide to compromise by standardizing some perks for their entire global workforce - for example a home office stipend for remote workers or a membership in a co-working space - while keeping other benefits localized - normally, this applies to traditional employee benefits such as health insurance. In any case, companies should make sure to clearly define their aims and goals concerning their global benefits management. The best way to do this is to work out a global benefits strategy which clearly defines which incentives can be offered to remote employees all over the world and which ones have to be adapted to each new market.
A global benefits policy should align with the business’s overall operational strategy and the values it stands for. Similarly, the strategy should help fulfill the key functions linked to employee benefits, i.e. talent attraction and retention, motivation and expression of appreciation, while at the same time being compliant and competitive across all geographies.
That’s where hiring foreign talent with an Employer of Record comes in handy. An Employer of Record (EOR) provider allows you to compliantly hire full-time and part-time employees in new markets without having to set up a local legal entity. As the legal employer of your international employees, the Employer of Record will take on all the legal and administrative burden of hiring abroad. This does not only include a locally adapted employment contract but also a fully compliant benefits package which is competitive enough to attract top talent.
In this way, your HR department won’t have to worry about researching local benefits requirements and coordinating them across all the different countries. To find out more about Lano’s Employer of Record solution, check out our global hiring solution or directly get in touch with our experienced global hiring team.
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