After coronavirus: Successful expansion depends on the right approach to HR & payroll
Article 5 minute read

After coronavirus: Successful expansion depends on the right approach to HR & payroll

08 June 2020

As businesses contemplate the future, and one that is markedly changed from a few months ago, they may also be reconsidering their growth plans.

Expanding into new jurisdictions can put unforeseen pressure on your human resources team, and these considerations remain, even as the COVID-19 pandemic reshapes many aspects of our working lives.

As your business grows, so does the HR checklist: from rules surrounding hiring, administering payroll and local variations in regulation that, if overlooked, can have a big impact on the bottom line.

Take for example employee handbooks. Think a global one will suffice? Think again.

Something that starts out seemingly simple and straightforward needs to be reviewed and redrafted for each jurisdiction’s quirks, while keeping one eye on the need for global consistency. Then it needs to be accurately translated into each new language, and checked for compliance against local employment and data protection regulations.

And that’s just the handbook. This underscores how many different aspects and requirements need to be taken in to account as you expand. It’s easy to underestimate how much time and skill these will take.

“Strategic HR and payroll support are about more than just running the numbers up the value chain,” says Jason Gerlis, Global Head of Consultancy Solutions at TMF Group. “It’s about understanding the cultural norms, making sure that companies are consistent globally, but compatible locally. It’s about ensuring that everything is aligned.”

The multiple strands and moving parts risk sapping the energy of even the most well-honed HR team back in your home jurisdiction. Here are some key areas to bear in mind:

Recruiting and training

Approaches to recruitment, retention and development vary from country to country. There is also the question of whether cross-border managers are equipped with the right knowledge and skills to manage and train remote employees.

Setting up processes to manage hiring, firing and paying employees is very or extremely complex in more than 40% of jurisdictions, in part because of the difficulty of hiring staff before a business has been incorporated as a legal entity, TMF Group research shows. That makes it hard to hit the ground running.

The situation can be further complicated by country-specific hiring restrictions. Many countries have policies in place to encourage the employment of locals. For example, it is tough to employ people from outside the European Union in Greece because government authorities are reluctant to provide work permits.

“The top HR priority for expanding businesses is getting the right skills in the right place at the right time,” says Kathy Daniels, Associate Pro-Vice Chancellor International at Aston Business School, who specializes in recruiting high-calibre students. “Businesses need to be constantly reviewing the skills that they need to ensure that they have the right skills for the present and the future.”

The complexities don’t end once the people are in place. Managing a disciplinary process and firing an underperforming employee is complicated in more than half of jurisdictions surveyed as part of TMF Group’s Global Business Complexity Index. That report underlines the regional differences: in EMEA and APAC, businesses must typically give three to eight weeks’ notice, while in the Americas, employees can be fired with less than a day’s notice in 52% of jurisdictions.

Cultural differences

Each new country comes with its own set of rules and procedures. Many countries in Latin America can be complicated places to do business, with stringent regulations and a highly unionised culture.

Where unions exert a powerful influence, businesses need to establish and manage good relationships. In Brazil, labour unions wield significant influence and compliance with the rules can be difficult and expensive.

Cultural norms, languages and working patterns will also affect how structures and processes need to be set up.

“Local partners can explain what is ‘normal’ and create the context necessary to adapt and flex approaches to elicit the right outputs,” explains Gerlis. “Creating consistent calendars, and relying on local expertise around standards, takes the guesswork out of operating your business. And that turns complex situations into straightforward operations.”

An on-the-ground presence to help smooth out these cultural and language issues can make all the difference. It is also key to keeping on top of the continuous monitoring required to ensure compliance in all locations.

Pay and benefits

Payroll is a flashpoint for many countries in TMF’s Global Complexity Index. Legislation can change frequently and can be applied retroactively, making compliance tricky.

Ensuring salaries are paid each month and benefit requirements are met is a significant

responsibility for all employers and usually requires the insight of a local specialist.

Some employee benefits – for example a minimum wage – are required by law almost everywhere, while others are more commonplace in some regions than others. Variations in annual bonus requirements, pension provisions and other perks add another layer of complexity and another set of regulations that need to be complied with, often in a different language.

Reporting requirements also vary. Payroll data must be submitted to the government each month in more than three-quarters of jurisdictions.

Harnessing technology

Technology and computer power make HR systems more streamlined and efficient. However, companies should avoid the temptation to create centralised structures before properly understanding the local requirements.

Without a local approach, problems can be unknowingly built into the system. These are then overlooked or result in the creation of potentially risky workarounds.

Take the cloud, for example. It’s an incredibly useful tool for global companies, particularly with regards to email; but what you can and can’t share in the cloud, and the infrastructure you need to use, differs from country to country. Data and privacy regulations are a common stumbling block.

International expansion brings a new dimension to your business, and one that you need to be hyperaware of in the aftermath of the pandemic. Alongside new opportunities and markets come new risks. Growth dreams can rapidly become nightmares without a firm grasp on what needs to be in place from the off, and careful monitoring that continues even once things have bedded down.

“Managing disparate populations of employees, under varying local legislative regimes, whilst maintaining a global ‘norm’ can feel overwhelming,” says TMF Group’s Gerlis. “However, there is no need to reinvent the wheel. We have experience of helping many clients in different industries and in different parts of the world build an operating model that works for them.”

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