The new Coronavirus (COVID-19) and its impact on the global economy is massive.  The disruption to travel, business conferences, shipping, production – the list goes on. But what are the longer term consequences? How will this change the way companies do business? I thought this may lead to more companies and more countries looking inward and staying local. So I started looking around, talking to people, speaking with clients, and researching.

Now it seems clear that many companies will be looking to minimize vendors to purchase from, and perhaps move production of their products or support of their services in multiple countries.  If certain areas of the world are more severely impacted by a future pandemic, companies need to determine what their game plan will be. This will actually cause more expansion, and a more global economy. Supply chains will need to be varied, and come from multiple regions, and companies will need to prepare for a scenario where one part of the company has to shut down for a period of time, and how to shift responsibilities elsewhere.

Another aspect of future planning relates to travel. Rather than companies depending on a few people to travel most of the time, they may need to hire more local talent, and have staff in key global regions so they do not have to depend on travel to keep their business running. So how do companies start to expand and add teams in new regions? So glad you asked!

For most companies expanding internationally, this is a new process and in many cases the first time managing employees outside of the US. Regardless of whether or not this is the first time operating outside of the US, or if you are entering a new country, it is always somewhat scary.  Let’s face it, you don’t know what you don’t know. You need to figure out important logistics prior to making a move in order to be successful in a new country. Let’s review a couple of key points to consider:

  1. How are you expanding? Seems like a basic question but, seriously – are you moving a few folks into a new country, or are you acquiring an existing group?New company formation vs. Acquisition both present their own challenges, but you need to prepare for both administratively. An acquisition means you’ll have an immediate need to pay employees, and if you are expanding on your own, you have a few things to clarify internally before hiring and paying employees.
  2. What type of person are you going to be hiring overseas? Are you going to use contactors or employees to get started?Contractors seem easier, and are similar to a 1099 in the US, but can become complicated if the line between contractor and employee is blurred. Do they take direction from you? Do they work for any other company? If they take direction from you or do not work for anyone else, they are going to be viewed as an employee for payroll purposes. If you choose instead to hire employees, how will you manage payroll and reporting?
  3. To Register or Not? Once you have selected employees vs. contractors, the next decision is should you register your company or not?If you choose not to register as an employer, you will have to partner with a Global PEO so that your employees are paid under the PEO in-country umbrella.  This can be a quick and convenient option for many companies.  It is ideal for companies looking to see if they will have long-term viability in a specific country, and it requires very little front-end work. However, using a PEO can become costly for long-term or large employee counts.If you decide to register in a new country, how do you get started, set up bank accounts, determine local regulations? If this sounds familiar, you’re not alone – I hear these questions and concerns every day! You can try and figure this all out on your own, but be warned – expanding in a new country is not like moving into a new state in the US – it’s complicated. It is always recommended that you find a resource to help you navigate the new country laws and employment regulations – someone who knows what needs to be done, and how to get it done.
  4. You’ve registered your company, or decided to use a PEO – now what? Congratulations – you’re ready to hire employees! Well, maybe not ready just yet – you still need to create employment contracts and handbooks that are compliant in each country, figure out how to pay employees, manage accounting, tax filings, and regulations in each country.You need to find a trusted partner that can help navigate these issues and help optimize operations from the start. Each country has nuanced regulations that you may not know about or understand (in some countries, your employees actually make MORE while they are on vacation than when they are working – imagine that!). You need to make sure your employees are paid properly to ensure compliance, avoid potential fines and penalties, and keep your international employees happy!

I know this seems extraordinarily difficult – but it doesn’t have to be. We are here to help with every step of the process. Our in-house consulting team takes care of registration and expansion, and our cloud-based payroll technology with aggregated reporting ensures your payroll is accurate and compliant if you’re in 1 country or 145+.  We also have a compliance portal to keep you informed of labor code changes proactively. If you’re trying to figure out where to start, or struggling with existing payroll or compliance we can get you back on track! Talk to us today about your expansion plans and we can help you get started.