Leading a Global Workforce? Expect the Unexpected
When it comes to global expansion, you are not in Kansas anymore. When you pull back the curtain, what you don’t see is just as important as what you do. Rules are different and complicated. Seek to understand these 10 HR challenges before you act.
International Employment Contracts
Outside the U.S., the written contract is very important but it isn’t the whole story. Employees have numerous contractual rights and obligations that must be addressed in a formal employment contract that is designed to protect them.
For e.g., the employment relationship in France is governed by the French Labor Code. In addition, there may be Collective Bargaining Agreements governing different industries.
Once you extend any kind of contract, it may be difficult to rectify the situation so make sure you are extending a locally compliant contract and in local language when required.
“Remember, the responsibility is on the employer to draft the employment contracts in a manner that protects them as much as they protect the employees.”
Case in Point: Canada Bonus Payments. A Canadian employer recently won a court battle over bonus pay because of a smartly worded employment contract.
Benefits and Entitlements are Not Optional
American workers typically accrue paid vacation based on length of time they work for an employer or “unlimited” vacation, as is the newest trend. The employer can decide how many days to provide for vacation and designate company holidays. Some companies provide Paid Time Off (PTO), which combines vacation and sick accrual into one bucket.
Rules are different and complicated
Internationally, companies cannot redefine the nature of statutory vacation and holiday requirements. It is not uncommon to see upwards of six weeks of vacation days and 10 or more statutory holidays. Vacation carryover and vacation caps differ by country and in general vacation is always expected to be used in the year accrued. Sick leave is entirely separate from vacation.
A “Vanilla” Approach to Total Compensation
Rolling out “vanilla” programs where all employees have common elements in their total compensation package might be easier to manage but you will overpay in some countries and underpay in others. In some countries, pension contributions are mandatory but supplemental health insurance is not, due to national insurance programs. You need to get educated on the statutory and the supplemental benefits to be competitive in your industry. Here are just some examples of benefits that are not common for U.S. employers: Contributions to housing funds (which is a mandatory benefit in some countries such as China), travel allowances (mandatory in Japan), profit sharing (mandatory in Mexico), car or car allowance (supplemental benefit in several countries).
Employee Handbooks and Policies
It is with good intention, employers want to extend their U.S. employee handbooks across the globe to send a consistent message, but the global handbook is really more myth than reality. The best practice is to develop regionalized or preferably country specific policies or handbooks. Legal requirements vary by country and the last thing you want to do is inadvertently extend protections that don’t apply outside of the US.
Most countries have common basic policies that include equal employment opportunities, acceptable use of IT/monitoring policies, anti-corruption, work from home, data protection and leave of absence. With just few employees, employee handbooks may be overkill but there is merit in undertaking the development of key policies as appropriate for each location.
For many companies, global equity programs are necessary for competing and retaining key talent. Staying on top of compliance requirements can be a real struggle often forcing companies to cut back the equity plan offerings to locations where they can comply rather than take the risk of non-compliance.
Understanding tax treatment, reporting requirements, employer social tax obligations, vested rights and entitlements are very big challenges.
Companies should manage and administrate these programs in the U.S. to be certain that plans are operated in a consistent manner across the globe and all U.S. and local laws are followed.
Keeping Private Data Private Especially Outside of the US
HR departments are collecting and storing vast amounts of employee related data from payroll to employment history. While these personal bits of information are useful, they also create challenges for the HR teams to comply with global employment laws, maintaining data security and upholding employee privacy.
Many countries require businesses to register with the local Authorities and provide detailed information about the company representative responsible for Data Protection. In numerous countries breaches of Data Protection laws can be a criminal offence. Some examples are Argentina, Finland, Hong Kong, India, and U.K.
Managing Employee Performance Issues
In certain countries, there is a legal process to follow in dealing with performance issues. You may want to consider developing a grievance/disciplinary process or adopt the legal process as your policy to make sure you are managing to local requirements. Sometimes a conversation is all that is needed to improve conduct or performance. However, when the issue becomes more serious, realize you may have to follow a specific legal processor or you could be considered at fault by the employment tribunals and subject to an increase in termination compensation cost.
Payroll System: One Platform is a Myth
The reality is that, one platform does not serve all. Different countries ultimately have different payroll systems to address localized needs. For example, payroll may be managed by a service provider such as ADP around the world but each country’s platform is localized. The one platform system is a myth.
International assignments provide great professional development opportunities for employees but they are expensive and often the return on investment is not realized. Make sure all parties understand the long term cultural adjustment required and the implications of the cost. Whether you have a comprehensive global mobility plan or do things on the cheap, you should prepare an International Assignment Letter that discusses the duration of the assignment, currency and compensation, benefits and repatriation issues. It is essential to understand the tax impact of the assignment to all parties, whether you tax equalize or not.
It takes longer to end employment relationships and it costs more, therefore, it is very important to implement good hiring and performance management processes. If performance is not up to the mark, the employee must have time to improve and be coached to improve their performance. All of this needs to be documented and cannot just be in English. Most countries have a specific termination process that needs to be followed that can take from weeks to months.
The European Union leads the way in creating some of the most onerous termination laws with Italy, Belgium and Spain being some of the most difficult jurisdictions with regards to employee terminations. “In some cases, the cost of terminating an employee (including mandatory notice periods) can reach three times the base salary.”
As they say, “there’s no place like home” but global expansion does not have to be all lions and tigers and bears! It really is possible to demystify the process and figure out where you are going and how to get there with support from your Wizards of HR and legal team.