Using an Employer of Record to Meet the Challenges of Global Expansion

By Nicole Sahin, Founder and CEO at Globalization Partners

Most organizations will eventually reach a point when they’re ready to enter new markets and generate new revenue streams. For most, this means embarking on global expansion and growing remote teams that can successfully operate in different geographies.

Although a potentially rewarding endeavor and the source of much excitement within a company, creating a legal entity abroad can be overwhelming. To get global expansion right, businesses need to invest a significant amount of time, resources, and planning to ensure everything from tax to legal, compliance, and HR is handled correctly.

International expansion plans — risks vs. rewards

When it comes to global expansion, there’s little room for error. Getting even a small part of the strategy wrong can seriously threaten the process. And success is not a given—even for businesses that have proven themselves experienced in their local markets.

So it’s no wonder that—with a prospect of spending months or more to get their operations up and running and still having nothing to show for it—some business leaders worry that the risks might end up outweighing the opportunity and apply the brakes to international growth plans.

Independent data collected from CFOs that intend to undertake international expansion backs this up. As a group, more than half cite legal and regulatory compliance as potentially the largest barrier to success. Furthermore, approximately four out of ten flag concerns over tax structure, while more than one-third raise the issue of human capital costs or recruiting talent.

COVID-19 and remote working 

This reticence has always been present across most economic sectors and throughout the world’s major economies. But COVID-19 has made many business leaders more risk-averse when it comes to expanding beyond their domestic markets. This is a real shame because, as the seeds of economic (and physical) recovery are emerging, a quick, agile expansion plan supported by a strong global team could well be the way to secure a solid financial future.

Yet, in another sense, business’ reaction to COVID-19—particularly the shift to remote, flexible working has made successful global expansion more attainable. It has shown senior management and employees alike that disparate teams can achieve exceptional results. Gaining confidence in the infrastructure that underpins remote, flexible working makes it more likely that global expansion projects will succeed—once all the recruitment and hiring has been completed.

Without even knowing it, companies have been testing out the infrastructure and re-writing the rule book on how to collaborate and communicate with their colleagues. They have motivated and supported each other—without having met physically in the same room for many weeks (or even months). And, guess what? If that structure is working across the company for everyone in the same city or district, it’s pretty much in place for remote team members in other countries and across multiple time-zones, too. That means you’ve done a considerable amount of the heavy lifting needed for global expansion.

Removing the burden of international hires

So, you’ve drawn up the plans, tested your global communications infrastructure, and are ready to execute on strategy. But there’s still an issue around hiring and employment. This is when many businesses partner with an Employer of Record (EOR). EORs can enable companies to enter markets and hire the skilled hands they need to succeed—with all the administrative details, such as legal compliance, running background checks, onboarding, and HR function handled on their behalf. This cuts down the costs and time associated with establishing a new business entity on the global stage and dramatically reduces the risks.

Putting together employment packages that match (or exceed) local job market expectations

It’s hard not to overstate the importance of attracting the right local talent in those first few weeks and months. So, it should come as no surprise that many organizations also draw on the local knowledge of their selected EOR to create incentives packages aimed at attracting and retaining the best candidates.

These might include benefits such as dental plans and health insurance, gym membership, pension contributions, sponsored education and training, enhanced holiday allowance, and tax-compliant bonuses. More recently, since COVID-19 forced more people out of traditional office environments, employees are also looking for more remote and flexible work benefits. Having first-hand knowledge of local cultural and social norms means EORs can take all these factors into account and create the most competitive job offers.

With the initial hiring taken care of, organizations have the scope, headspace, and flexibility to expand at their own pace — whether that means testing their offering in new markets or going for a full-scale launch. Whichever strategy they choose, senior management can remain laser-focused on growth and considerably improve their chances of success over the long term.

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