When business leaders reach a point where they start to think about capturing global markets and expanding beyond borders, it can be exciting but also heavy-laden as they begin to thumb through the perceived hurdles ahead. Hiring and onboarding, payroll and benefits, training and reporting—there is a seemingly endless list of intricacies that have the potential to hinder a company’s global expansion strategy if not approached correctly.
One of the main issues companies face when expanding to new regions is compliance and for good reason. If the globalization process is rushed, it can lead to mistakes like skipping over key compliance criteria, which can then lead to serious issues such as million-dollar fines and challenges to reputation that could prove disastrous for a company.
Achieving compliance and effective global human resource management is much easier said than done.
Different markets have different standards, customs, and laws that can make achieving compliance in new territories a challenge.
Consider the following components of a global expansion strategy and how each of them contains their own unique element of compliance for an organization.
Protecting Employee Data
Data protection legislation is increasing in severity and scope, which means the way companies handle employee data will need to shift. They must be able to establish protocols to avoid data breaches and ensure private employee data is managed correctly. Cross-border data sharing between company offices can present challenges as every region follows slightly different regulations.
Taking on Taxes
Fast-paced globalization, ever-changing tax laws, often-cumbersome accounting standards, and increased demands from tax authorities are a heavy burden to carry for many organizations. Between sales tax, property tax, and income tax, many local corporations struggle to scale properly in the face of global taxes. Moreover, paying the appropriate taxes on time introduces a compliance component, making it all the more critical.
Fluctuating Financial Reporting
Just like tax and compliance laws, every region has their own financial reporting system that introduces additional elements of compliance complexity. While more than 120 countries use International Financial Reporting Standards (IFRS) as a common accounting language to streamline record keeping, account reporting, and financial transactions, the U.S. uses Generally Accepted Accounting Principles (GAAP). Organizations must be able to provide consistency, transparency, and comparability to their financial reporting in order to achieve corporate global compliance.
Addressing Workplace Discrimination
Discrimination protections vary widely by region as well. For example, the U.N. considers the principles of equality and non-discrimination to be part of the foundations of the rule of law. Diversity and inclusion will only continue to drive corporations’ approach to social responsibility policies.
Delivering on Employee Rights
Perhaps one of the most extensive components of international operation is labor law. Work vs. rest vs. vacation hours, compensation requirements, employee-offered benefits like insurance and savings plans, safe work environments, and certification training all fall under employee rights protection. These protection laws vary from country to country and can be extremely complex. Payroll management is one of the main concerns organizations have when beginning to expand to new territories.
Since everything from currencies to customary benefits are localized, it is important for organizations to understand the norms and laws of each specific region. Neglecting these differences can lead to poor compliance, especially when dealing with sensitive employee banking and personally identifiable information.
While compliance failures can mean significant penalties and stifled growth, it is certainly not all doom and gloom.
Implementing strong governance processes, adding internal compliance experts like an in-house Compliance Officer or Chief Legal Counsel, and showcasing strong corporate ethics can go a long way toward making compliance an integral part of any company’s business.
However, we are seeing these regulations changing more quickly every day around the world, which introduces the need to continuously monitor compliance rules and act on these shifts in regulations quickly. On-the-ground experts on compliance—such as an Employer of Record (EOR), which enables companies to hire great talent anywhere in the world without setting up subsidiaries—prove vital when it comes to ensuring locally compliant employment contracts, benefits, and worker classification.
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ABOUT THE AUTHOR
Nicole Sahin
Nicole Sahin’s mission is to eliminate barriers to doing business internationally and building global teams. As founder and CEO of Globalization Partners, she is recognized for having created their innovative Global Expansion Platform™, which empowers companies to hire anyone, anywhere within a few business days – expanding their global footprint without the need to set up in country branch offices or subsidiaries.