While international markets were once seen as attractive growth considerations mainly for larger businesses, it's becoming easier than ever to expand across borders, opening the doors for more mid-sized business owners to become proprietors of global companies.
According to the ADP Midsized Business Owners Study, one in 10 mid-sized companies plans to expand internationally in the next two years. Yet, when it comes to actually managing a global workforce, many feel they don't have to the tools needed to do so.
ADP recently co-hosted a webinar, "Global Expansion: Establishing the Groundwork for Success," which shared advice from industry experts on some of the most important considerations businesses need to focus on when building their international expansion strategies, including the legal, administrative, financial, and process challenges.
Here are some of the most important things to consider when going global:
1) Operations. Decide how you will structure your business overseas. There are many options including, opening a branch office or establishing a wholly-owned subsidiary. Both have pluses and minuses depending on how you want to expand. If you want to sell a product in another country, then you should consider establishing a branch office. If you want to build a larger presence with the local customer base, then a subsidiary may be the way to go. In some countries like Thailand, it's better from a tax perspective to go with a subsidiary.
2) Hiring. Determine how you will go about the hiring process. How many employees will you hire and what will their functions be? Next, decide if you will hire all in-country personnel or send some employees abroad from your headquarters. If you're thinking of hiring local talent, you need to consider the availability of local resources. For example, if you're breaking ground with new technology, there may be no one in the local talent pool with the necessary expertise. If you are part of an established industry with existing technology, it's easier to hire experienced people from local competitive companies. Don't forget: If you send a U.S. national to work in another country, you'll need to consider tax equalization rules. Also, if you are hiring people who will travel across many borders, they can be subject to payroll taxes in various countries.
3) Payroll. Whether you plan to employ expats or locals, it's important to put a solid payroll process in place in order to manage payroll across countries with different payroll rules and cycles. Don't forget that while payroll in the United States is usually a bi-weekly event, in most other countries the payroll cycle is once a month. You'll also need to consider whether to use a single vendor for payroll or a local-to-local model. More mid-sized businesses have been moving toward a single vendor that can support payroll across the globe and provide additional compliance support rather than just going with a local payroll software provider. You also want to be sure your payroll provider can support employees speaking the local language and that you have analytics in place to understand how your payroll costs differ from country to country and how you compare to other companies in the local market. Lastly, it's important to establish a single global system of record to maintain valid and current data about all employees across the globe.
4) Compliance. U.S. compliance requirements can look nominal when considering the extensive requirements in many countries. It's important to first consider all the different type of taxes that exist and that income taxes can be due at many levels in separate jurisdictions — federal, provincial, city and country. You'll also need to take into account indirect taxes like value-added taxes (VAT), property taxes and payroll taxes. Since VAT laws are being amended across Europe, regardless of where you are selling from or what you're selling, your revenues will be subject to local VAT. Finally, pay attention to regulations regarding the handling and sharing of employee data across countries or regions, data privacy, national collective bargaining agreements, and employment contracts.
For more tips on how to expand your business across borders, you can listen to a replay of the webinar at: https://adp25.webex.com/adp25/ldr.php?RCID=2d90f9e9a1453a40c99c4875c2b8cc03
Disclaimer: The information in this blog is provided for informational purposes only and does not constitute legal advice.