How to Hire International Employees and Manage Global Compensation - Pavilion

As companies compete globally in both the marketplace and talent pool, the hiring process is increasingly a global fight. Companies might seek to lower their labor costs or they might need technical expertise that a country has in abundance. Companies need local contacts who understand local markets and have the ability to localize products and services.

In competitive fields, sometimes the most qualified candidates are not found within the geographical confines of one’s own country. For this reason, global recruitment can be a crucial part in hiring the best individuals for your business. 

As with any business decision, there are pitfalls to avoid and important best practices to follow when hiring international talent. International employees can be a boon to your organization. They bring cultural knowledge and technical knowledge that will only benefit your company.

But there are important legal and cultural issues to consider. You’ll want to work with legal professionals to make sure you know what is required before you put up a job listing. Are you required to pay for housing or medical expenses? A lawyer can help you understand what unique rules you face. You also need to understand tax laws before you bring any employees on board.

International leadership

International business can be complicated. For starters, a home country’s customs are much more influential on workplace culture than any corporate dictates. Certain types of workers might expect to be able to take a long lunch break, for example, while other countries’ workers are used to an intense in-office culture. You’ll need different statements of purpose (SOPs) and norms for managing each culture.

• Learn about the countries you are hiring from: Your company’s leadership and HR professionals need to recognize the cultural values they are dealing with. This is more than knowing how to politely accept a gift. Your organization’s HR practices need to match local regulations and your management team needs to effectively lead workers. Your company might need to learn how to communicate with employees; what works for an American worker might offend an international employee.
• Understand the power difference between countries: Some countries are used to a formal workplace, with employees finding it essential to include the right title when addressing each other. Those are countries with a high power distance; a clear chasm between management and non-management workers. In a lower power distance dynamic, like you might find in Sweden, for example, people commonly refer to each other by their first names and might dress more casually at work.

A company’s leadership team is responsible for creating workplace culture, but it’s not a one-way street. Managers are responsible for evolving the culture and figuring out what works best for the company as a whole. Companies with a deep sense of mission are more likely to have employees that understand how they can best contribute to the bottom line. But the specifics of that culture — things like dress code — should vary from country to country.

Search and interview process

Before you begin to look for talent, you should decide what your company’s footprint is going to be on foreign soil. For a lighter commitment, you might consider hiring contractors. You’ll need ironclad agreements that cover IP protection and meet the legal standards of the country you’re working in. 

The gold standard for commitment to a foreign market is establishing a subsidiary. That’s when you create a legal entity in the new country and your parent company controls more than 50% of the stock. It’s the least risk in terms of following your new company’s labor laws, taxes and IP. But it carries more risk and cost than any other option.

A subsidiary gives you the most direct control. That’s important when it comes to actually hiring international employees. Among the things to watch out for:

• Local legality: A business contract written and signed in the United States is not valid in a foreign country, so you’ll need to make sure you have a binding contract that’s valid in your new country. And there’s work to do at home as well. Companies often have to get certified by the Department of Labor in order to hire international workers. The certifications often verify that staff hires outside of the U.S. have little effect on employment or salaries of local workers. 
• Differences in resumes, styles: foreign workers might not understand what talents or traits your company values. As a result, you will have to pay close attention to resumes, but also you will have to be clear about what you’re looking for in a job listing. 
• International recruiting tips: You’ll want to visit international locations and maybe attend a job fair to introduce yourself to prospective employees. Zoom interviews can be great tools but you need to understand the people you’re hiring and they need to understand your company. 

Global compensation and strategy

You’ll need a compensation plan that falls in line with your global business strategies. Moreover, your compensation plan can serve as a guide to your foreign workers, laying out a clear path to job mobility and showing them what a career looks like with your company. 

Salaries are typically paid in terms relative to pay ranges in the home country. Software engineers are paid what they would typically make in your new country, not what they would make in Silicon Valley. Some approaches to consider:

• The home-country rules. This plan focuses on your new country, and what constitutes a standard of living in that country. Considerations include taxes, housing, goods and services and discretionary income.
• The host-country approach. This applies if you are shipping U.S.-based employees overseas. You might pay an employee more or less because of different costs of living, while continuing to pay for 401(k) plans or similar U.S.-based benefits.
• Pay everybody the same. In some ways, this is the least-complicated option, but it might not be beneficial for workers relocating overseas if the cost of living is higher abroad.

But how much is the right amount to pay a new hire overseas? This is where it helps to have an overseas HR employee, in addition to overseas legal help. Your local employees can determine what a competitive salary is for your team. Also, the U.S. State Department has myriad business resources, including salary comparison, cost of living information and cost of relocation. Help is out there for growing your company.