Hiring In-Country Versus Sending an Employee
A business entering a new market must consider how it will staff its new operation. Many companies are conflicted between two options: hiring in-country or sending an employee from home.
Deciding between the two requires an examination of the pros and cons, as well as identification of the key success factors offered by highly ranked countries.
Let’s look at those first.
Key Success Factors
Certain countries rise above the competition because they offer what a foreign business needs to succeed. For the purpose of this analysis, we’re using a few of the top countries mentioned in the 2019 Doing Business rankings.
We’ll look at the commonalities between leaders and why they’re so important for a company considering investment in a new territory.
If you’re reading this article, English is probably the language of choice for your business operations. As a result, it is vital the country offers English proficiency.
Many countries claim to have an English-speaking population, but the question is whether it is common and whether locals, government officials, and workers offer fluency.
Singapore ranks second in the Doing Business rankings. While it has four official languages, English is the most widely spoken and the most commonly used in business. Additionally, most Singaporeans speak English as well as their native tongue.
Denmark ranks third overall. Over 86 percent of Danes are highly proficient in spoken English as a second language. This makes dealing with officials, locals and workers much simpler for an English-centric business.
Business Climate Suitable for a Multinational
Many countries around the globe want foreign investment. However, not all make it easy for a foreign company to expand into their territory without significant barriers.
Conversely, some countries have less burdensome policies for work permits, visas and immigration. For instance, New Zealand ranks first due to its open and business-friendly economy.
Pro-business countries often encourage local hires too, as it bolsters the economy. This reduces company startup times and costs.
Highly-Educated, Talented Workforce
Even if you decide to send employees from home initially, you will eventually need to draw on the local talent pool as your business grows. Consequently, the quality and availability of the talent within your chosen region is extremely important.
Norway offers a very rich talent pool with highly-educated workers. US News ranked their educational system 12th in the world. Doing Business ranks them 7th overall.
A diverse and skilled talent pool is critically important for any business as it reduces the time and cost to hire and improves the quality of workers. This is especially important for companies that rely on educated professionals in R&D, manufacturing and hi-tech.
Active Governmental Support for Entrepreneurship
Certainly, the world offers many possibilities for global expansion. Nonetheless, not all governments support a new business when they enter their territory.
It can be difficult to navigate the myriad of governmental agencies without this support. Establishing a business and competing in a global market demands expansive resources.
The U.S. Small Business Administration includes an Office of Entrepreneurial Development specifically designed for businesses new to the region. Countries that encourage entrepreneurship often offer programs to ease the financial burden of hiring too.
Easy Access to Well-Developed Infrastructure
Any business entering a new market needs well-developed infrastructure to succeed. Otherwise, they’ll waste valuable resources just trying to access fundamental needs.
Establishing a business, obtaining construction permits, hooking up electricity, and paying taxes and payroll shouldn’t be unnecessarily long, complicated processes. Doing Business ranks Hong Kong highly in these areas.
Competitive Corporate Tax Rate & Incentives
An attractive tax rate and corporate incentives directly affect a company’s bottom line. For instance, Georgia offers a 15% corporate tax. They do not charge payroll or social security tax either.
Compare that to France’s corporate tax rate of 33.3%, Brazil’s at 34% or Argentina’s at 35%. These countries also have significant social contribution burdens including old age, survivor, disability and survivor pensions, health insurance, unemployment insurance or savings for unemployment and family allowances. Many also have very high minimum wages.
In-Country Worker Benefits
Choosing the right country for expansion has a direct bearing on employment costs and ease of doing business. When deciding whether to hire in-country or send an employee from home, consider these in-country benefits.
Governments Often Favor Locals
The 2019 Doing Business rankings favor hiring locals over foreign nationals. Their Fair Consideration Framework demands employers show foreign nationals have a higher level of qualification and compensation. Otherwise, they face immigration compliance risks.
Hiring locally ensures government compliance and improves goodwill. The foreign company creates a good initial and ongoing impression, which is always important for any business.
Simpler Hiring & Payroll Options
Hiring and paying employees within the region is simpler than working at a distance. Companies do not necessarily need to set up their own subsidiary, since a local employer of record can easily hire, onboard and payroll all employees, whether they’re residents or expatriates.
Sending an employee on an expatriate assignment involves significant costs and risk. According to CFO magazine, expatriate assignments can triple yearly total compensation costs.
Additionally, repatriation occurs often. A Harvard Business Review 10-year study found between 10 and 20% of all U.S. managers sent abroad returned early because of job dissatisfaction or difficulties adjusting to their new location.
Of those who stay, almost one-third don’t meet company expectations and a quarter leave the company, often to join the competition.
Since in-country workers already operate in the area, relocation is not an issue. Companies can onboard employees quickly, without immigration and work visa issues.
Local, Regional & Cultural Acumen
A new foreign business needs to pay special attention to the local, regional and cultural traditions and customs. Hiring in-country ensures employees do not inadvertently offend customers or government officials.
Additionally, they have an established personal and professional network, making it easier to navigate the new market.
Benefits of Sending Employees Abroad
Many companies send their own employees initially, and understandably so. They can offer noteworthy benefits.
Sending an employee from your company means they already know operations, products and services, accepted practices and expectations.
They may have the company knowledge and experience needed to bypass time-consuming onboarding and training necessary for new employees overseas.
Proven Track Record
The employee you choose to move into the new market is already familiar to you. You know how they work and can expect the same performance when they work abroad since you have a solid working relationship and communication network.
Establish Corporate Identity Abroad
The individual you send abroad acts as the face of your company to establish your corporate identity and reputation. Additionally, they can act as a leader and train employees for future managerial and executive roles.
Clearly, there is no one-size-fits-all solution for all businesses. Whether you want to explore sending an employee or hiring in-country, Blueback Global is your international business expansion expert.
We offer advice and services including business set up, recruitment and hiring, global payroll, accounting and reporting, statutory compliance, immigration support and more. We’re well-positioned, highly experienced and can help you establish employees abroad or hire in-country.
Contact us for a free consultation, explore the possibilities and let us help you expand into your new market quickly and affordably.
Contact Blueback Global Today!