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Setting up international benefits and compensation for your employees 
Angelica Krauss
July 13, 2022

Setting up international benefits and compensation for your employees 

When planning a global expansion, many companies are concerned with the costs associated with supporting employees who are working overseas. What happens when you have an international team and want to set up benefits for them?

Benefits and compensation are not just about ensuring that employees are paid fairly for their work, they’re also a critical part of attracting and retaining top talent. Setting up international employee benefits and compensation can be tricky and time-consuming, especially if you don't have direct experience working with people in other countries (and currencies).

Fortunately, there are resources and solutions that can help you make this process as seamless as possible. In this article, we discuss the best ways of setting up international benefits and compensation for your employees.

Things to consider when managing international benefits and compensation

It’s important for companies to manage international benefits and compensation in a way that best meets the needs of their employees, while also helping them meet their business goals. However, when it comes to adjusting your compensation plan for international workers it can be more complicated than simply adding a few countries to your list of locations. You'll need to consider:

1. Country-specific tax laws.

Employers with global employees need to be aware of the tax laws in each country in which they have employees, especially if they are operating on a cross-border basis. This includes withholding taxes and other liabilities that may arise from employment status.

For example, some countries have double taxation treaties with others, which allow an employee's income to be taxed only once. However, some countries do not have these treaties or do not offer them to certain categories of workers.

2. Currency exchange rates.

When managing employees who work in different countries, you need to be aware of how currency exchange rates affect their pay. In some cases, your company may have a policy stating that all employees will receive their pay in their home country's currency, regardless of where they work. In other instances, you might pay them in the local currency where they are living and working. If you choose to pay employees in a foreign currency, make sure that they understand what they're getting paid so that it doesn't appear as if they're getting shorted on their salary.

3. Culture-specific benefits.

When hiring abroad, you’ll need to understand which benefits are common in the country you’re planning to hire and how they integrate with the local culture. For example, if you're based in a country where most people have access to affordable healthcare through the government or through their employers, then offering an expensive health plan may not be a good idea. The lack of a local HR team for global employees means that it’s up to you to understand these challenges and manage them accordingly.

4. International payroll compliance.

International payroll compliance can be a challenging task — you have to ensure that your international employees are paid on time and in full and that the correct tax is withheld, which will get complicated the more countries you hire in. You also need to ensure that you comply with local labor laws and regulations, while meeting the expectations of employees around the world.

Common mistakes in managing international benefits and compensation

One of the most important things you can do as an employer is manage your employees’ benefits and compensation programs effectively. But how do you do this when working with multiple countries? There's no one-size-fits-all solution, but here are five common mistakes that companies can make when managing international benefits:

1. Failure to implement a global strategy.

If you want your company to succeed on an international level, then you need a global strategy that takes into account cultural differences and employee expectations from around the world. For example, some countries require employees to work long hours and travel frequently, and others have very generous maternity leave policies.

To truly support your international employees, you need to understand their unique needs and tailor your benefits accordingly. This means addressing issues like cross-cultural communication, and developing policies that meet all of your employees' needs regardless of where they are based (e.g., maternity and paternity leave). This will ensure that you're meeting their expectations and helping them feel more connected to your company culture.

2. Not tracking employee satisfaction with benefits packages.

While providing attractive benefits is important, it's more important that employees feel like they're getting what they need from their employer. When it comes to international employees, this can be especially challenging because there are so many variables at play — cultural differences, employment laws, and language barriers are just a few factors that can impact how satisfied an employee is with their benefits package.

By tracking employee satisfaction across multiple countries, you'll get a better picture of how well your current offerings are working for individuals from diverse backgrounds and cultures. While there are tools available to help you determine whether your company's benefits package is competitive, there is no substitute for asking employees directly where they stand.

3. Not communicating with employees in other countries.

Communication is key for any company. When it comes to managing international benefits, it’s important that you have clear communication channels with your employees so you can accurately understand their needs. Additionally, if there are ever any problems with anything related to payroll, your international employees will expect to have a clear point of contact who can help them get paid on time.

4. Misclassifying employees.

If an employee works in one country but lives in another, it can be difficult to determine whether they should be classified as a local or foreign national employee, and therefore receive different benefits. This becomes important when it comes to tax and retirement plans as those rules vary by country. You'll need to consider whether an employee should be paid hourly or salaried, because that could affect how you classify them for payroll purposes. Learn more about the penalties and fines associated with misclassifying employees.

5. Not having the right tools to support your international employees.

You should make sure to have all the tools necessary to manage the different needs of your global workforce. You’ll want tools that will give you a better understanding of what works best for each group of employees based on their unique locations and circumstances. Access to an online portal, a 24/7 helpline, and translated documents can be helpful.

How to set up an international benefit and compensation structure for your employees

A good starting point for companies that want to grow internationally is to set up a compensation and benefit plan that attracts top talent from around the globe. But how do you go about doing that?

1. Study target countries' local laws and culture.

If you're expanding into a foreign market, it's important to study the laws and customs of that country so that you can best make decisions about benefits and salary. Since other countries take different approaches to employee benefits, it’s important to ask yourself these questions before offering an international employee your standard benefits package. By doing this research up front, you can avoid any surprises later on in the process.

Do they have a national health insurance system? If so, what does it cover? How long do employees get paid leave after having children? Is there a required minimum number of paid vacation days per year? How many sick days do employees get per year? Do they have laws governing overtime pay and work hours? What is their minimum wage? How much does it cost to live comfortably in that country (rent, food, transportation and other expenses)?

2. Educate your team.

If no one on your HR team has experience managing international benefits and compensation, now is the time to educate them so they can handle this task effectively. They'll need up-to-date information on how to set up benefits in each target country, including how much they'll cost and how they'll be taxed by each country's government.

Additionally, your HR team should understand the ins and outs of international compensation so they can help you make the right decisions when hiring new employees or negotiating with current ones. They should also be able to explain the policies to new hires or those who are transferring to another country (from within your organization).

3. Establish a clear budget for benefits and compensation.

Once you've completed these tasks, it's time to establish a budget for benefits and compensation costs — including any taxes that might be levied on these expenses by various governments around the world.

Once you've developed some general guidelines, it's time to take a closer look at each country where your company operates and determine how much money will be needed each month or quarter to pay employees' wages and benefits. Your employees' salaries should be competitive with other companies in the same industry, and also with other companies in their own country.

4. Be sure to define all terms that will be used in your contracts.

The best way to ensure that everyone is on the same page about what their benefits and compensation package means is by defining key terms in your contracts at both headquarters and abroad.This includes things like vacation time, sick days, and overtime pay.

Be transparent with your employees so they know exactly what's expected of them at all times. This will help prevent any confusion or misunderstandings down the line when it comes time for reviews or pay adjustments based on performance or other factors.

5. Handle the task yourself or hire an expert to do it for you.

Determine what kind of infrastructure you have in place for managing benefits and compensation. In some cases, it may make sense for you to handle this task yourself; in others, it will be better to hire an expert who can help you navigate the complexities of international payroll management.

If you choose to handle it yourself, make sure that you have a clear understanding of how your business is organized and how its employees are grouped together. You also need to understand how different countries' labor laws apply to your organization's operations, so that you can ensure compliance with all applicable regulations.

Employer of Record (EOR): A full-service solution

An Employer of Record (EOR) is responsible for providing payroll services, benefits administration, and other HR support to its employees working in another country.

A good EOR will cover:

  • Health insurance for your global employees

  • Equipment provisioning for international hires

  • Handling equity, bonuses, and other financial benefits based on local laws

  • 24/7 support to answer questions about visas, onboarding, and/or payroll

  • Dashboards and analytics so you can visualize how your team is distributed

Additionally, an EOR provider should handle all the paperwork and ensure bulletproof compliance with local laws, so that you don't have to worry about fines (or in some cases even jail time).

Remofirst is an Employer of Record (EOR) operating in 150+ countries and we manage employees & contractors for Fortune 500 companies around the world.

Summary

One of the most important things companies who succeed in expanding globally do is manage their benefits and compensation programs effectively. Although there are ways to do it manually yourself, the most simple and safest option is to partner with the right Employer of Record (EOR), who can help you explore options, decide on a strategy, and implement it seamlessly so that both employers and employees are happy with the results.