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Expanding your business to another country opens the door to countless new opportunities. From accessing fresh markets and reaching new customers to tapping into previously unexplored talent pools, the potential benefits are vast.
But global business expansion is a big undertaking, and no company should go into it without thorough research and preparation. In this article, we’ll share 10 essential questions that every company should consider before taking the leap into global expansion.
The role of compliance in global business expansion
Expanding your business globally means exposing it to a lot of risk. That’s because every country has its own set of labour laws, tax legislation and business regulations that could apply to your company. If you don’t pay enough attention to these things, you could easily find yourself in breach of the law.
Aside from the potential legal consequences, non-compliance can have a devastating impact on your company’s reputation. It can lead to negative publicity, a loss of trust in your brand and even problems with talent attraction and retention.
On the other hand, taking a proactive attitude to compliance demonstrates a commitment to ethical business practices. It shows that you understand the impact your actions can have on your employees, customers and wider society in the countries you operate in.
10 essential questions to ask before expanding your business globally
You probably know already that expanding your business overseas will require a lot of research. But, if you’re new to the world of global business expansion, it can be difficult to know where to start. To help you take the first step on your journey, here are 10 crucial questions to ask yourself before launching an overseas expansion.
1. What are the local labour law requirements?
Businesses that expand their operations globally need a strong understanding of the law in every country they operate in to ensure compliance and avoid legal consequences. The problem? Labour regulations change frequently, and keeping up with them is a big challenge for international companies.
The best way to protect your expanding business is to partner with an expert in international labour law. For example, when you work with an employer of record (EoR) like CXC, they’ll provide in-depth, localised expertise to help you manage compliance with everything from employment contracts to tax filings.
2. How should employment contracts be structured to ensure compliance?
While written employment contracts are mandatory in some countries, verbal agreements are acceptable in others. Some countries also have specific language requirements for employment documents, as well as mandatory terms that must be included.
The point is, the standard contract you use in your home country may not work for your overseas employees. Again, businesses can overcome this problem by working with an EoR. At CXC, for example, we provide compliant employment contracts that are tailored to both abide by local regulations and match employees’ expectations, all while taking your internal policies and preferences into account.
3. What tax obligations and social security requirements do we need to be aware of?
Hiring employees in another country usually requires registration with the local tax and social security authorities so you can withhold and pay employment taxes from your employees’ salaries.
If the authorities judge that your company has a ‘permanent establishment’ in a country, this could also trigger an obligation for corporate taxes. However, the conditions for permanent establishment differ from one country to another.
For these reasons and more, working with experts in both global payroll and international tax regulations is essential if you want to ensure compliance and protect your company from risk.
4. How do local regulations impact employee benefits and worker protections?
Employment law includes various provisions to protect employees. However, the rules vary significantly from one country to another, and what is acceptable in one place may be illegal in another.
Each country also has its own requirements for statutory benefits like annual leave, maternity leave, healthcare and flexible working arrangements. In many countries, there are also benefits that are not required by law, but are either mandatory under certain collective agreements or expected by employees.
Understanding both your legal obligations and employee expectations can help businesses to not only remain compliant but also improve their offering to talent in your chosen market. Working with an expert partner can help ensure your benefits align with local standards.
5. How should we handle data privacy and security?
Global expansion almost always involves some level of data security risk, simply because it involves transferring data across borders. And, stringent data protection regulations like the GDPR mean that protecting employee and customer data needs to be a priority for international businesses.
Best practices include:
- Implementing data protection measures including encryption, password protection and access controls
- Appointing a data protection officer (DPO) to oversee GDPR compliance
- Conducting regular data protection impact assessments (DPIAs)
- Obtaining consent before processing data
- Implementing processes to deal with data breaches
If you work with a workforce management partner, you also need to ensure that their systems and processes are compliant with the GDPR. For example, CXC incorporates data protection policies and offers GDPR-compliant systems to ensure personal data is handled securely.
6. What is the best way to manage a remote or distributed workforce?
Managing a remote or distributed workforce comes with a number of challenges. While communication issues can be resolved with a combination of technology, training and processes, problems related to payroll compliance can be trickier to overcome. Even an employee working remotely in a country for a few months could trigger a tax obligation, as well as requiring the correct visa and work permits.
While it’s possible for businesses to handle this internally, it can be a lot of work. Working with a global payroll and workforce solutions partner can help you monitor worker locations and comply with local tax and employment regulations across multiple regions.
7. How can we adapt to cultural differences to enhance employee satisfaction?
A successful business expansion requires familiarity with the local culture, including the norms and expectations surrounding work. This understanding sets you up for solid, positive working relationships with local employees, as well as ensuring that your benefits and working conditions are in line with their expectations.
However, this type of cultural knowledge can be difficult to obtain without boots on the ground. For many companies, the solution is to engage a partner who is already familiar with the local culture and market practices. By offering valuable insights into local customs, people, places and organisations, local partners can also help you hone your branding and market your products to new customers.
8. What are the costs associated with global business expansion?
While the goal of international expansion is ultimately to increase revenue, there are always upfront and ongoing costs that businesses need to consider. For example, it’s important to properly budget for:
- Set-up and business registration costs
- Office space and other real estate
- Recruitment costs
- Relocation costs for existing employees
- Payroll and taxation
- Training and onboarding costs
- Market research
- Licencing and insurance costs
Businesses may be able to avoid some of these expenses by working with a partner like an EoR. These companies allow you to skip the expense of setting up a local entity, as well as providing localised advice that helps you to get more from your budget.
9. How can we mitigate non-compliance risks and avoid potential penalties?
As we’ve mentioned, global business expansion comes with a lot of risk. Labour laws and tax regulations are different in every country, and a lack of familiarity with the law isn’t an excuse for non-compliance. Businesses that want to mitigate compliance risks and avoid penalties have two choices.
The first is to ensure their internal team has the necessary expertise and resources to not only fully understand local tax and labour law requirements but also to keep up with them as they evolve. The second option is much simpler for most companies: protect your business by working with an experienced compliance partner.
10. What are our long-term workforce planning needs?
While expanding a business overseas presents a lot of new opportunities, it’s also a big financial risk. That’s why it makes sense to set up your operations to ensure you have as much flexibility as possible.
While establishing a business entity in your target country is the most traditional way to expand overseas, it also represents a significant time and financial investment. Taking a flexible approach allows you to change course if things don’t go to plan. For example, hiring talent through an EoR allows you to test the waters in a new market without the financial commitment of establishing an entity.
Best practices for a successful global business expansion
Here are some tips to help ensure the success of your global business expansion:
- Centralise compliance monitoring: If your operations span several countries, keeping up with compliance obligations in all of them is a never-ending task. We recommend working with a trusted compliance partner who can handle everything through one centralised solution.
- Establish strong local partnerships: While thorough research is key to a successful expansion project, it’s no replacement for real, on-the-ground expertise. Establishing relationships with local partners including industry associations, workforce management providers and business networks can help you navigate the local market.
- Don’t ignore cultural differences: Taking the time to consider the cultural differences at play will help you to both attract local talent and successfully market your business to new audiences. Visiting your target country in person is a must, but we’d also advise you to seek guidance from locals who know the market well.
Building a compliant and flexible global workforce with CXC
At CXC, we’ve been helping global businesses to expand their operations for more than 30 years. With a presence in more than 100 countries worldwide and a team that’s highly knowledgeable on all things compliance, we’re well-equipped to support you in your global expansion journey.
We provide a range of solutions to help businesses navigate international business expansion smoothly and compliantly. Put simply, we can help you to find the people you need, wherever they are, then engage, manage and pay them on your behalf.
Get in touch with our team to learn more about how we could support your business.
