Three clients: A major consumer products company, an international investment finance company, and an energy generation company, made acquisitions in South America (Colombia and Brazil) and Asia (Thailand, Malaysia, Singapore). During the acquisition process, they identified several key employees who were crucial to the operation that needed to be retained. The companies were not purchasing the legal entities and were not established in country, nor did they have the expertise to manage the employment of those workers.
The objectives for the companies was to compliantly engage and retain these key workers so the acquisition would grow and prosper. The companies had several options including the establishment of a new entity in country, conversion of the workers to contractors, or outsourced employment of the workers to a third party. Regardless of the method chosen, all three clients required:
- Knowledge of statutory tax requirements
- Ability to pay contractors in their local currency
- Benefit and retirement plans in excess of local statutory obligations
- Transparency and communication
- Knowledge of paid time off and termination notice requirements
- Seamless transition of the workers to prevent disruption of work
The challenges facing these companies were that:
- They did not have a physical entity in the country to manage the contractors’ payroll and compliance
- They did not know local employment standards or payroll requirements
- They could not match the benefits provided to the workers by their former organizations
- They did not have a processes in their US operations for purchasing and wiring foreign currency
CXC designed a contract between CXC Global USA and each of the three clients that established CXC Global as the managing entity, supported by the local CXC Global office in country which managed onboarding, compliance and payroll. This provided local US based support for contracting and administration support, with local in country support for employment and compliance matters.
CXC Global USA took responsibility for working with the local CXC offices, advising on the statutory requirements and benefits due the workers, paid time off requirements, and termination notices and was able to report back to the three companies how they could compliantly onboard the contractors, manage payroll, provide full indemnity to the clients in-country against risk and most importantly ensure compliance.
In the client’s request for capabilities of paying the contractors in local currency, CXC Global undertook currency management. This allowed the contractors to be paid in local in-country currency and CXC Global USA to invoice the three US based clients in USD, providing a seamless solution for accounts payable and full compliance within their own purchase order systems.
The contractors had a local in-country CXC resource dedicated to them, to help with onboarding and any questions during the transition from full time to contractor. They were offered the existing benefit plans CXC Global had in-country for CXC’s existing workforce population. CXC Global directed the contractors to local insurance brokers; government and privatized, for benefits CXC Global could not procure on behalf of the contractors, allowing them to individually purchase what was needed. The approach had the added advantage of enabling the contractor to have these costs reimbursed as an approved expense, rather than as an additional expense to the employer.
CXC Global USA provided each client with a dedicated Account Manager as their primary local point of contact. The Account Manager worked with the local CXC Global offices in each country to answer any questions regarding employment laws, payroll schedules, onboarding and termination.
A consolidated invoice for all contractors enabled a single invoice to be delivered to each client in USD, simplifying the payment process. CXC USA managed payroll and statutory costs with the local CXC offices around the world. Currency risk was managed by CXC with a 90 day average rate, allowing Controllers and Financial Managers to plan costs by quarter.
- 100% retention rate of contractors across all three companies.
- Expanded local support and offerings for contractors. Enhanced currency management and conversion.
- Created reporting of spend by contractor type, spend by country, spend by currency.
- Approval by client leadership to expand the M&A program with CXC Global supporting contractors globally.