Global HR: Are you ready? Jane Booth, Globalization Partners November 28, 2017

Transcription

1 Global HR: Are you ready? Jane Booth, Globalization Partners November 28, 2017

2 About Globalization Partners Globalization Partners is a global Employer of Record, or global PEO. We hire a client s candidate onto our payroll locally and assign their services back to the client. So while we assume responsibility for payroll, tax and labor law, the employee walks and talks like the client s own. Named 2017 Global PEO of the Year by the Global Payroll Association No. 33 on the Inc 5000 list of fastest-growing US private companies (no. 6 last year) Largest legal and client service team of any PEO, to manage risk Jane Booth Jane is Vice President of Sales for Globalization Partners, joining the firm as employee number 2 in She previously worked for Radius, advising VPs of HR and CFOs on expansion into more than 100 countries. Prior to moving to the US, Jane was a headhunter in London, UK, where she focused on helping US multinationals to build out their pan-european teams.

3 Agenda Considerations for going global: True cost of employment Differences in employment landscape Creative ways to hire talent fast Case studies Resources 3

4 Going Global is still a Top Priority According to the Wells Fargo 2017 International Business Indicator: 81% of respondents expect a rise in international activity in the next 12 months This is despite 86% having concerns about the negative attitudes towards trade pacts and 32% having concerns about Brexit... While also reporting the highest level of business optimism since the survey started in 2014 The top 5 markets were China, Canada, Mexico, Japan and Germany Source: Wells Fargo 2017 Business Indicator, April

5 Considerations for going global: A team effort! Develop business strategy, tax strategy, sales strategy, budget and forecast, production/logistics, capital requirements, review local regulatory framework, compliance requirements, entity structure... Several areas where HR contributes: Explain the true cost of employment Educate on differences in the employment landscape especially notice periods Find creative ways to hire top talent FAST 5

6 What is the true cost of employment in... United Kingdom Social Security 13.8% Mandatory corporate 6 pension plan (sliding scale) 3% Statutory vacation Notice period TOTAL: 16.8% Takeaway: Don t just take the social security rate check other mandatory costs Brazil Social security (INSS): 24% Retirement (FGTS): 14.43% Training Fund (SENAI) 6.8% Severance (Aviso Previo) 0.83% 13 month bonus 8.33% Annual vacation pay 11.1% Benefits/meal vouchers 14.5% TOTAL: 79%

7 Educate on differences in employment landscape Where are some of the pitfalls that require special attention? Notice period at-will is a concept that does not exist outside the US Watch for mandatory severance often one month per year of service plus prorated amounts for 13-month bonus and vacation pay plus additional accruals for seniority Mexico 90 days severance, plus 20 days for each year of service, plus prorated 13-month bonus and vacation pay, plus seniority premium of 12 days per year of service (capped at 2x minimum wage) Even if this is a dismissal for cause, it is extremely difficult to prove in the labor courts and the costs for proving cause often outweigh the original payout. Take the path of least resistance! The probation period is your friend! 7

8 Educate on differences in employment landscape Where are some of the pitfalls that require special attention? Watch for Collective Bargaining Agreements what do they govern, and how can you select one that is most advantageous to you? Hours of work Benefits Notice period Check other key areas of labor law that can push up cost parental leave France is up to 2 years and employee cannot be dismissed during pregnancy/leave - check CBA for whether leave is paid by the employer Vacation and sick leave - 20 days in Australia, plus 10 days of sick leave annually plus 7 public holidays 8

9 Educate on differences in employment landscape Where are some of the pitfalls that require special attention? Benefits, benefits, benefits... Start with what is locally expected rather than mirror the US model Many countries have strong socialized medicine and additional insurance is neither necessary nor expected Japan, Germany Some countries have a mix of public and private Argentina requires employers to contribute 5% to the Obras Sociales a plan that each employee carries round from job to job The CBA in some countries may include an obligatory benefits plan, but the plan varies from CBA to CBA Brazil, Colombia In some countries, a top-up plan on top of socialized medicine might be needed to recruit top talent UK, Canada This might be cheaper than you think! If statutory benefits are strong, supplementary are not expected 9

10 Creative ways to hire top talent fast We need boots on the ground today! Early steps in a new market so often come down to putting someone on the ground to test the market, gain traction with some early customers, before building an infrastructure I ve just interviewed an amazing candidate in Germany can you get her onto next month s payroll? Options: Set up a local entity to be the local employer - XYZ GmbH Hire as a contractor Hire through a global PEO, or Employer of Record 10

11 Creative ways to hire top talent fast Local Entity Advantages Can easily scale no limit on headcount, well to the hundreds Strong from a tax perspective tax gurus may prefer this option Points to consider Takes several months to set up, and you may lose your candidates Setup and maintenance costs are high - $40k setup not unusual Creates a taxable entity tax gurus may dislike this option! Burden is on the company to manage local labor and tax law When might this be a good option? 11 If you know you will scale quickly a call center in the Philippines, a tech team in India

12 Creative ways to hire top talent fast Hiring as a contractor Advantages Don t need to set up an entity if it doesn t work out, no tax footprint Can hire fast Points to consider Can limit the talent pool many top candidates have never been self-employed and want the security of being an employee Misclassification woes costs can run well into six figures and your contractor has a bargaining chip When you grow large enough to need an entity, contractor fees converted to salaries can unbalance your compensation scale When might this be a good option? 12 If the candidate is hand on heart TRULY an independent contractor but don t turn a blind eye or let yourself be talked into it

13 How can misclassification cost so much? A thumbnail sketch of how the costs can mount up: Independent annual contractor fee: $100,000 Withholding 35% $ 53,846 Gross salary: $153,846 Payroll 46% $ 70,769 Total tax cost: $124,615 Over three years: $373,845 Plus employee benefits: Plus penalties: Plus interest: $XXX,XXX $XXX,XXX $ XX,XXX 13

14 Creative ways to hire top talent fast Hiring through a global PEO How does the model work? Client sources their candidate Global PEO hires the candidate through their local entity in-country Global PEO takes responsibility for the locally compliant employment contract, payroll, payment of all local payroll and withholding taxes, provides statutory benefits plus supplementary where required, expense reimbursement, compliance Global PEO assigns the candidate back to the client; while the global PEO is the legal employer, the employee takes direction from the client and walks and talks like the client s employee 14

15 Creative ways to hire top talent fast Hiring through a global PEO Advantages Secure top talent they like the security of being an employee Hire immediately onboarding in a matter of days Labor law and tax compliance moved from the client to the PEO Avoids misclassification risk Flexible terminate in one month, and no footprint Points to consider Designed for early expansion stage does not scale to high headcount typically move between 8 and 15 hires per country When might this be a good option? 15 First few hires in a new country, outlier employees

16 Case studies: Hire a VP APAC in Singapore Sponsored visa for a US national, hired through us VP hired 8 employees so far into his team through us - 4 in Japan, 1 in Hong Kong, 1 in Thailand, 1 in Australia, 1 in Taiwan Japan became a local entity (KK) and employees transitioned Now hiring in LATAM with similar process starting in Colombia H1-b application failed for an Indian national we hired locally Contractor team of 12 in Mexico client concerned about risk converted them all to employees via our global PEO Company made an acquisition assets (including people) moved but entities didn t we hired the overseas employees on deal close Company closed deal which required their employees at client sites worldwide on a 2-year contract hired through global PEO 16

17 Resources: (online Knowledge Base of 130+ countries) World Bank reports a thumbnail of labor law and taxes US Social Security Administration data on worldwide social security International attorneys, global HR groups on LinkedIn Me! Globalization Partners knows a lot of firms focused on international recruiters, attorneys, benefits consultants contact me and I would be happy to connect you with someone who can help. jbooth@ 17

18 Thank You Jane Booth