Whether it’s your company’s first global expansion venture or you’re already operating abroad, determining what is required for your business in a new market can be an overwhelming and time-consuming task.
In talking with multinational companies (MNCs) across sizes and industries, our international HR experts have found implementing both statutory and supplementary (non-statutory) benefits packages to be among the most daunting undertakings for a global HR department.
“However difficult it may be, offering the right benefits package is critical for success overseas,” says Liliana Mata, GoGlobal’s head of account management for North America and LATAM. “Sometimes, an MNC makes the blunder of not aligning operations in a new market with local compliance regulations, cultural expectations and company ethos. This can result in fines, unexpected costs, irreparable reputation damage and talent retention problems.”
A global benefits integration strategy – one that accounts for local statutory benefits and supplementary offerings – will pave the way for success in a new market. When done correctly, an MNC can apply benefits to harmonize a global team and build a sustainable talent pipeline in any country around the world.
Staying compliant with statutory benefits
There’s a myriad of reasons why administering cross-border statutory benefits can be complex.
- The baseline for compulsory benefits can vary by country, region, city, economic union membership, free trade zones, industries and worker categories. In many cases, the worker or the employer (or, in many cases, both) are required to make contributions to the payroll in order to fund public or private benefits. The HR team must be aware of these obligations in order to properly execute payroll.
- The scope of statutory benefits can vary and may include requirements unfamiliar to the HR team. For example, the global HR team will be tasked with learning the nuanced requirements for paid holiday leave, paid sick leave, parental leave, workers’ compensation, unemployment insurance, bonuses, retirement, garden leave, medical insurance, training and more.
- Adding to an already unfamiliar regulatory landscape, the HR team must also be aware that the contribution rates, bases and requirements can evolve regularly following amendments and new legislation. It can be difficult for the global HR department – especially when managing a workforce across multiple countries – to keep pace with updates. This puts the company at risk for labor law violations.
Supplemental benefits are a lever for top talent
The extras really do matter. Supplemental benefits (those not required by law) play a key role in an MNC’s talent strategy. These benefits may include offerings like private medical insurance, dental benefits, financial education, education, training, counseling, career development, transport supplement, housing support and more.
“Expectations for supplemental benefits can vary greatly across countries,” says Ana Vizzotto, GoGlobal’s director of client solutions. “For example, in the Philippines, many companies provide a monthly rice subsidy to workers. In some Latin American countries, it is customary for employers to provide meal and grocery stipends.”
In an increasingly competitive marketplace marked by labor shortages, forward-looking companies are designing robust supplementary benefits packages to engage and retain top talent. However, it should be noted that adding supplemental benefits, while critical for success, can pose a challenge for a global HR department.
What works in one market may not work as smoothly in another. For example, certain categories of benefits may be taxed differently in different jurisdictions, creating tax liability issues for workers and companies alike. What was initially intended to be a benefit can easily become a burden.
Supplemental benefits must be designed to resonate with the cultural expectations and legal ramifications of the country the worker is located in.
Global integration of benefits is key
For companies managing a workforce across borders, benefits offer a unique opportunity to unify the team and reflect the company’s ethos, harmonize a corporate culture and bolster the overall talent strategy.
Naturally, offering benefits in one market and not in another can have negative implications for the workforce. While cost is of course a major factor, it is important for a global HR department to understand the long-term advantages of integrating certain benefits across all the jurisdictions it operates in – while still customizing packages in some countries to meet statutory requirements and niche cultural expectations.
An Employer of Record can help your benefits “go global”
There’s no way around it: administering benefits can be tricky and there are regulatory and reputational risks to consider. Companies need to streamline the administration of both statutory and supplementary benefits in every country it operates in, for the betterment of not only the workforce but the company at large.
The Employer of Record (EOR) hiring model is a resource that can help MNCs streamline benefits and build a globally integrated package for workers. The EOR, as the official employer of the worker, is liable for following the jurisdiction’s labor code – including contributions toward statutory benefits.
In many cases, the EOR can also help build a supplementary benefit package that reflects your company’s ethos and resonates with the labor landscape of the country you’re hiring in. For example, GoGlobal offers free supplemental benefits to workers in some of the markets it operates in, which can offer client companies a leg up in attracting and retaining workers.
The EOR hiring model provides great benefits along with a solid compliance footprint across borders. As a result, companies can tap into top talent – no matter where in the world they are located.