When you need to hire good people, you may not always find them close to home. You could recruit your next remote marketing manager from overseas. Or perhaps you’re taking your business global. You want to bring on staff who live and work in the countries you’re expanding to.
While hiring from locations outside your home country can be an effective recruitment strategy, it doesn’t come without obstacles. Different labor laws, cultural variances, and currency fluctuations are just a handful. Issues like these shouldn’t stop you from forging ahead. However, you don’t want typical international hiring challenges to put a wrench in your plans. Here are four potential barriers you may need to work around.
1. Labor Laws
When you decide to hire abroad, you may not realize what red tape lies ahead. Each country has a unique set of laws governing employee-employer relationships. Typically, these regulations extend to independent contractor relationships as well. While there are some parallels to hiring across state lines in the U.S., international labor laws can be more complex.
For instance, hiring global employees means your company usually needs to set up local legal entities. This goes for each country you want to hire from. Without these separate legal entities, your business won’t be in compliance with labor laws. In some nations, companies must establish local entities even if only freelancers are brought on board. Setting up these separate companies can take a year or more.
You’ll also spend money in the process, which can get expensive if you’re hiring from several countries. Your business must also comply with each nation’s laws, including taxes and benefits. A faster, more cost-effective way to go is to partner with an employer of record service. An EOR already has local legal entities in place and handles compliance requirements for you. They become the legal employer, but you manage your global staff.
2. Cultural Differences
Quite a few countries around the world speak English. It’s an official language in 40 nations, and 18 others partially use it. About 410.4 million individuals worldwide are native English speakers. However, sharing the same language doesn’t mean all native speakers share identical cultures. There’s more to communication than using similar words and linguistic structures.
Even if you hire from countries where populations are well-versed in the same language, cultural differences impact a lot. Culture can influence everything from training to work styles and management preferences. Social traditions usually shape what employees and contractors expect from a professional relationship. So despite technically speaking the same language, you may not be coming across from a cultural perspective.
For example, U.S. workers tend to be more individualistic when it comes to highlighting achievements. In contrast, employees from collectivist cultures may see work accomplishments differently. They might talk about goals and triumphs from a group perspective. Instead of focusing on what “I” can do, they’ll speak to what “we” can attain. Individualistic coaching and managerial styles may cause confusion or disengagement.
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3. Currency Fluctuations
International trade involves converting currencies, sometimes daily. Running global payroll is no different. As a business, your costs of paying international employees and contractors are subject to currency fluctuations. These variations may increase your overhead, especially if the currency in question is more volatile.
Rapid changes in exchange rates could make labor cost projections obsolete. The amount for salaries and benefits you have on the books may no longer be accurate. What you thought would cost you $2,500 this pay period has now shot up to $4,000. Of course, currency changes can also work in your favor. But depreciations in one of the currencies your business deals with may impact your overall operations, including non-labor-related expenses.
Keeping on top of exchange rates and market volatility helps global companies prepare for potential financial implications. For example, a few Chinese companies are hanging onto export revenues in U.S. dollars since the yuan may lose value. Other Chinese firms are using currency-hedging strategies to balance out currency exchange gains and losses in 2023. The stability of various worldwide currencies can become a deciding factor in your company’s plans.
4. Compensation Issues
Offering competitive wages and benefit packages is critical to any recruiting strategy. Yet companies can encounter difficulties with national hiring efforts at home because of differences in labor market conditions. These conditions include disparities in state minimum wage laws, unemployment rates, and dominant industry players. Some of the same challenges apply to international labor markets.
The difference is your business is dealing with diverse tax and benefit structures. You might offer a candidate above the local minimum salary range for an open position. But the country’s tax rates and other cost-of-living factors may decrease the offer’s value. Maybe it’s too low for a worker with a family to accept. Your company loses the chance to hire its top candidate because the compensation package isn’t competitive.
Multinational recruiting efforts might complicate matters further if there are wide gaps between various countries’ average compensation. Say you’re hiring internationally for teams of software engineers. Competitive pay for the position is substantially less in one of the countries you plan to recruit from but not others. You’ll have to decide whether to pay everyone the same or adjust wages for the location. Alternatively, you could include only countries with similar pay scales in your strategy.
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Mastering Global Hiring Challenges
International hiring can be intimidating for any business. You’re facing a brand-new set of labor laws on top of cultural nuances you may not yet understand. Navigating around these barriers isn’t impossible, but you’re less likely to succeed if you don’t do your homework. Researching and vetting all your options, including partnerships with global HR experts, can help you avoid the most common pitfalls.