As you look to grow your business in international markets, there is a lot to consider with regard to HR and global HR strategy. Maintaining compliance while effectively managing and building upon your global teams is incredibly complex, especially for businesses without much experience operating in foreign countries. In this session, the discussion is centered upon global HR, and what all companies must ensure they understand before going global.
This webinar was originally featured at the BambooHR Virtual Summit 2020.
With over 15 years of experience in HCM and professional services markets, Adam Sheffield oversees Global Upside’s worldwide sales organization with the aim to help clients navigate global workforce complexity. A true entrepreneur at heart, Adam is tenacious and designing strategy and mentoring teams to forge strong client relationships and transform the way businesses manage growth. Please welcome Adam Sheffield.
Adam Sheffield: Hello. Hi, I am hoping you are all having a wonderful time at the HR Summit by BambooHR. We are grateful that you are able to join our breakout session called “Go Global. Act Local”. I am trying to provide you some strategies to keep you successful internationally with your employees.
And just a little bit about myself and our organization and Global Upside. We have been in business for 21 years. We are headquartered in San Jose, the Bay Area. We have been helping companies on the international side ever since then and we primarily helped around what I call, kind of, the entity creation and incorporation, all the way through guidance around HR, payroll, to accounting functions. So all of those things fall under the HR suite, or the payroll suite or the accounting suite comes to our organization to help support companies in those challenges internationally, we do it in 150 plus countries.
A little bit about myself – My name is Adam Sheffield, I am the chief revenue officer here, I live here in Salt Lake City, it is in one of our shared service centers, I live here in the mountains and love the Utah snow, cannot wait for that to start, so we can start skiing again. But about my experience, I have been in the HR payroll space for 15 plus years, many of those years on the global side, helping organizations navigate those challenges. Before I came to Global Upside, I was the VP of Global Sales for a company called ADP. And that is how I got to know of Global Upside, they were a partner of ours, they still are a partner of ADP’s. But I came over, got to know Ragu, our CEO very well, and came over to join this organization that was great at executing and delivering and filling in some of those gaps that existed. Excited to be able to talk to you today about some of the strategies and challenges and some of the pitfalls that companies fall into when they go international.
So, to give you some key considerations on this on the international side, and what you are trying to do, maybe you are already global, or maybe you are thinking about going international, and you are trying to figure that out, the key thing is location. Where do you want to go? Why? What is driving you there? And then the question is to say what type of footprint do we want to have? Is it going to be small or big? Are we going to be there for a long time? Or are we going to be there to try it out? Maybe it is just to support one of your clients or you find out that it might be a good market for you to be in? And so you might need to figure out what is the best strategy? What we mean by footprints, small or large. It depends on how you set up that entity.
Are you going to set up an entity meaning it could be a branch, it could be a wholly-owned subsidiary in that country, are you going to use a company like some of the things that we provide, where we can do the employer of record service for you in those countries or a PEO, that we provide that service will hire your employees on behalf of you? Those are some of the things that you need to consider when you figure out what type of footprint you want to have.
And then the other thing is to consider is what are the HR and employment law in those countries? How challenging are those? We see a lot of times where organizations make a misstep there because they did not consider that aspect of going international in that country. If they would have maybe selected a different country adjacent to that area, it could have been a better opportunity for them and better employment law practices in that area versus some of the other more constricting ones.
What are the accounting and the payroll like? What type of services do you need to have to make sure that your books are proper and up to date in those countries? Are you prepared to do transfer pricing? What does that even mean? All of those things you need to consider when you think about your international strategy. And then you need to say, put some thought process not say but put some thought process around. What systems do you have? Are the systems you are using right now only US-based? Do they only support your international employees? Are there areas where they might not be GDPR compliant, so they might not be available for you in those other countries? And then what are the other compliance pieces that you need to have? What other laws around, you might need secretarial services or resident director, are you prepared for that? How can you navigate those things, so you do not make a mistake and go into it improperly?
When you do make that decision, you put those things together, now you are going to be hiring your employees. And these are the three areas where we mainly see US companies deal. First of all, they like to do what we call an independent contractor. So, how we get contractors? Well, the 1099 or the independent contractors in the United States, that practice is not legal internationally, that is not something that you can do long term. However, we see a lot of US companies do it, they wire money to individuals. And what happens is when there is a termination, regardless of that employee or contractor, said that they were signing or paying their social charges, a lot of times they do not, and they do not even know how to. So the foreign country is going to side with those employees. Or you might have an issue where, “Hey, that could be seen as money laundering”. You are just wiring money to someone internationally, that is a problem, or you have issues with intellectual property. Is that employee you are saying they are not an employee, then it is their intellectual property and then it becomes this intellectual property fight. So we have seen all types of things. The way to do independent contractors legally, and it is different than what we do in the United States, is to be able to have that employee have their own company, and you are paying that company. That is the only way to do it. But then again, you still have challenges with intellectual property. So most companies in the US now are kind of wising up and they are realizing that is not a valid option for them.
So they will do either direct hires or an employer of record service. And to explain that a little bit, a direct-hire is where you have set up your entity, whether that be a branch or subsidiary and you hire those employees directly. The employee contracts are with you, you are making sure that the payments are done, your payroll, HR, all the compliance things fall on you.
The other option that has been a fast-growing option in the past 10 years, is this term called the employer of record, or PEO, a little bit different than PEO in the United States where you have co-employment, this is a situation where the organization becomes the employer of record. So all the employee contracts, all the compliance aspects of that employee are now on that organization’s behalf to be able to do it for on behalf of you as a client. So that is an area that is growing fast and makes a lot of sense. If you are just having one or two employees, and you are testing out a market, it might make a lot of sense for you to consider that option.
Here is a great quote that I love by the author, Simon Sinek. It says “When people are financially invested, they want a return. When people are emotionally invested, they want to contribute.” I like that because it falls well into your international employees.
And a lot of times we see organizations that select a place, they know where they are gonna go, set up their entity where we are supporting them. But what they do is they lose focus, or they try to apply their US business culture to a different country. And that never works. The way they do business in France, or Portugal or Brazil, or Singapore is different than the way we do business in the United States. And a lot of times organizations make that mistake. They do not take that into account when they are looking to go international or they are trying to get something done globally. And that is important for that employee experience. They feel like there is an organization they are working for that does not, so to speak, get it in their culture, or what is going on in their country, it can be very difficult for them. For example, if you were going to roll out a key initiative in France in August, or a new training in France in August, that is a bad idea. Most of those people are on leave and that would be a huge mistake.
Another thing that we see a lot of times are things like weddings, here in the United States, you go to a wedding, it might be a weekend, it may be the longest, maybe a day and a half or even a few hours. Internationally, it is different, especially in Asia you could have a wedding that goes for a week to two weeks, maybe a month, depending on a wedding in the family and who that is. And you have to be aware of that. So you do not try to apply your pressures or the way you do business in the United States or those countries because you want those employees to be happy and to understand.
The other area that always is critical, to keep in mind, is under the employment law aspect of your international folks, keep in mind that when you employ someone globally, there is no at-will employment. You cannot just terminate them when you want, you always have to follow a process in that given country. That can mean a lot of different things. That means that there are certain performance plans you have to have in place, you have to have the right work councils buy off depending on their job description and their job title. There is a lot of things to take into consideration, you cannot just terminate them. And if you do, it is very, very expensive. It costs a lot. Because companies make mistakes when they try to do that. You are always giving them an employee contract, which is a legally binding agreement on both sides, not just an offer letter like we do in the United States.
A lot of things might be, you have to consider is around your pre-hire checks. What kind of background checks, can you do? Can you do drug tests in a certain country? It is very important that you understand those things. So right out of the gate and step in a landmine that can cost you. What is the immigration status of that employee? What type of work permits need to be applied for, for those employees that might need to be done? There might be a medical check that is needed to onboard that employee. Or in India, you have a 45-day waiting period and notice that they need to get before they leave their employer and come to you. So there are all these things that have to be signed off and documented with the proper jurisdictions and agencies in those countries to make sure you can onboard them properly. And then the other thing is, a lot of times companies miss the entitlements or the things that are needed in those countries that are commonplace, that are required, that are mandatory, that are even outside of the employee contract. So it could be things like in Brazil, where you might need to have 14 payrolls, even though it is a monthly payroll. It is 14 payroll, 14 months, there are only 12 months out of the year. Or you have to run payroll before they go on vacation in the summer, and then you need to run an extra payroll during the holidays, during the holiday time. So that is something that you need to be aware of, and you need to make sure that you are doing those things right. If not, you are going to have a disgruntled employee, and then you are going to have some very expensive fines coming your way.
Some of the other things that a lot of organizations maybe are not aware of are things like work councils and collective bargaining agreements. The job description might cause an employee to fall under that. There are different requirements and guidance that are needed if that is the case. What are the working time regulations? What does that mean? Who are the people that you need to have clocking in and out? Just recently, a year ago, in Europe, in the EU, they had a new ruling that said everybody has to track their time. Regardless of their hourly, or salaried, they have to track their time, because they found that some of the salaried employees will be available for overtime, depending on the country. So what happens is a ruling goes like that out. Now each country is identifying how to do that properly. So it is important that you know those things, so you can make sure that you are on top of them again, so you do not get in trouble with your employee or the government or agency that is responsible for those things.
And then what are the benefits? What are the benefit packages that are customary and which ones are supplemental? On top of the benefits that you might not have in the United States, or that they are the norm in those countries, even though they might not be statutory, these might be more customary, and therefore called supplemental benefits in that country.
The other thing to keep in mind, right, you think about these global employees, they are spread out across the globe. And maybe what we see a lot is most of the employees in the United States or North America and then they have got a handful of employees globally. And a lot of these employees are run by different systems, whether they be local systems in those countries or their Excel spreadsheets, and email is typically what we see. And that employee does not have the best kind of experience of feeling part of the organization, because they are not part of that system that exists. A great example, you have got BambooHR in the United States that you are probably using, they do a great job. They have a phenomenal product. Internationally, there might need to be some Wage and Hour Laws in a given country that you are going to have to track independently of that. So how do you do that? Typically, we see Excel spreadsheets or emails that are done, and then what happens is you lose visibility.
So you cannot make good business decisions because you do not have the right functionality with your HR system. So it is important that you consider an HR system that can function in that way, that can connect, that can work with your US system. One of the things that we have at Global Upside is our own global HR system that connects with BambooHR because BambooHR does the US. We do international, we provide the localization and the local requirements in those countries in our system. And it works very well. So now your employee feels connected, and he can make good business decisions. So that functionality is really important. And then what type of systems can connect? What are its capabilities? Because you might have little nuance things that need to be done based on the requirements in that country? What is the reach like, is it multiple different languages? It is really difficult to give someone a system that is only in English, and they speak Japanese. it would be challenging, do they feel like they are part of the organization? Probably not. However, if that system that they are interacting with your organization is in Japanese, that makes them feel like, “Wow, this company values me, I am only one of a handful of employees in Japan, but they do value me, that I can communicate this way to my organization.” Then how reliable is it? Does it have the right GDPR or security requirements that are needed to be legal in those countries? Or is the data being housed properly? Is it housed in the system that is going to be able to have the proper backups, so you do not go down and that you are struggling to stay connected to your employees. So those are the four aspects that we consider when you are looking at your HR systems and how you are going to manage your employees worldwide. Get out of the Excel spreadsheets and emails. It is not the best way to manage and by the way, you can open yourself up for some liability because of that. Get out of those into a system that makes sense, gives you visibility into your organization like you are doing with BambooHR today in the US.
Another great quote from Doug from Campbell Soup, “To win the marketplace, you first must win the workplace.”
Cannot agree with that more, you have to take care of your employees. It is important that we do that. Sometimes it is hard to do it when they are so far away from us. I mean, look at today, we are at a webinar. We are having a conversation over the video again, how many zoom calls are we on lately, but we cannot get on a flight. We cannot just fly away and see our employees face to face like we used to. It is a different workplace. So how do they feel connected? How do we keep them engaged? Those types of things that we talked about systems, culture, all of those things are very important to make sure that we keep those things aligned. So our employees feel like they are part of a great organization, which I am sure they are.
Some of the other things that we have, as far as keeping those employees engaged, we would give recommendations to, is how do you want to manage them. A lot of organizations will manage them centrally or have a central hub here in the United States that kind of manages their international employees. But as they get bigger, they typically go with a regional kind of approach, that they have a group of people that will manage Europe or Asia that are more close to those time zones that make more sense. And then as they get bigger and bigger, they typically actually have someone locally to help support them. Again, still reporting into a centralized corporate hub. But really, that is where the rubber hits the road as far as services being done. But making sure that you have that kind of capability and then when you have local support. If you do not have it on your own internally, who can you reach out to? Companies like us, we make sure that you have that local support internationally, then you do not have to try to figure that out on your own. You are not googling something to figure out what is the answer to a very serious question you are trying to deal with one of your employees.
And then what type of local expertise do you have? Is there someone in your organization that can do some of the things that we have been talking about? Great! If not, what do they know as they get more knowledgeable? Can you now add those things to them? And then your communication. Are you available? What are your work hours and time zones look like? Again, this is where systems can help and support, to be able to communicate your employees and be able to have a case management log, if done well, that you can manage those things. So again, it is not just email, and you are trying to communicate with someone in Japan and Japanese when you speak English. There are ways that you can handle those and support those better for your employees. And then what type of payroll systems need to be put in place, making sure that all the requirements are done in those countries. Are they being paid at the proper time, you do not want to miss a payroll, you do not want to miss a pay stub for someone. First of all, are they getting the paper pay stub still because, in some countries, that might be a requirement? So those things are really important that they feel like you understand their local country, and it will help them be more engaged.
And then going back to benefits, benefits is a big one. In the US, we are so used to the company providing those benefits for us. And internationally, it can be a little different. You have the statutory, they are mandatory, you are going to be required to provide those. Those are not going away, that is part of the service or employee someone in that country. But then there are what we call the customary and supplemental benefits. What are those customary benefits? This employee who does this type of work in that country is used to a certain set of benefits that you might not even be familiar with. And then above and beyond that, sometimes you want an employee to stay, it is a retention tool. You might provide supplemental benefits on top of the customary benefits. So there is a whole process to understand the benefit aspect to your employees internationally, and each country is different there is no one-size-fits-all solution, it really is.
And again, these are some of the areas that we can help support you at Global Upside Corporation. Like I mentioned earlier, we have been doing it for 21 years, and you have my contact information there, you are welcome to free to reach out. We love supporting organizations, we have had many situations and I will give you a couple of examples, which I think give a good taste of who we are and what we are all about. We provide the life cycle for an organization in a given country.
I will give you an example, we had a Private Equity come to us and say they are buying out 100 and some employees in 10 countries from a large organization, it was a divestiture. And they were buying them out, the seller was not helping them transition and they came to us and said that “We want to put everyone on your employer record service. That is what we want to do.” And we talked about the long-term strategy of what this private equity was trying to do. Are you going to be in those countries that you are trying to put everyone on the employer of record and actually, it might make more sense to set up your own entities. So, we ended up setting up instead of it was in 12 countries, we ended up setting 10 countries up with their own entities within the 45-day window that they needed for their TSA and transitioned it to other countries to employer record services. Because that is the type of flexibility this company needs. It is never a one-size-fits-all. Your strategy will vary country by country, client by client, however, you are supporting whatever is driving your international needs. And that is important to keep in mind and we are here to help and support you.
If you have any other questions, please reach out. Let us know. Enjoy your time at the conference. Enjoy this beautiful fall weather and thank you so much.
Adam brings more than 15 years of experience leading sales organizations in the HCM and Professional Services market. He currently oversees the global sales organization and helps Clients navigate global workforce complexities in over 150 countries. A true entrepreneur at heart, Adam is tenacious in designing strategy and mentoring teams to forge strong client relationships and transform the way businesses manage growth. Prior to Global PEO Services, Adam has held a variety of leadership roles for ADP, one of the world’s largest outsourced payroll and HR companies, including Vice President of Sales, Global Enterprise Solutions, for ADP in North America.