BlogHidden Costs of International Hiring

Whenever a company looks at global expansions, it needs to familiarize itself with the target nation’s cultural, regulatory, and legal environment. The most challenging aspect of expanding into foreign markets is navigating complex labor laws and hidden employment and operational costs.

This guide highlights a few hidden costs of international hiring during global expansion. We cover:

  • What are the hidden costs of global hiring?
  • How to budget efficiently for global expansion surprises?
  • How to manage a distributed team?
  • Tips for managing the costs and keeping your budget under control

A business should have adequate bandwidth to keep up with ever-changing laws and regulations before entering a new market. Hiring a global talent will expand your business in the long run. There are many things to consider, from tax brackets and payment methods, including managing a recruiting budget for international staff and hiring costs. Along with the other challenges might come some hidden expenses you may overlook. Here are some ways to make sure you’re working your budget correctly.

What are the hidden costs of international hiring?

There are a few hidden costs that can quickly add up and blow your budget when it comes to international expansion and international hiring. In addition to wages, hidden employment costs include payments mandated by law or cultural expectations.

Here are a few things to keep in mind when you’re budgeting for an international hire:

  • Recruitment – The hiring process can take much longer if you’re using a recruitment agency to help you find candidates. This agency fee can vary depending on the agency and the country you’re recruiting. In addition, you are likely to incur a fee for things like a background check.
  • Work visa costs – If your candidate needs a work visa to work in your country, there will be associated costs. For example, the cost of hiring an employee can include the visa application fee and any legal or professional fees associated with getting the visa, which will take a lot more time and effort on your part.
  • Tax laws – Assess your company’s and the foreign employee’s tax responsibilities. For example, foreign workers in the US require a Social Security number and pay payroll taxes.
  • Benefits – Offering employees a competitive salary is often not enough in a hot talent market. Companies may need to compete for the best workers by offering good benefits packages and other perks like car allowances or additional parental leave. Bonuses vary depending on the country.
  • Terminations – A severance package must be offered by employers when an employee is laid off, whose job is eliminated because of downsizing, or who retires. Some employees may receive one when they resign or are fired.

How to allocate your recruitment budget efficiently?

Entering a new market is no easy task, and the costs should be carefully planned and allocated within the global expansion strategy. When distributing your budget for international hiring, there are a few key things to keep in mind. Typically, during the planning phase, the focus is on the regulatory environment, the setup costs, and talent recruitment. Unfortunately, as often as not, language access and support are overlooked over more tangible issues. Still, if you consider that not addressing your new audience in their language would trump all other investments, then perhaps you should reconsider.

First and foremost, be realistic about the costs associated with recruiting candidates from another country. While cutting corners to save money may be tempting, this can often cost you more in the long run. Make sure to factor in the cost of travel for both you and the candidate and any visa or work permit fees that may be required. It’s also important to budget for additional training or supports the candidate may need to succeed in their new role.

Finally, don’t forget to account for the time and resources employers will require to manage the recruitment process from start to finish. By taking all these factors, you can ensure a realistic budget for your international hiring needs.

How to manage costs when you have a distributed team?

Distributed teams entail employees working remotely from different locations, and businesses have embraced the remote work model with the pandemic confining millions of employees to their homes. Assuming you’re managing a team of employees who are all in different locations, there are a few significant areas where associated costs need to be managed and these are:

  • project management tools
  • data security
  • communication tools
  • work from home equipment
  • mental well-being programs

Tips for managing the costs and keeping your budget under control

You’ve probably heard the saying that time is money. Well, that adage couldn’t be more accurate regarding hiring internationally. Unfortunately, the hidden costs of international expansion can quickly eat into your budget if you’re not careful. There are many potential pitfalls, from visa and travel expenses to language training and cultural adjustment costs. Fortunately, there are ways to manage these costs and keep your budget under control. Here are a few tips:

  • Plan ahead and budget assessment – Visa and travel expenses can add up quickly, so it’s imperative to plan and budget for them in advance.
  • Use a professional employer organization (PEO)/employer of record (EOR) service – Several organizations can help you with the visa process and other aspects of international hiring. Utilize their resources to save time and money.
  • Be flexible – Be prepared to adjust your start date or salary expectations depending on your hiring country. Wages vary globally, so you may need to be flexible to stay within your budget.
  • Train your employees – Several barriers can be an obstacle to productivity, so it’s worth investing in technical and language training for your employees to overcome those and be more productive.

About Global Upside

As your business grows and you venture into foreign markets, there are many factors to consider, which can be overwhelming. So how do you decide where to start when addressing your business’s expansion challenges, given the constant time pressure? Global Upside, a Safeguard Global company, provides a wide range of business expansion services to help you expand domestically and internationally, including incorporation, professional employer organization (PEO)/employer of record (EOR) services, accounting, HR, payroll, compliance, and M&A.

Our comprehensive business solution guides you every step of the way, whether you are making your first foray into international markets or expanding your global business. We keep you compliant, offer options and simplify your daily operations so that you can focus on growing your business all via a single point of contact.