All over the world, the COVID-19 pandemic has changed the way businesses operate, possibly forever. Flexible working has emerged as a long-term trend, supported by modern technology like video conferencing that is making it easier than ever to work in any place and at any time. No longer do companies and employees have to be shackled to an office-based nine-to-five routine, and have their ambitions for growth held back as a result.
Because of this, there has perhaps never been a better time for businesses to expand globally and make the most of opportunities all over the world. As keeping your business within the domestic market, could limit your business potential.
This blog explores why companies should explore international expansion, the challenges to getting it right, and what it all means in the context of employing people from across the globe.
One of the most compelling reasons to explore global expansion is obviously the profit potential of operating in more international markets. But for similar reasons, recruitment also becomes easier because flexible working has broken down the physical and geographical barriers to talent. Companies can now (within reason) hire people anywhere in the world, and are no longer restricted to attempting to attract the best and brightest within their country or local area but exploring a more global market.
This is especially important because of a worldwide shortage in human talent. Research from the Korn Ferry Institute suggests that this shortage will reach more than 85 million people by 2030. As it becomes harder to attract the best employees, and the competition between companies to hire them hots up, businesses who can’t take a global approach to talent will be severely hampered.
It’s also worth considering that your competitors will be looking at expansion opportunities just as much as you are. It’s easy to see a situation where they take full advantage and your business ends up being left behind, so expanding to keep pace may be vital, depending on the nature of your industry.
Companies that do extend their reach around the world will perhaps face their biggest challenge in the form of gaining expertise. Entering new markets means going up against existing local competitors, who will have vastly more experience, as well as country-specific knowledge of their marketplace.
There’s also an additional burden from an administrative perspective. Every new country means a new set of laws and trade regulations to get to grips with, and you’ll also need to take taxation into account, both in terms of local taxes and any tax treaty that may (or may not) be in place with your country of origin.
And at a more practical level, you’ll need to consider how employees in different countries will be able to interact with each other as entering foreign markets can sometimes present many different obstacles with one of the main ones being cultural differences and language barriers. This is something to also consider regarding your new customer base, as global employees may find difficulty when communicating with this new market as there may be a problem posed by local language barriers and cultural differences here also.
When spread across different time zones, and when working more flexible hours, it can be much harder to work out who is working where and when, and to organise collaboration within your global teams.
Global expansion also needs careful consideration of how staff are employed and paid. Different territories means different currencies, different rules around minimum wage and bonuses, and different withholding and contribution requirements around tax and social security. All of this has to be managed effectively, not only to ensure staff are paid fairly and accurately, but also to ensure the international business remains legally compliant.
Additionally, all these payroll functions generate masses of data for processing, and if this data is in different formats and used by disparate systems, it can be hard to keep payroll efficient and controlled. As businesses expand, it’s important that their payroll function expands with them, with a global approach that integrates and harmonizes data for every employee worldwide, and eases payroll functions in every applicable currency.
Making things more consistent and integrated helps the business as a whole, too, especially when moving money from one country to another. A unified global business solution can help companies track things like currency exchange rates and processing fees, and factor in lead times in completing transactions.
The importance of payroll in any global expansion business plan can’t be overlooked. Running different payroll operations in different countries is a sure-fire way to over-complicate things, to the point where it’s hard to prove compliance and keep costs under control. A unified approach that combines a global payroll solution and expertise across territories is the best way forward.
To help you plan your payroll as you expand globally, CloudPay has created a library of payroll guides to dozens of countries all over the world. Take a closer look here.