The global business environment is changing. As technology continues to help accelerate international expansion, more and more companies are reaping the rewards of an international presence. However, positioning your organization competitively involves creating a solid HR plan related to your workforce globalization.
For human resources professionals, obtaining and analyzing global HR data can provide some unique insights into these new markets, particularly as it applies to tailoring your workforce strategy and budget to your company’s unique needs. After all, any critical expansion effort will involve shuffling around your talent, developing new international assignment policies and packages, and managing your employees across distant, challenging markets. The key here is catering to these local markets and having a deep understanding of different consumer demographics and trends.
Legislative Factors Impacting Global Talent Management
You can only globalize your workforce if you are able to operate within the local laws and regulations of many different countries. Naturally, there are several considerations that go along with this, many of which have a direct impact on HR strategic planning, including:
Minimum Wage Laws:
You should be well versed in the pay regulations of any new countries you hope to operate within, or else you could possibly incur legal liabilities and other penalties. It’s crucial to understand the various regional factors (like the pervasiveness of local labor inspectors and different approaches to compliance) and how they work together to shape the extent of enforcement — and the severity of punishments.
Local Employee Allowance Requirements:
In many countries, companies are legally required to provide special allowances for designated functions. You will need the right data and insights to keep track of each country’s statutory allowances to ensure that your compensation packages fall in line with local governance, while also maintaining competitive appeal.
Statutory Employee Benefits:
While employee benefits serve roughly the same purpose everywhere in the world (that is, attracting and retaining talent), the benefits you will be legally required to provide can vary greatly. These could include anything from parental leave incentives to mandatory vacation time to even more obscure regulations. For example, did you know that in India, women are forbidden to perform factory work at night unless they have been granted special permission? That means no third shift work (or bonus pay) for women. Or, did you know that in Australia, employees could be entitled to as much as 12 weeks’ salary after being fired? If you fail to comply with a country’s statutory benefits, you could incur a number of penalties, ranging from fines to organizational dissolution.
Tax Laws: You should also ensure that any tax-related issues connected to international relocation/assignment or local pay are addressed. Tax burdens and other penalties can be greatly minimized if you manage your global workforce effectively, and that involves taking into account the specific standards and regulations of each new country.
It’s for all these reasons (and plenty more) that organizations like to seek outside counsel to identify regulatory hazards during their workforce globalization efforts. Still, the complications don’t stop there. You must also pay close attention to the many labor market disparities throughout the world if you want to truly succeed.
Local Labor Markets and Global HR Challenges
You should carefully analyze global HR data regarding local supply and demand, cost-of-living stats, unemployment rates, and other demographics before deciding whether or not a new market is a good fit for your company. Some important factors to account for:
Base Salary Differentials: Before sending an employee on an international assignment or attempting to attract local talent, take a moment to consider: What are the prominent pay trends of this new location? What is considered “attractive” to the local market? Base salary differentials can vary greatly based on job level, industry type, job function, and so on. Each of these can be further complicated by local labor market specifics like skill saturation, standard of living, and regional working conditions. As such, you should certainly seek out the aggregated local market data of any new area if you want to create the most affordable yet appealing compensation plans possible.
Market Spans of Control: Factors, such as physical size and exact job function, can help you determine the appropriate span of control needed for a new location. For example, if your international operations are to take place in a small call center, then you could probably get away with one supervisor overseeing all your employees. However, if there was a larger location in close proximity, then you could likely assign other high-level employees to oversee managers at several smaller outposts. Span of control expectations also vary across cultures, so geographic factors might play a significant role as well. If you wanted to understand the typical span of control of an office manager in Bulgaria or a manufacturing foreman in Germany, you should first reference specific market data before making any large and potentially costly decisions based on your own span of control assumptions.
Sending Talent vs. Sourcing Talent:
Finally, you will need to consider how much organizational talent you will need to send overseas versus how much talent you can source from the local labor market. To do so, make sure you answer the following questions:
How will your workforce be determined
? If you are planning to relocate your existing talent, you must determine how many employees to send. Conversely, if you are not sending any existing talent, you will have to make sure that all your vacant positions can be filled locally. But first, you’ll have to obtain a clear understanding of market-appropriate compensation and benefits packages to accurately benchmark for each new location.
What types of jobs will you need to fill, and what types of skills will your employees need to fill them? You will need to be aware of the technical skills that are available (or lacking) in any new labor market before deciding on the most efficient way to fill your roles. Meanwhile, if you are relying on expatriate employees, make sure they have the proper skills required to thrive in a new or foreign environment. These skills could include anything from emotional intelligence to cultural adaptability to the ability to speak multiple languages, and they are all unique to the new particular job’s location and industry.
How much should you pay? International relocation pay rates are heavily influenced by the quality and cost of living of the local areas. Factors like local education quality and regional infrastructure should be taken into account, especially if the expatriate’s family is expected to make the move too. And, be prepared to account for general lifestyle changes. After all, an employee moving to Singapore from New York might have a harder time adjusting than an employee moving from New York to Canada. As far as local talent is concerned, understanding the pay rates and compensation trends of your major competitors throughout the area can help you establish a viable workforce.
The Key to Successful Workforce Globalization
As you expand your operations, remember that your ability to create strategies that are globally consistent yet locally adaptable will be critical. After all, there is no one trick that will work for every job in every location. At the end of the day, your global workforce management success will be fully dependent on your ability to reward the right talent with the right compensation packages, no matter the location.
by Antonis Christidis
, Partner and Global Products Innovation Leader at Mercer