Navigating Global Expansion With The Three Cs – Culture, Cost, and Compliance

Expanding internationally opens up exciting opportunities for multinational corporations, giving them access to a wider talent pool and new markets. However, international hiring comes with its own set of challenges. This blog post is based on insights from our recent webinar on global expansion, led by a panel of experts in Culture, Cost, and Compliance.

Meet the Experts Behind Our Global Expansion Webinar

In our recent webinar, industry experts shared strategies for expanding globally while navigating complex employment laws.

• Izzy Sayers was our host and moderator. As Head of KPMG Emerging Giants, Izzy helps fast-growing companies expand globally, focusing on tax, finance, and operations.
• Maarten Greijn, Senior Manager of Tax Law at KPMG, specialises in global mobility, advising companies on cross-border employment and Dutch payroll obligations.
• Sven Mol, Sales Leader at Deel, assists companies in building and managing remote teams worldwide, with deep expertise in HR and compliance.
• Miriam van de Ven, Solutions Manager at Settly, has extensive experience in HR and mobility, supporting seamless relocation journeys for employees and their families.

Let’s dive into the key takeaways on how to manage Culture, Cost, and Compliance for successful global expansion.

Culture: Building a Cohesive Team Across Borders

Creating a unified company culture across a global workforce can be challenging, especially for HR teams managing employees in different countries. Companies must consider how cultural differences impact collaboration, communication, and overall employee satisfaction.

Why Culture Matters in Global Expansion

A strong company culture fosters a sense of belonging and improves team performance. When hiring across borders, cultural awareness becomes essential.

Key Steps to Building Cultural Awareness

Implement Cultural Awareness Training

• Training sessions help employees understand cultural differences, fostering teamwork and inclusion.

“Cultural awareness workshops are essential when teams grow across borders.” - Mirjam van de Ven

Adapt to Remote Work Cultures

• With remote work becoming more common, companies must adapt. Research shows that 30% of companies formed in the last five years are fully remote.
• Miriam also notes that 40% of remote workers report feeling disconnected from their colleagues.

Encourage a Sense of Belonging

• Building a connected team is vital for employee satisfaction. HR teams can:
• Host all-hands meetings or virtual events to bring everyone together.
• Offer work-life balance options that respect local customs and holidays.
• Focus on hiring for cultural fit, ensuring employees align with the company’s values, even if working remotely.

Cost: Strategic Financial Planning for International Hires

Cost is a major factor in global hiring. HR teams need to balance financial considerations with the long-term goals of the company. Here are some key models and strategies to manage costs effectively.

Choosing the Right Hiring Model

When hiring internationally, companies have three main options:

1. Local Entity Setup

Pros:

• Provides stability and greater control over employee management.
• Ensures full compliance with local employment laws.

Cons:

• Requires a significant upfront investment and ongoing costs.
• Best suited for companies with a long-term focus in a specific market.

2. Contractor Model

Pros:

• Quick and cost-effective, ideal for short-term projects.
• Minimises financial commitment.

Cons:

• High risk of misclassification if contractors are treated like employees, potentially leading to fines and legal issues.

3. Employer of Record (EOR)

Pros:

• Allows companies to hire globally without setting up a local entity.
• EOR providers manage payroll, tax, and compliance, reducing risks.
• Ideal for fast expansion.

Cons:

• Monthly management fees add to operational costs, though often less than a local entity setup.

The Role of Cost Management in Global Expansion

Global mobility services help companies weigh these options by providing insights on cost forecasting and compliance.

“If you need to get a candidate on board quickly, an EOR allows you to onboard within days.” - Sven Mol

This model is particularly helpful for companies in fast-growth stages that need to act quickly.

Managing Payroll Across Borders

Each country has unique requirements for payroll, tax, and social security, making payroll management complex. Companies need to decide whether to:

• Handle payroll in-house with a dedicated HR team.
• Outsource payroll to a global mobility service provider to ensure compliance and accuracy.

Compliance: Navigating Employment Laws and Regulations

Compliance is a critical pillar of international expansion. Companies must adhere to tax, social security, and employment laws across different countries. Here’s how to navigate this complex legal landscape.

Key Compliance Requirements

Taxation and Social Security

Taxation:

• Employees are generally taxed in their country of residence, but cross-border work can complicate this.

"Tax treaties determine where an employee’s income should be taxed based on their residence and work location.” - Maarten Greijn

Social Security:

• Social security regulations vary widely by country and often don’t align with tax laws.
• Within the EU, multi-state legislation allows employees to be insured in their country of residence if they work there at least 25% of the time.
• In non-EU countries, bilateral agreements often determine social security entitlements, but these vary on a case-by-case basis.

Using an Employer of Record (EOR) for Compliance

• An EOR simplifies compliance by managing payroll, taxes, and employment regulations for your international hires.
• Sven highlights the benefits: “The EOR model shifts compliance risk away from the company, offering peace of mind for HR teams.”

The Importance of Clear Communication and Transparency

Clear communication on compliance matters is essential for employee satisfaction and trust. Maarten advises, “Companies should be open about compliance, especially around payroll and benefits. This builds trust and prevents misunderstandings.”

Risks of Ignoring Compliance

Ignoring compliance can lead to serious repercussions:

• Financial penalties for breaching local employment laws.
• Denied benefits for employees, such as health insurance or parental leave, if social security isn’t managed properly.
• Global mobility services provide essential guidance to help companies stay compliant and protect their employees and their families.

The Intersection of Culture, Cost, and Compliance

To succeed in global expansion, companies must integrate Culture, Cost, and Compliance into a cohesive strategy. These pillars are deeply interconnected and must be balanced carefully.

How the Three Cs Work Together

When planning global expansion, companies should consider all three pillars:

1. Culture: Ensure that hiring practices align with your company’s values and support a connected global workforce.
2. Cost: Select a hiring model (local entity, contractor, EOR) that matches your budget and long-term goals.
3. Compliance: Stay updated on tax, payroll, and social security obligations to avoid financial and legal risks.

How The 3 Cs Support Your Global Expansion Strategy

By providing compliance solutions, financial insights, and cultural strategies, global mobility services empower companies to make informed choices for sustainable growth. Sven’s advice is clear: “Make a conscious decision about your global setup. Think about how your culture will evolve over the next five years and plan for that future.”

Tips for Successful Global Expansion

• Foster Cultural Awareness: Invest in workshops and activities to build a strong, unified culture.
• Manage Costs Wisely: Consider the long-term financial implications of your hiring model.
• Prioritise Compliance: Partner with global mobility services or EORs to stay compliant and protect your employees.

Conclusion: A Proactive Approach to Global Mobility

Global expansion presents enormous opportunities for growth and innovation. However, companies must take a proactive approach that integrates Culture, Cost, and Compliance for sustainable success. Global mobility services can simplify compliance, optimise costs, and help build a strong culture that supports employees and their families.

In a world where business landscapes are constantly evolving, addressing these three pillars thoughtfully will help your organisation thrive and build resilient, future-ready teams.