Introduction

In recent years, with the further deepening of China’s “Belt and Road” policy, an increasing number of Chinese companies have ventured abroad and expanded globally. According to PwC observations, the majority of Chinese companies venturing overseas have chosen the method of international employee assignment, with durations of one year or longer being most common. With the increase in cross-border business activities by Chinese enterprises, the cross-border mobility of talent has become increasingly frequent, and more and more Chinese employees are being dispatched by companies to work abroad through various means.

When companies choose international assignment as a method, there are some issues that need to be considered in advance in order to prepare for risk mitigation.

What Issues Require Attention at the Project Level?

• Can project objectives be achieved?
• Can projects be completed on time?
• Can budgets be controlled within planned limits?

In addition to the above challenges, when dispatching an employee abroad, attention needs to be paid to the following aspects:

• Coordinating employee accommodation and opening local bank accounts
• Ensuring compliance with local legal and tax requirements for compensation
• Establishing contact with local points of contact
• Providing support for employee visas and work permits
• Recruiting, onboarding, managing, and compensating remote employees
• Adhering to local health and safety regulations, such as quarantine and social distancing requirements

It is important to note that if companies violate local labor laws, tax laws, human resources requirements, or even union requirements, they may face fines and legal action.

However, each country/region has different labor laws and tax laws. For example, according to the OECD 2020 Taxing Wages report, mandatory social security contribution rates range from 0% in New Zealand, Denmark, and Australia to 22% in Slovenia.

How Companies Can Control Costs

Companies need to carefully account for every cost involved in overseas assignments. Simply considering the costs of employee assignments and placements can lead to significant deviations from the final budget.

If a company registers and establishes a subsidiary in a particular country or region for a project lasting three to five years, the costs of registration and eventual deregistration should also be included in the overall budget. Moreover, these costs can vary significantly depending on the country or region.

For example, in Japan, the minimum required foreign investment amount is 100 million Japanese yen; in the Czech Republic, the minimum required foreign investment amount is 80,000 euros. Additionally, maintaining the operation and management of a company entails many additional costs, including taxation, compliance, and operational expenses.

To avoid additional cost outlays, companies should consider partnering with an Employer of Record (EOR), whether on a part-time or full-time basis, to legally and compliantly hire or assign employees overseas without the need to establish and operate locally, thereby avoiding the additional costs of company establishment and operation, as well as the restrictions of minimum investment amounts. This not only helps companies control overall costs but also provides sufficient flexibility.

How to Expedite the Assignment Process

According to a 2020 survey on corporate assignments, the average duration of assignments increased in 2020, with half of the assignments lasting from one to three years.

Many companies choose to establish a local entity in the destination country for international assignments. However, the costs and time required to establish a local entity overseas vary depending on the country and region. On average, the costs are approximately $80,000 USD, and the average time can be as long as five months*.

(*Data varies by country.)

For example, according to World Bank data, registering a company in Venezuela may take 230 days.

Accurate assignment and employee onboarding timing are crucial to ensure the timely completion of projects with tight deadlines, especially for projects with fixed bid dates.

Companies lacking a local entity can collaborate with an Employer of Record (EOR) to avoid the waiting time and costs associated with company registration, saving traditional placement time and speeding up the process.

How Companies Can Mitigate Risks

According to Statista data, 37% of companies consider business interruption a threat to their global operations, so companies often develop contingency plans, including for international assignments. Companies should establish emergency processes and procedures to provide protection for projects and employees in unforeseen events such as the COVID-19 pandemic.

Allianz Insurance’s 2017 Allianz Risk Barometer analyzed global business risks, with business interruption being seen as the second-largest enterprise risk in China. It has ranked first in the global enterprise risk list for five consecutive years. 

According to KPMG’s report, 78% of globally mobile employees view stricter border control regulations as the top immigration challenge, followed closely by (72%) evolving legislation and (70%) complex foreign immigration laws.

To overcome the systemic barriers to managing foreign workers in China and better attract foreign talent, China began to implement the unified Foreigner’s Work Permit system on April 1, 2017, merging the Foreign Expert Certificate and the Foreigner’s Employment Permit into the Foreigner’s Work Permit. This system ensures a unique identifier for each individual that remains unchanged for life, dynamically recording work, service, credit, and other situations in China.

Many companies seek assistance from professionals to ensure legal compliance even in the most challenging times.

In fact, the results of a survey on corporate assignments show that 90% of companies outsourced assignment services in 2019. China’s “Interim Regulations on Labor Dispatch” require that the proportion of dispatched workers be reduced to less than 10% by March 1, 2016. Since it is unlikely for companies to convert dispatched personnel to regular employees while having a demand for labor, outsourcing is the best option.

When selecting the most valuable partner for international assignments, an Employer of Record (EOR) can meet all your needs, assume all risks related to international assignments, and provide continuous support for the entire process of employee experience, including onboarding, compensation, visas, and ongoing management.

Conclusion

Whether full-time or part-time, service providers can offer end-to-end services for companies to legally and compliantly hire their first overseas employee. In a rapidly changing environment, service providers can also provide real-time alerts on policy changes, helping companies prepare in advance.

The “Employer of Record” business model means that companies can place employees without the need for a local entity, avoiding the time, cost, and investment required to establish a company. It provides companies with an efficient, compliant, low-cost, and risk-free global solution, truly simplifying overseas employment for businesses.

In the process of globalizing a business, companies no longer need to worry about various issues, enabling them to focus on business development and commercial success, setting sail confidently.