With the deepening of China’s “Belt and Road” policy in recent years, an increasing number of Chinese enterprises are expanding globally. According to PwC observations, a majority of Chinese companies opting for global expansion choose the method of international employee deployment, especially for periods exceeding one year. As the cross-border business activities of Chinese enterprises increase, the international mobility of talents becomes more frequent, with more Chinese employees being dispatched abroad through various forms of employment.

What are the challenges that enterprises need to consider at the project level when choosing the method of international deployment?

• Can the project goals be achieved?
• Will the project be completed on time?
• Can the budget be controlled within the planned limits?

Apart from these challenges, sending an employee abroad also involves coordinating accommodation and local bank account setup, ensuring compliant salary structures in accordance with local laws and tax regulations, establishing connections with local contact points, providing support for employee visa and work permit guarantees, and managing the recruitment, onboarding, and compensation payment of remote employees. Adherence to local health and safety regulations, including quarantine and social distancing requirements, is also crucial.

It is important to note that violating local labor laws, tax regulations, human resource requirements, or even union demands may lead to fines and legal actions against the company.

Every country/region has different labor and tax laws. For instance, according to the OECD 2020 Taxing Wages report, mandatory social security contributions vary from 0% in New Zealand, Denmark, and Australia to 22% in Slovenia.

How can enterprises control costs?

When deploying employees internationally, detailed accounting of every cost is essential. Focusing solely on the costs of employee deployment and settlement may result in significant budget deviations.

If a company has established a local entity for a three to five-year project in a specific country or region, the costs associated with registration and eventual deregistration of the company should also be considered in the overall budget.

These costs can vary significantly depending on the country or region. For example, in Japan, the minimum required foreign investment is 100 million yen, while in the Czech Republic, the minimum required foreign investment is 80,000 euros.

Maintaining the operation and management of a company entails additional costs, including taxation, compliance, and operational expenses.

To avoid additional costs, enterprises should consider partnering with an Employer of Record (EOR), either part-time or full-time. This allows legal and compliant employment or deployment of employees overseas without the need to establish a local company, avoiding additional costs associated with company establishment and operating within the limits of minimum investment requirements.

How to expedite the deployment process?

According to a 2020 survey on corporate deployment, the average duration of international deployments increased in 2020, with half of the deployments lasting between one to three years. Many companies choose to establish a local entity when sending employees abroad, but the time and cost of establishing a local entity overseas vary by country and region. On average, the cost is approximately $80,000,   and the average time can be as long as five months.

However, companies without a local entity can expedite the process by partnering with an Employer of Record (EOR). This eliminates the waiting time and costs associated with traditional establishment, thus accelerating the process.

How to mitigate risks?

According to Statista, 37% of companies consider business interruption as a threat to global business, prompting companies to develop emergency plans, and international deployments are no exception. Companies should formulate emergency procedures and processes to provide protection for projects and employees in unforeseen events such as the COVID-19 pandemic.

The 2017 Allianz Corporate Risk Report analyzed global business risks on a worldwide scale, ranking business interruption as the second-largest corporate risk in China. Globally, it has held the top position on the global corporate risk list for five consecutive years.

According to a KPMG report, 78% of globally mobile employees identified stricter entry and exit regulations as the top immigration challenge, followed by (72%) ever-changing legislation and (70%) complex foreign immigration laws.

To overcome systemic obstacles hindering the management of foreigners working in China and better attract foreign talents, China implemented the Foreigner’s Work Permit system on April 1, 2017. The original “Foreign Expert Certificate” and “Foreigner’s Employment Permit” were unified into the “Foreigner’s Work Permit,” maintaining a consistent identity throughout an individual’s employment, service, credit records, etc.

Many companies seek professional assistance to ensure legal compliance, especially in challenging times.

In fact, the results of a corporate deployment survey show that 90% of companies outsourced deployment services in 2019. China’s “Interim Provisions on Labor Dispatch” require the proportion of dispatched employees to be reduced to below 10% by March 1, 2016. It is unlikely that companies will convert dispatched personnel to regular employees but still have staffing needs, making outsourcing the best option.

In choosing the most valuable partner for international deployment, an Employer of Record (EOR) can meet all your needs, taking on all risks associated with international deployment.