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How to Navigate Regulations When Doing Business Overseas

How to Navigate Regulations When Doing Business Overseas 1

You’ve done it. You’ve come up with your business plan and put in the hard work to make your venture a success. Now it’s time to move forward.

Maybe you find yourself in a saturated local market, or perhaps it’s just the next step in growing your client base. Whatever the reason, you’ve decided you’re ready to expand your business internationally.

Whether you’re simply opening your hiring pool to remote workers or setting up shop abroad, there is a great deal of potential overseas. With this potential for success come myriad considerations regarding international regulations and technicalities. Before you dive into the global market, here are things you’ll need to research and plan for.

Making Sure Your Workers Are Being Paid Properly

To ensure you’re adhering to local and national standards for paying workers, there are two main questions to ask. First, should your workers be classified as employees or contractors? Second, do you have a legal business presence in the country of hire?

When it comes to classifying your workers as contractors or employees, consulting a regional expert is highly recommended. Misclassifying an employee as a contractor can carry massive fines, and each country has its own unique standards for worker classification.

That said, the standards for judging classification in most countries depend mainly on the degree of independence the worker retains. Workers who set their own hours, don’t receive expense reimbursement, and perform work on a project with an established end date are likely contractors. Some indicators of employee status include working for only one business and performing the work on-site. These are not blanket rules that apply to every country, though.

For example, offering international contractor benefits can vary a great deal in terms of compliance with classification mandates. In the U.S., businesses are allowed — but not required — to provide self-employed health insurance to their 1099 contractors. Some countries view the provision of benefits as an indicator that the worker is an employee rather than a contractor. Confusingly, other countries such as France actually require businesses to offer certain benefits to the contractors they engage.

Thankfully, you can retain the services of professional organizations to help you differentiate worker status and stay within regulations. The type of organization to engage depends on whether or not you are established in the country of hire.

If you are hiring remote workers but haven’t established a physical presence, you will need to engage an employer of record (EOR). An EOR will go through the process of setting up as an employer in multiple countries. If they are approved for the country you would like to hire from, they will employ workers on your behalf.

Since the workers are technically not your employees, all employer administration ultimately rests on the EOR. They take care of payroll, benefits administration, and employer tax requirements. This goes a long way toward taking the regulatory compliance burden off your shoulders.

If you have a physical presence in the country of hire, you can handle employer administration yourself or rely on a professional employer organization (PEO). The PEO typically handles payroll, benefits administration, and payroll taxes just like an EOR. The difference is that they only handle the administration rather than actually taking on your workers as employees on your behalf.

While this might seem like a minor difference, it means that you are responsible for any compliance errors. If a problem arises, a reputable PEO will often assist in corresponding with the necessary government entities to resolve the issue. Even so, the regulatory risks are greater for your business when using a PEO instead of an EOR.

Gathering a Strong Support Team

Engaging an EOR or a PEO is a great start when it comes to navigating tricky international regulations. Other avenues of support might include legal aid and developing relationships with other businesses in the country you’re expanding to. This is especially important if you’re setting up a physical presence.

When choosing whom to engage for legal representation, you typically have two primary options. You can find a firm in the region of your new location, or you can hire a firm specializing in international law. Either choice should be able to help you stay in good standing and satisfy certain taxation and application requirements.

A local firm might be more knowledgeable in specific municipal or regional regulations. An international firm can sometimes be more helpful in managing the relationship between your home country and the new location. Regardless of what type of representation you pursue, make sure the firm is reputable and has the expertise to serve your needs.

Building relationships with regional businesses has multiple benefits. You can seek assistance in working within the local culture, which can be essential to hiring and public relations. It’s especially advantageous when the relationship dovetails with your own operations. If you create a partnership with a supplier you purchase from, that business then has a vested interest in your success. They will therefore be more willing to offer you guidance and further recommend you to other connections.

Look Before You Leap

A business that profitably operates in one country will not necessarily have equal success with global expansion without adjustments. With the vast differences in international regulations and taxation, getting everything in order before the big move is key.

While it won’t tick every box, engaging the expertise you need is a huge step toward taking your business overseas. Paying workers incorrectly and running afoul of local regulations are a couple of the biggest dangers to avoid. Once you’ve addressed those considerations, you can focus on making your venture a success.

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