Challenge: Opening a company office or operation in a new country can expose a bewildering cluster of employment law issues.


Launching business operations in a new country is daunting, because of all the unknown aspects of local human resources law. This is a checklist of the questions to ask. (Answers, of course, vary by target jurisdiction.) The list is broken down into six stages of starting up foreign operations: (1) Business structure and contracting (addressed in last month's Global HR Hot Topic), (2) Benefits/compensation, (3) Expatriates, (4) Local-hire issues (addressed here), plus (5) Written employment contracts, and (6) HR administration (addressed in next month's Global HR Hot Topic).


Pointer: Tackle human resources matters in the new country head-on, using a checklist.


Stage 2: Benefits/compensation

Benchmark: To hire people into an operation in a new country requires attracting in-country employees into a business which, as yet, lacks a market presence — and an "employment brand." Under these conditions, attracting host-country talent without overpaying requires careful benchmarking of local benefits and compensation. Get a breakdown by "minimum expected package," "standard expected package" and "rich expected package." And before setting initial compensation, factor in vested rights: Countries tend to restrict an employer's flexibility to roll back pay or benefits granted up front.

Statutory benefits costs: Engage an experienced in-country payroll provider and then ask about total payroll costs, beyond wages. Budget for applicable "statutory benefits" and "social costs" like social security, housing funds, disability funds, profit sharing, provident funds, premium paid vacations and thirteenth-month bonus. These add a surprising amount to base pay.

Customary benefits: Many countries offer government payer ("socialized") medicine, so employer-provided health benefits may not be an issue — except that, increasingly, employees in certain countries expect supplementary health insurance. Separately, the social security systems in some countries replace a high enough percentage of final average pay that in some (not all) positions, private pensions may be unnecessary. But in many countries, employers are expected to give other customary benefits, ranging from bus transportation to meals to cars to housing. Find out which benefits are customary and how much they cost.

Stage 3: Expatriates

Visas and work permits: If anyone from existing company facilities will need to move to the new country operation, start applying early for a visa and "work permit."

Expatriate and "secondment" agreements: Prepare an expatriate assignment agreement with an enforceable choice-of-law clause. Consider a separate intra-company secondment contract between the expat's home country and host- country employer entities.

Local caps/rules: Comply with host-country rules on expatriates: Brazil puts a cap on the percentage of foreigners in a workplace. Middle Eastern countries prohibit paying expats more than locals. In China, different employment laws can govern expats vs. locals.

Worker's compensation: A too-often-ignored but potentially big-ticket expatriate issue is the very real risk of expats (or their families) getting injured or killed and then bringing an uncapped personal injury or wrongful death claim. Where possible, preserve the workers' compensation bar affirmative defense. Get "voluntary supplemental" workers' compensation insurance. On US government jobs, comply with the Defense Base Act of 1941. Heed the duty of care. Consider waivers or acknowledgments.

Stage 4: Local-hire issues

Hiring strategy: Expatriates aside, find out which strategies and tools work in the target country to attract and retain bilingual multinational-quality local talent. How effective are host-country recruiters?

Job application form: Adapt an organic in-country job application form for the new operation, or else modify the headquarters application form appropriately. Ensure any web-based job application complies in-country.

Background checks: In many countries, data privacy and criminal laws tightly regulate background checks and pre-hire screening. Formulate a host-country background check strategy, factoring in what can be done legally and practically.

Affirmative action: Diversity has gone global. Some jurisdictions actually impose affirmative action hiring requirements that outstrip US rules. Some German laws require hiring the disabled. Brazilian rules require hiring Brazilians. Indian laws promote hiring low-caste employees. South African affirmative action regulations force employers to file sensitive government reports that distinguish "African" employees from "Coloureds." Further, many multinationals have adopted their own in-house global diversity policies. Be sure to comply.

The March Global HR Hot Topic continues this checklist with the final two stages of starting up foreign operations: written employment contracts and HR administration.