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When businesses set up new offices internationally, it is common for them to relocate certain members of staff, deploying them as ‘boots on the ground’ to help ensure that their expansion is a success. After all, it can make sense to utilize familiar talent when you are broadening your horizons to less familiar countries.
However, the nature of their living circumstances means that they may require a number of extra considerations in your international employee benefits strategy. In this article, we share the 6 key mistakes businesses make when hiring expat employees.
‘Expat’ vs ‘migrant’: knowing the difference
Firstly, it’s useful to know the difference between an ‘expat’ and an ‘migrant’. Both words are commonly used interchangeably and mean very similar things, but the key difference between the two lies in how long they plan to stay in their new country:
Expats: Relocate to a foreign country usually on a short or medium to long-term basis in pursuit of a job that they have already secured by the time they arrive. They will apply for documentation that indicates a temporary stay, like visas and permits.
Migrants: Move to a country with the intent of securing permanent residency. As such, they will usually apply for full citizenship. In the business arena, we might sometimes refer to these employees as ‘permanent transfers’.
6 common expat mistakes you might be making
When relocating or hiring expats to support your operation overseas, many businesses underestimate the challenges and resources needed to keep their expats happy and make the process as seamless as possible. Here are the 6 main pitfalls that we see organizations make, to help you ensure that you are not falling into the same traps:
1. Offering expats the same as local employees
Moving to a different country, no matter how far away it is, can be a huge step. Especially if it’s long-term, uprooting their entire life can be a daunting prospect for your people and their families, not to mention the stress of relocating and having to acclimatize to a potentially brand-new culture.
As such, many businesses offer expat compensation packages to encourage people to join their new expansion operation overseas. Standard packages mainly include financial support to help make the transition smoother, such as:
Help with relocation costs (visas, work permits and travel)
Allowances to help with routine purchases and investments (housing, education for their children, vehicles, and travel back to their country of origin)
2. Not properly preparing your people for life overseas
Making assumptions about the country (or countries) that you want to operate in can have implications for the success of your overseas strategy. No matter the destination, we advise doing your research to identify any areas in which you need to provide your expats with comprehensive training before they relocate, to help them:
Settle into their new way of life
Understand the local culture, behaviors and customs
Conduct themselves in a professional environment, in alignment with local expectations
Better communicate with local colleagues and stakeholders
Key types of cultural training include language courses (if the expat doesn’t speak the native language to the necessary level) and cross-cultural workshops.
3. Leaving the expat on their old payroll
When an employee goes to work in a new country, there is often an obligation to inform the local tax authority of their presence, and occasionally a requirement to pay the local income tax. Every country has a different approach to tax laws, which makes it all the more important to do your research into what is required of you and your people.
Seeking guidance before you finalize an employee’s transfer to another country is the best way to avoid getting it wrong, and there may be plenty of things you may need to bear in mind:
Confusing tax codes
Record keeping responsibilities
Reporting and filing requirements
Changes in exchange rate and regulations
Cost considerations
4. Not knowing the full range of costs
Relocating or hiring expats naturally comes with a higher cost when compared with recruiting local hires. While the idea of using expats to aid your overseas operation can makes sense, you need to make sure that you have the budget to offer your expat employees the full range of financial and cultural support that they need:
Locally competitive salary
Relocation costs
Help with visas and permits
Housing benefits and allowances
Support for family members (school or childcare fees)
Language classes and cultural training
5. Not understanding the differences in healthcare
Accessing high quality healthcare can be a major pre-departure and ongoing concern of an expat being relocated to a new environment. Relocating employees face specific challenges that you need to prepare for, such as:
Navigating an unfamiliar healthcare system
Accessing the best medical facilities in new locations
Avoiding having to pay up front and seeking reimbursements
Managing pre-existing conditions overseas
Obtaining their regular maintenance medications
Having coverage for a medical evacuation if needed
6. Underestimating the challenge of offering tailored benefits to expats
Firstly, when offering any employee benefits internationally, you need to make sure you understand which benefits are required by local law. Determining whether these laws or other regulations apply to expats varies from country to country. In addition, for expats, you have the added complexity of whether compliance to home country laws still applies. Failure to comply with your legal requirements at any time can result in:
Regulatory fines
Reputational damage and loss of trust
Being declined future coverage
Consequently , administering, monitoring, and managing expat benefits, in addition to the benefits of your local national workforce, could add a considerable amount of additional time and effort for your HR team. As a result, it’s worth thinking about whether you’re able to manage this yourself or whether you need an external international benefits partner to help you choose, implement and manage your international employee benefits.
NFP’s guide to international benefits
While this article relates solely to expat benefits, we also understand how challenging it can be for an international business to manage the employee benefits strategy for local hires, as well as expats, in all their locations. From navigating legal and tax legislation to understanding local cultures, creating compliant and competitive benefits packages in multiple countries is no easy task.
In our latest guide, our global benefits specialists outline how you can help your business thrive internationally, implement new benefits and, importantly, ensure they remain fit for purpose. You will learn:
What to consider when designing your global benefits strategy
How to identify the right benefits and provider(s) to deliver them in all your locations
How to efficiently administer and run your global benefits program
How to review and maintain oversight of your strategy
