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Hidden Employment Costs You Must Evaluate Before Hiring International Employees

HR & Compliance

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Updated on:
March 15, 2024
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Updated on :

March 15, 2024
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Hidden Employment Costs You Must Evaluate Before Hiring International Employees


A question that many businesses ask themselves is how easy it is to expand to an international level and what are the difficulties that they might face during the process. Many companies have motives for expansion, which might vary, and the potential benefits are usually pretty straightforward.

The range of taking advantage of new and expanding markets for the top-line growth in gaining efficiencies for reducing expenses and the potential benefits are usually pretty straightforward and range from taking advantage of newly developing markets.

With the top-line growth, it is possible to gain efficiencies by reducing expenses and increasing its overall global footprint. It will ultimately help your business position itself better as an initial public offering. There are hidden employment costs that may occur before hiring international employees for your business.

What are the various hidden employment costs and risks associated with starting operations in a new country?

Even though all of your strategies are clear, the costs and risks of establishing operations are applicable in a new country. It is crucial for organizations to be aware of those risks, be accountable for all the expenses, and understand the overall cost-benefit return.

It is important to compare your expectations with different countries, especially while making P&L projections. You can hold people accountable for the results you get, and you can ultimately justify the decisions in expanding into a target country. It is especially significant to pursue a global initiative significantly while expanding into different geographies.

Businesses that are new to international expansion fall prey to the costly mistake of the budget-planning process. It usually occurs because companies think that launching a business in a new country will be quite the same as in their home country.

For example, some US companies often find it challenging to start their base of operations in another country.

New and upcoming businesses usually begin planning by drawing up a list of the most common domestic expenses. Some of the most common domestic expenses involve corporate income taxes and the operating costs of the office. The next move these companies make is going online to determine the target-country rates, real estate prices, and other typical expenses. With the help of data, you can make reasonable cost projections for your ultimate expansion as a business.

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What are the various methods of ensuring successful global expansion?

Successful global expansion is rarely a simple process, as every country has its own unique set of laws and regulations. When you are familiar with a country’s laws, you can accomplish your business goals without specific cultural peculiarities.

It is essential to have severe gaps within a business’s cost-benefit analysis that can help you avoid any unpleasant surprises in the future. It can be detrimental to your business if you proceed without the right kind of expansion plan based on false premises. Even opening a new bank account in another country appears complicated and may also be a legal requirement to start a business in the country. The process may take months, especially if a business does not account for these facts.

What are the benefits of researching before expanding into other countries?

A business can get off to a shaky start and might even fail if proper research is not done at the outset. It is essential to know that cost-estimate, whenever appropriately done, does not create success or failure, as you eliminate the entire element of surprise. Companies in the due-diligence stage of the expansion process have usually explored business-related questions, such as whether they can sell their products or services at a higher price.

Some of the other questions that businesses need to ask themselves continually are whether they can sell enough of their products or services or can they get a better return.

It is crucial to go into the budgeting process by asking the right questions as nobody likes surprises related to their budget. Thus, these tips are aimed to give you a higher level of understanding, especially while budgeting for overseas expansion.

What do we mean by hidden employment charges?

The additional amount apart from the wages that are either mandatory by law or are culturally expected from the employer is titled as hidden employment charges. The employer has to endure some additional taxes that are based on the percentage of the employee’s income. Let us take a deeper look into the various hidden employment costs:

1. Contributions towards Social funds:

Taxes that an employer pays based on the salary of its employees are given as a contribution to social funds. This type of tax contributes to society by providing it with some major funds. The various social funds which are paid out are health insurance, unemployment insurance, along pensions. Some countries successfully integrate charity caps; therefore, when there is a hike in the salary of an employee, there is a decrease in the contribution percentage.

Do you know that employers in the Netherlands need to pay approximately 18% tax in providing support for unemployed workers? Apart from this, it helps to cover disability claims as well as health insurance. It is also not so different across the world. In Argentina, employers have to pay up to 27% for the social benefit programs. These percentages are in accordance with the highest remuneration that the employee accepts in a month. Hence, the extra benefit that the employee gets in the form of commissions and incentives can elevate the cost of the employer.

2. Paid Holiday Leaves issued by the Government:

Employees often enjoy additional benefits like paid holidays, and the extent of such benefits depends on the duration of their association with the organization. The various employers are capable of helping you deliver a premium on all vacation days. Employees are also encouraged by their government to take more vacations along with countries that have mandatory reimbursed free time for all national holidays. Employees in Germany can take a set number of days off per year, along with the extra days off which are granted every single year. In the country of New Zealand and Afghanistan, there are paid travel programs along with public holidays.

How are sick leaves provided in various countries across the world?

Sick leaves are the leaves provided to employees as a method of protecting them when they frequently fall ill. The benefits differ in different countries. This difference depends on the leaves and the remuneration received by the employee.

What are the most unique requirements of your market?

It is important to understand the various requirements from the perspective of the companies entering into a new market. Some of the requirements from the market’s perspective include employment contracts and tax laws.

Final Thoughts

As an international company that is looking to hire international employees, companies need to avoid surprises along with unexpected and hidden employment costs.

You can reach out to the right experts before beginning your expansion to other countries and set yourself on the path to global success.

About the author

Catalina Wang is a Human Resource Consultant. She manages recruitment, onboarding, and contract administration staffing for many organizations and remote teams. She’s passionate about efficient HR management and the impact of tech on hiring practices.

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