Tips and tricks for managing international benefits and compensation

November 19, 2020

International employment is a prime opportunity for companies looking to achieve a more diverse and innovative workforce. And now, with the rise of remote work and virtual teams , it’s given employers incentive to look beyond their local markets for the best talent.

But each country has different laws and regulations that govern local employment, and your HR team may not be familiar with how to manage the nuances of international benefits and compensation. As you can imagine, these challenges in international business staffing can be a hindrance in your expansion plans but they can be avoided.

As you look to hire workers internationally, here are some considerations to keep in mind, so you can ensure your global talent receives a competitive employee agreement that’s compliant with the local law.  

Considerations for managing international benefits and compensation

Here’s why understanding local requirements and cultural expectations is so important for effectively managing international benefits and compensation.

Common U.S. benefits may not translate overseas

There are many instances where it may be inappropriate to offer benefits that are commonplace in the U.S. to international workers. For example, most countries offer state-provided healthcare coverage that is more than adequate, so offering a private health plan to foreign workers is often not necessary.

It’s OK if you want to keep some continuity in your company’s benefits scheme, just ensure you’re offering relevant components that are both necessary and favorable in the local market. 

Bonus plans may pose risk

If you hire an employee in Germany, for example, equal protection laws may interfere with how bonus participants can be selected, and if bonuses are performance-based or discretionary, German Labour Courts can determine the amount of bonus pay.

Additionally, bonus payments that are a large percentage of employees’ total pay can fall under regulatory scrutiny by the local government in some countries.

To avoid possible litigations, you’ll need to be cautious when agreeing to a bonus plan with an international employee.

International benefits and compensation costs can multiply

In many countries, the definition of total compensation goes well beyond salary and includes bonuses and benefits, so employer contributions like social security, pension and severance pay can be calculated at a much higher cost than you'd expect.

Make sure you carefully consider how total compensation is defined in a foreign country before you make an employment offer.

Collective bargaining agreements may be a factor

In some areas of the world, collective bargaining agreements—negotiations between trade unions and employers that determine working conditions and terms of employment—can play a large role in how you manage international benefits and compensation.

Across the EU, 60% of employees are covered by collective bargaining. In Germany and Italy, collective agreements may regulate the legal salary range within certain industries. And in Australia, they dictate overtime pay, rather than the local law.

Before you hire an international employee, research whether collective bargaining agreements will influence the terms of employment.

Local culture will influence expectations

Benefits that are considered a perk for your U.S.-based employees may be less appealing to your international workers. For example, in Brazil, a paid company vehicle is often viewed as a burden.

You’ll need to understand whether company benefits will integrate with cultural norms in the country you’re planning to hire—a difficult undertaking when you don't have an in-country HR team to guide you.

How to ensure your international benefits and compensation plans are competitive and compliant

Go beyond minimum statutory requirements

Your company’s benefits package can be a competitive advantage when attracting and retaining international workers, so try to go beyond minimum statutory requirements whenever possible.

Researching the international benefits and compensation that industry leaders are offering in the local market can help you learn how your company stacks up against the competition. And for a greater competitive edge, you can differentiate employee benefits by offering unique perks, like unlimited PTO or monthly meal allowances, that may appeal more universally to the global workforce.

Partner with local HR experts

Going beyond statutory requirements can give you a hiring advantage in the local talent pool, but that advantage will fall flat without compliant employment contracts in the local language.

If you’re looking to hire global talent quickly and have little experience with the laws that will affect international benefits and compensation, consider partnering with a global employer of record, sometimes known as an international PEO.

An employer of record, like Global Employment Outsourcing (GEO), will ensure employee contracts are compliant with the local law and can help you benchmark international salary and tailor a competitive benefits plan that takes local customs into account.

GEO can also save your organization time and money by eliminating the need to establish your own local entity.

Contact us today to speak with a global solutions advisor and learn how GEO can support your unique international hiring needs.

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