There’s no getting around it—we’re living in a global era. Technology makes it easier than ever to do business on an international scale, which means your company can reach new markets and take advantage of global talent.
But managing a diverse workforce across various countries also poses new risks. When you take on international human resource management, you’ll be faced with challenges like:
- Cultural diversity
- Compliance issues
- Global payroll deployment
- Legal concerns
Here’s why managing a global workforce is so complex and how you can simplify it.
What is international human resource management?
International human resource management (IHRM) deals with all the typical functions of human resources—but it also includes various adaptations to accommodate cultural differences and regulatory compliance for different governments.
Let’s compare IHRM to the domestic human resource departments function you’re probably used to.
Domestic human resources
This type of department typically handles activities related to planning, hiring, training and development, payroll and compensation programs, performance management, and industrial relations.
These activities usually all happen within one country where your company conducts business. This means that all (or most) employees speak a common language. Most probably have similar cultural backgrounds.
Working in domestic HR also means your company has one set of rules and regulations to follow. As international business becomes more accessible and common, the human resource responsibilities become increasingly complicated.
International human resources
Do you like complexity? Because IHRM offers plenty of it.
Instead of a single country to worry about, your global human resource activities will probably involve considerations for at least three countries:
- Your home country
- Your host country
- Your workers’ country of residence
Your home country, where your company conducts business, may have different regulations than a host country, where you own a subsidiary like a manufacturing facility.
To further complicate international HRM activities, it’s common for international labor to live in yet another country, introducing a third set of laws and regulations into the equation.
As the employer, your business must address laws for different types of employees governing the home country, host country, and third-country nationals.
That’s a lot of compliance considerations.
What you need to know about ethics and global corporate social responsibility
Managing the company image in each country is also a big part of the global HR role—and corporate social responsibility (CSR) goes a step beyond following the laws. A global business has a responsibility to invest in their employees and in the communities where they do business.
Studies show that well-designed CSR programs provide long-term value for shareholders through:
- Increased sales
- Customer loyalty
- Employee engagement
- Higher productivity
- Less employee turnover
So, extend your domestic CSR program around the globe? It’s not that simple. Cultural differences mean that an effective CSR program looks different in different countries or regions.
For example, a CSR program that promotes safe products may increase sales and loyalty stateside, but it will likely fall flat in China. While both cultures place high importance on quality, the U.S. is more consumer-safety-focused.
Diversity and employee relations on an international scale
Cultural factors and language barriers are some of the biggest challenges you’ll face with international hiring.
Many employers rightly want to create a diverse and inclusive global workforce. For one, it widens the talent pool available to the company. Other reasons include:
- Meeting the needs of a diverse customer group
- Building a positive brand image
- Penetrating new business markets
But your diversity and inclusion practices that work to benefit the business domestically cannot be blanket policies around the globe. It takes resources and local expertise to understand the nuances of local cultures—and serve those needs in meaningful, specific ways.
Managing risks in global human resources
With an international business presence, you’ll face a higher risk of fines and legal consequences for noncompliance—simply because you answer to more than one national government. The most common risks include:
- Minimum wage regulations
- Contract terms, including fixed and limited agreements
- Employee classifications (e.g., employee versus contractor status)
- Employee time off (differing leave laws)
- Timekeeping and payroll regulations
- Workplace safety compliance
- Employee compensation and benefit requirements
- Employee data privacy
If your business overlooks global compliance issues—even unintentionally, like relying on hiring practices used in the U.S.—it causes a ripple effect that can hurt the business in many ways.
Damage to the brand image will hurt customer loyalty and employee engagement, resulting in lower sales and lower productivity.
Financial losses from a drop in sales, product recalls, and/or noncompliance fines will eat away at profitability.
And, in some cases, legal action can force the company to stop operating in a specific region.
But you can avoid all these potential risks with a proactive approach to identifying and addressing the compliance needs of local and national governments. International human resource management targets the multifaceted needs of global organizations to mitigate these risks.
Large or aspirational multinational corporations rely on in-house IHRM paired with outside consulting as part of their business strategy. Growing international companies often outsource many of their IHRM needs to a third party with specialized skills and scale as they gain greater global mobility.
How a global employer of record can help
Does managing HR in multiple countries sound daunting? It doesn’t have to be. A global employer of record, like Global Employment Outsourcing (GEO), can remove the complexity of international human resource management by hiring and paying workers on your behalf.
With GEO, you can rest easy regarding global HR compliance and focus on keeping your talent productive and engaged on the job.
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