News Coverage

5 Things You Must Know About Foreign Staff Benefits

7/9/2014

An international expansion has a lot of moving parts to it, but the heart of any organization is its people, so they should always remain a priority when expanding overseas. That means it will be vital to understand the benefits implications of any move abroad, both for the workers you'll be hiring in new markets and for the existing employees you'll be sending out from HQ. Don't just assume other countries follow Canadian practices, because you'll fall afoul of your employees and the authorities.

Here are five aspects of the benefits equation that you should keep in mind when eying an international expansion.

1. Each country has its own peculiarities

In every country you expand to, there will be a new set of standard benefits practices to learn. That includes both benefits dictated by law and those dictated by local custom. In the Netherlands, senior employees expect and get company cars. In the U.K., supplementary medical insurance is de rigueur. In the U.S., two weeks vacation is generally acceptable—although many companies offer more. In most parts of China, employers must contribute between 0.5% and 1% of an employee's salary to a fund that pays for maternity leaves (which were recently increased from 90 days to 98). And in the Philippines, employees are entitled to one 50-kg sack of rice per month (or a monetary equivalent). It can certainly be a lot to keep track of.

2. Pensions are complex and changing

In pensions, as well, there is both local law and local custom to contend with. In Canada, as in many other parts of the world, defined-benefit pension plans are on the decline and defined-contribution plans become more popular. That's not the case everywhere. In the Netherlands, for example, the system of defined benefits pensions remains quite strong (defined contribution plans are also still an option there). In the U.S. and the U.K., there are tax incentives for keeping your defined benefit plans funded. In Australia, you'll be required by law to fund defined benefit plans.

In Singapore, employers aren't required to pay retirement benefits. Instead, employers and employees make monthly contributions to three separate accounts, one of which is dedicated to financing the employee's retirement years. The city-state's pension system, the Central Provident Fund, could change soon, though. Earlier this year, thousands of citizens protested the system, saying it provided inadequate retirement savings. Like in Canada, pensions are a complicated and ever-shifting field.

3. It's worth searching for scale

A small company opening a foreign branch with only a handful of employees is going to find benefits packages a burden. Check with your existing Canadian benefits provider to see if they will extend coverage overseas so you can take advantage of your current scale. But also be mindful of local practices: In many countries, for example, dental coverage doesn't exist.

4. Expats can have special expenses

The logistical aspects of sending your workers abroad—such as securing the proper visas and ensuring tax compliance—are demanding enough. But there are also optional benefits aspects that will require some forethought.

Will you offer family benefits like subsidized housing and education? Will you offer an allowance for a certain number of trips home each year? One Canadian executive expat recently wanted to know that his dog would also be relocated along with his family. Consider the holistic impact of a foreign assignment on the lives of expat employees when crafting benefit packages for them.

As a transferred employee myself, (from U.K. to Canada), I know that my productivity dropped for the first few months as I came to terms with the new business culture and went about getting myself fully established with a social insurance number, bank account, driving license, Ontario health card, etc.. There are a great number of tasks to undertake when transplanted somewhere new.

5. Don't ignore your duty of care

Under Canadian criminal law, employers owe a "duty of care" to employees, which requires them to take "reasonable steps" to protect employees from harm. Upholding that duty of care can get tricky when firms send their employees abroad—even if it's just for business travel.

What does it mean to uphold your duty of care to employees you send overseas? Employers need to understand the local risks—political instability, crime, access to emergency health care etc.—everywhere they send their employees, and educate them accordingly. They should also institute a formal policy for handling overseas emergencies.

As the Canadian Trade Commissioner Service warns, "For a mid-sized Canadian company, one incident can be enough to put them out of business" (if they haven't made sure to uphold their duty of care). Depending on where a company is sending its employees, it may need to provide them with emergency preparedness training, access to emergency evacuation services and special forms of insurance. One company sending a staffer to open a new facility in Poland took out "key executive" insurance coverage and provided extensive training on what to do in event of kidnapping.

As with other complex projects start your thinking early and seek help from others with experience.

 

Tom Gardner is the Canadian country manager for Radius, a provider of international business software and services. Its technology and services help organizations capitalize on global growth opportunities by simplifying the management and control of international expansion and operations.