Preparing for global expansion: A primer

Pensions, benefits, taxes and a host of HR issues

Thousands of Canadian corporations with international operations are relocating employees overseas on a regular basis. But even the most seasoned international relocation managers can be taken by surprise if they, their companies and their relocating employees aren’t fully informed and prepared.

For firms looking to branch out internationally for the first time, the issues can seem daunting. Extensive research may be required in regards to local hiring practices, the availability of skilled labour and employment regulations.

Just as HR professionals need to know the legal requirements on compensation, benefits, employment contracts and labour relations here in Canada, they will need to know how to incorporate the new country’s laws and practices into their companies’ operation. Finding in-country advice about local practices certainly makes the job easier.

Organizations should try to find someone who is specifically knowledgeable about how things work in the country they are researching. Lawyers, accountants and HR professionals are all good sources of information.

China is an example of where it is critical to know how to proceed. Developing relationships with government officials and local business people is a requirement for anyone attempting to set up an operation in China. It can take years of relationship building before a company becomes successful in opening a new venture. And don’t rely on Canadian staff to be knowledgeable about how things work in another country. They are Canadian experts, after all.

Assisting Canadian employees and their families relocate overseas is one important aspect of going global. Most crucial is the need to ensure the individuals selected to work in the new location understand the organization’s business strategy and corporate culture.

A heavy load rests on these employees; not only must they ensure that the business is profitable, but they will also represent the company in a different country and culture. Their ability to be accepted by the local staff, government officials and business people can make or break the overseas venture’s success.

As many organizations have experienced, just because an individual is successful in one country does not mean that he will be equally as successful in another. If these Canadian representatives fail to be accepted into the local culture, they put their company’s reputation at risk, which could make it very difficult to conduct business there. A relocation manager should be prepared to offer up the right tools to assist in identifying the most potentially successful candidates.

What staff will want to know about HR’s assistance

Employees who are considering an international assignment will want to know how working and living in another country will impact their compensation, benefits, and taxes and what kind of relocation assistance they will receive. While there are different ways to tackle all of these issues, the right strategy depends on the organization’s corporate culture as much as anything. However, there are generally accepted practices within the international relocation industry that support the fair and equitable treatment of expatriate employees.

For example, the balance-sheet approach to compensation ensures that the employee retains a similar level of savings as in the home country, and does not have to pay more for the cost-of-living or taxes in the host location. Attempting to remunerate an employee in a foreign location at the same level as a peer at that location may reduce the standard of living of the expatriate and family. This type of localization can also be a severe cultural shock for the employee and could prevent a successful integration into the new work environment.

Benefits can also present difficulties if not investigated and managed correctly. Most domestic benefit providers have limited coverage for out-of-country expenses, and provincial health-care plans may not allow the expatriate and family to remain as part of the plan.

Reimbursing employees’ benefit and dental expenses from an international location can be seriously delayed due to differences in language and currency, so finding an administrative solution is extremely important. For example, there are international benefit providers that not only set up an international benefit plan, they can also receive and pay employee claims.

As pension regulations differ from country to country, it would be wise to know the exact implications around a company’s pension plan contributions. Verify whether Canada has a treaty regarding CPP and other government-mandated contributions. If the contributions are not processed correctly, the employee’s future pension and CPP earnings may be put at risk.

Perhaps one of the most critical issues not to overlook is the tax implications of living and working in a foreign country. In many cases, Canada will have a tax treaty with the destination country. Such a treaty likely means that the employee has to pay tax only in one jurisdiction, not both. Always consult with a tax expert. Tax providers can also assist employees with completing their tax returns on an annual basis.

Last but not least among topics to research: immigration regulations.

Allowing employees to enter a foreign country without proper immigration papers can put both the company and the employee at significant risk. Not only could the employee be arrested and put in jail, the company could be blacklisted by immigration authorities, preventing any future employee’s entry into the country. In some cases, even corporate representatives who knowingly allow or permit employees to enter foreign jurisdictions without proper documentation could be held personally liable for such actions. For most corporations just starting out, this is an area that generates significant pressure on HR, particularly as business managers are pressed to get relocating employees and families to the new location as quickly as possible.

In conclusion, a strategic and proactive HR professional ensures that she is involved in the process as soon as she first hears rumblings about “going global.” The research may be painstaking and difficult, but the efforts will pay off handsomely when she is able to assist the organization in making the right business decisions.

Gail Reinhart is a senior consultant in client services in the Calgary office of relocation firm TheMIGroup. She is also on the board of directors of the Canadian Employee Relocation Council. She can be reached at (403) 730-1616 or by e-mailing [email protected].

To read the full story, login below.

Not a subscriber?

Start your subscription today!