Bearing “battle scars” from his own challenges with operating overseas, Radius Worldwide’s Michael Butler shared some of the lessons he’s learned in hopes of smoothing the voyage for his audience in the GPMI webinar “Cost Drivers That Affect Your Global Payroll and HR Operations.”
Butler, Sales Solution Architect for Radius, has more than 20 years of experience in the global arena and advises U.S. companies on international expansion. He noted that the degree of difficulty of entering a country for payroll revolves around four C’s: compliance, cost, change management, and complexity.
A company exploring expansion abroad must consider company structure, tax implications, strategic workforce planning, and cost budgeting, Butler said, adding that HR and payroll-related costs can constitute 70% of a company’s total costs in the early stages.
“My conversations with our clients around cost analysis and management are often about eliminating surprises,” he said. “They know surprises cost credibility. Senior payroll folks know what questions to ask and how to avoid making assumptions that might overly increase the risk of their companies’ expansionary activities.”
Even those who thoroughly plan and investigate their options will encounter the unexpected, he told his audience.
“I’d love to tell you that if you do a handful of things that we talk about today, it’s all going to be smooth sailing for you,” Butler said. “The reality is that there will be hidden costs, surprises, frustrations. It’s impossible to know at the front end what you’re getting into.”
If language is a barrier, he urged his audience not to rely on Google Translate but to quickly hire a local or expat who is fluent and can help with all contract negotiations.
Giving country-specific examples of unexpected costs and complications, Butler said counting the costs of global HR should include areas such as:
- Recruitment—The overall cost of hiring expats can be three times higher than their base salaries
- Social security—Although the typical employee contribution is about 10%, in France it is roughly 44%
- Mandatory extras—Mexico requires profit-sharing, while Argentina requires life insurance
- Customary elements—Some Latin Americans expect lunch vouchers, and the Japanese expect a commuter allowance
He said payroll must do its best to figure out costs and recruitment sources. Reliable estimates:
- Justify international expansion
- Allow an organization to compare investment and return in different countries
- Enable an organization to set profit and loss goals
“Spending a little time on the planning and re-sorting of next steps can make a new strategic move more predictable and safer to manage,” he said. “You won’t be able to control everything, but a view that embraces change and a country’s approach can add rigor to plans and compliance implementation. Embrace the diversity.”
GPMI Director of Instructional Design and Learning Development Nicole Smith hosted the webinar, which is available on-demand.