Hiring in a new country is a great way to tap into a larger talent pool and expand your business. However, it also requires mastering another country's laws, regulations, and workplace expectations.
So, how can businesses implement their policies internationally without accidentally running afoul of differing legal systems, cultural norms, and employee needs?
In a word (or two) — local knowledge. Partnering with experts on the ground can transform global hiring from a compliance challenge into a strategic advantage.
Key takeaways:
- Even when labor laws seem similar, enforcement can vary and impact the steps businesses must take to remain compliant in different jurisdictions.
- Customs vary from country to country, making it essential to have a localized, deep understanding of what employees value.
- Working with local partners makes it easier for businesses to understand and navigate employment laws when employing local talent in multiple countries.
The Hidden Costs of Ignoring Local Context
Companies have a lot of reasons to hire globally, from bridging the talent gap to expanding into new markets. However, companies hiring in a different country for the first time often face numerous challenges.
Failure to address them head-on can be costly.
Here are some of the common risks that lead to legal consequences and reputational damage for businesses:
- Failure to comply with local labor laws
- Failure to understand local workplace culture and communication styles
- Failure to provide benefits packages that meet local legal requirements or cultural expectations
- Failure to align work-life balance, such as working hours and time-off policies, with local regulations and practices
Ultimately, getting these details wrong can result in increased attrition, frustrated employees, legal penalties, and a damaged brand for your company.
Why HR Teams Often Miss the Mark in International HR
Cross-border expansions expose companies to two primary HR risks.
First, companies sometimes assume that the legal and regulatory rules they follow at home apply everywhere. That misconception can quickly lead to compliance problems in other countries.
Second, there’s the failure to take into account cultural differences. This can create misunderstandings with international employees, which in turn can affect communication and productivity.
HR Risks for U.S.-based Companies
U.S. companies expanding internationally often struggle with the fact that workplace policies that are standard in the U.S. are either illegal or uncommon in countries with stronger worker protections.
Here are a few specific examples of HR practices that don't translate globally:
At-Will Employment
In the U.S., at-will employment is the standard, meaning employers can terminate an employee for almost any reason, with or without notice, unless a contract states otherwise. But this practice is rare in many other countries.
In France, for instance, terminating an employee requires a legally justifiable cause and a specific process, often involving significant severance pay.
Mandatory Paid Leave
Unlike most countries, the U.S. has no federal law mandating paid leave for vacation, holidays, sick days, or parental leave. Consequently, U.S. executives may be surprised by the mandatory leave policies that are common elsewhere.
For example, in Mexico, employees are legally entitled to a minimum of 12 paid vacation days after one year of service, which gradually increases over time. Similarly, almost every country worldwide mandates extended, paid maternity leave, a benefit that is not legally required in the U.S.
Health Insurance
Most countries have a national healthcare system, where the government or a public body provides health coverage. In these regions, employers typically contribute to the system through payroll taxes, and offering a separate private health insurance plan is usually a supplemental perk rather than a requirement.
The U.S. is different. There is no national healthcare system, so the employee expects employers to provide health insurance, even though it isn’t legally mandated.
HR Risks for German-based Companies
German companies expanding internationally often mistakenly assume that standard employee entitlements in Germany are also the global practice. This can lead to significant issues when German employers hire in countries with different labor laws.
For instance, a German company hiring in other countries may expect robust employee protections — such as a legal minimum of 20 paid vacation days, up to 14 months of paid parental leave, and a standard 35-40 hour workweek with strict limits on overtime — to be the norm.
However, in countries like the United States, Singapore, or India, labor protections differ and often require more proactive employer involvement. For example, the United States has no federally mandated paid vacation or parental leave, so employers must provide and fund these benefits themselves.
In Singapore, there is no statutory requirement for overtime pay for high-earning employees, meaning companies must set their own policies. In India, while paid leave is mandated, enforcement varies by state, and employers may need to take extra steps to ensure workplace safety compliance and provide adequate health insurance.
Ultimately, what's considered a standard or even generous protection in Germany may not be a legal requirement or even the expectation in another country. And that can be the tipping point toward non-compliance with a country’s local labor laws.
HR Risks for Japan-based Companies
Japanese companies expanding internationally may mistakenly assume that the cultural norm of lifetime employment in Japan is a global standard.
In Japan, it’s common for employees to join a company fresh out of school and remain there until retirement, with loyalty rewarded through steady salary increases and seniority-based promotions.
However, this approach doesn’t always translate well in countries where job-hopping is more common and career growth often involves moving between employers.
For example, a Japanese company hiring in Canada or Australia might expect employees to remain with the company for decades. As a result, they may put less emphasis on retention strategies — such as clearly defined career progression plans, regular performance-based raises, or professional development opportunities.
In regions like these, where workers often switch jobs every two to five years to boost their salaries or take on new challenges, that oversight can be costly. Employees who don’t see clear advancement prospects or competitive pay adjustments are far more likely to seek opportunities elsewhere, leading to high turnover rates, increased recruitment costs, and a loss of valuable institutional knowledge.
HR Risks for Brazil-based Companies
Brazilian companies often mistakenly assume that their country’s relatively relaxed, relationship-driven, and employee-focused business culture is the global norm.
In Brazil, it’s not uncommon for work arrangements to rely on personal trust, verbal commitments, and flexible job boundaries, with the understanding that adjustments will be made as the working relationship evolves.
While this approach can work well in Brazil’s business environment, it can cause friction when expanding into countries where precision and strict contract adherence are expected, or even required.
For example, a Brazilian company hiring independent contractors in Germany might assume they can agree to terms verbally, send over a basic scope of work, and adjust responsibilities along the way. However, German contractors are accustomed to detailed written agreements that spell out deliverables, payment schedules, performance expectations, and termination clauses. Without this level of clarity, they may view the arrangement as unprofessional or even risky.
Similar challenges can occur in Sweden, where employment contracts and work expectations are highly structured, and in the Netherlands, where clear agreements are essential to ensure compliance with labor regulations and tax laws. In these markets, skipping formalities can create misunderstandings and expose the company to legal and regulatory risks.
The mismatch can lead to frustration on both sides. More importantly, it can result in legal issues if disputes arise, since many countries require written contracts for certain work arrangements or have strict labor classification rules.
Clear documentation, detailed job descriptions, and well-defined timelines aren’t just best practices; they’re often legal necessities.
Take the Time to Understand Local Benefit Preferences
Knowing what matters most in local markets can make a significant difference in attracting and retaining top talent. Designing the right benefits package that aligns with local laws, culture, and employee expectations is key.
Here are some country-specific examples that illustrate how companies can align their offerings with local expectations:
- India: It’s common for employers to offer allowances and reimbursements for things like fuel and mobile phone usage.
- France: The "Réduction du Temps de Travail,” or reduction of working time, provides employees with extra paid time off for working more than the standard 35-hour week.
- Japan: Commuter and educational subsidies are highly valued. Many companies also offer wellness programs as part of a long-term strategy for employee health and retention.
- Brazil: Transportation vouchers (“vale-transporte”) are a mandatory benefit for employees who use public transit for their commute.
- United Kingdom: The "cycle-to-work" scheme is a popular initiative in which employers offer employees a bike through a salary sacrifice arrangement.
Why Localized Benefits Matter
Taking the time to research and offer benefits that employees genuinely value can help a company build a good reputation and improve its ability to attract and retain top talent.
On the flip side, failure to design a package that employees value can lead to higher turnover as they seek out competitors with offerings that better suit their lifestyle.
This is why working with local partners that understand the wants and needs of the area workforce is essential.
How Local Expertise Becomes a Competitive Advantage
Companies that actively adapt to the unique culture and expectations of each country in which they hire build stronger teams, hire more efficiently, and retain their best employees for longer.
The approach also helps foster a more inclusive and unified company culture.
Here’s a look at the positive returns on investment of adopting a market-specific HR strategy:
- Better talent attraction and retention: Offering locally tailored compensation and benefits packages enables companies to be more competitive in the hiring market by making employees feel more valued.
- Smoother onboarding and integration: Understanding local communication styles, workplace etiquette, and training preferences helps companies design a more effective and welcoming onboarding experience.
- Greater engagement and productivity: Local knowledge helps leaders navigate cultural nuances and motivate their teams in ways that resonate more personally with their employees.
- Reduced legal and compliance exposure: Ensuring compliance with local labor laws and regulations when entering a new labor market drastically reduces the risk of legal penalties, fines, and lawsuits.
- Positive employer reputation: A commitment to localizing HR practices shows that a company is invested in its international teams and helps build a positive employer brand, making the company a more attractive choice for future talent.
By leaning on relationships with local partners to understand each market, companies can transform global hiring from a logistical challenge into a strategic advantage.
How EORs Help Bridge the Compliance and Culture Gap
An Employer of Record (EOR) simplifies international hiring by handling all the on-the-ground legal and administrative complexities — from payroll to taxes to compliance — for employers hiring across borders.
However, while an EOR can also help with workplace culture issues, the service does not directly manage or oversee employees' day-to-day work. Those details remain the responsibility of the client company.
However, not all EORs are created equal. One key difference maker is whether the EOR you choose works with local partners.
EORs that work with a network of experienced local partners can help companies tailor their people strategy to align with both regulations and local norms, offering a significant advantage in global talent attraction and retention.
RemoFirst: Your Local Expertise Partner for Global Hiring
RemoFirst empowers companies to hire and manage a global workforce in 185+ countries.
As an EOR, we handle all the complexities of international employment so you don't have to. Our local experts ensure you fully comply with local labor laws, taxes, and employee benefits.
Beyond compliance, we focus on what matters most to employees across the globe. Our team of local partners understands cultural expectations, market trends, and preferences, helping create and manage a people strategy that attracts and retains top talent.
Ready to expand your team globally without the hassle and expense of setting up new entities?
Schedule a demo today to learn more about how RemoFirst can help.
