Do People Matter?

Written on 3 Dec 2015

Of course they do! However, it’s surprising how many businesses fail to recognize their “Human Capital”. In this post, I consider some of the issues to prioritize when working with an overseas team and share with you some of the pitfalls that can be avoided with some sensible advice.

Where to start?

My experience in Silicon Valley is that the War on Talent rages on. Every business is fighting for the best people, desperate to keep them focussed and ensure that their recruitment processes identify the best talent in the market. So, why when looking overseas does the recruitment process often become secondary to getting the business started? Almost without exception the people and the team will be the make or break of the overseas operation. A strong leader with experience of both the local market but also an understanding of reporting back to a US HQ is vital. Once the manager is appointed, having him/her recruit the local team can ensure that the combined talent works well together and drives in the right direction. So often, I have experienced teams flung together, leaders plucked from chance encounters or recruitment undertaken at a distance with little to no local guidance.

Engage properly

Overseas employees are protected by their local laws. If you only remember one item from this post, please let it be that! It is therefore not only customary but often a legal requirement that they will be presented with a local employment contract. The document will often run to many pages and will look very different to a US offer letter (offer letters can still be used, but they are merely correspondence prior to or accompanying the contract). The contract is mainly written for the benefit of the employer (although of course also sets out the rights of the employee). Without the contract, any dispute with an employee will result in local laws applying without variation which can lead to longer and more expensive negotiations and settlements.

The content of the offer letter/contract is also important. Many experienced HR professionals will be aware that notice periods are required (no employment at will outside the US), time off is longer (and will be taken!) and certain policies must be included. However sometimes, contracts can be overly generous in other areas – healthcare insurance need not always be included where a national health system exists; stock options will often be rejected in jurisdictions where they are unattractive from a tax perspective; and not every employee need be described as a “manager”. Vacation or PTO policies should generally not be unlimited as has become popular in Silicon Valley – in many cases it is legally unacceptable, but more importantly, you may find that employees take up your offer to spend material time out of the office!

The size of your workforce is also important – if just one or two, then it’s usually light compliance. However, if you’re employing (or planning in the short term to employ) 20 or more employees in any particular country, you should consider whether a works council is necessary. Collective bargaining agreements may also become applicable for all employees.

For non-English speaking markets, it is often customary to include a dual-language contract. This again can seem unnecessary when your employee speaks fluent English and you’re trying to save costs prior to sales being concluded locally. However, if a dispute arises the lack of a local language contract could cost you very dear.

Stock options

Incentivizing employees with stock options in the US (particularly Silicon Valley) is the reason for many employees joining. Outside of the US, employees (particularly in more junior roles) are less interested in the future value options can create and prefer more immediate benefits. More senior employees often join a US company because of the option value, but bear in mind that the options will be taxed subject to local laws. It is therefore vital to check that position prior to issuing the options as there’s often no quick fix at a later stage. Such local laws can be attractive for emerging business and provide very generous tax treatment; others can be neutral and require very little localization and others (as trailed above) can be so harsh that employees simply reject the offers of options.

Immigration

If you plan to send any employee from one country to another, ensure that immigration rules have been checked. These will often apply to simple business trips (irrespective of duration), sometimes will become an issue when repetitive visits are being made and almost always will apply if a longer term stay is planned. Build in time for any of the above – some countries provide fast track options whilst others can be extremely bureaucratic and take many months.

There are some systems whereby your local subsidiary can apply for a licence and approve applications to shortcut the process, which will often be advantageous when the business anticipates sending multiple employees (whether in one go or over time).

The most important issue is to ensure your employee is not stopped at any point of entry and turned back. Not only will it be inconvenient from a business perspective but if the individual’s passport has a “Denied Entry” stamp, any future business or personal travel will be either forbidden or cause administrative headaches. Crossing borders usually means permission is required and respect should be given to rules: which are different and change regularly.

Your biggest asset

Finally, we’ve heard of many large tech companies completing acquisitions for the talent within the target business (“acqui-hires”). Paying a premium for people can provide a long term gain – but since it is not legal in most countries to enslave employees, they are only going to stay for as long as they feel wanted and rewarded. When one or other of those begin to decline, your investment can start to look elsewhere. There are legal restrictions on competing, confidentiality and IP protection, but ultimately it’s better for you to keep your employees. When they are overseas, that can be more difficult to achieve: they often don’t get the same soft benefits as HQ (big offices; catered meals; sports facilities) nor do they benefit in the same way from Town Hall meetings and the infectious enthusiasm of founders and senior management. Thought must be given to communication, supervision, recognition, support and culture – all at a distance which can be quite a challenge. There are no easy answers but many global businesses have found ways to achieve happy global workforces.

Happy people usually mean loyal and hard-working people…which means profit!