Overseas Expansion Adds Hidden Payroll Costs and Risks

When you think to set up a branch office or a company in overseas country, you may be unfamiliar with the payroll regulation in the local government, and get suffered from the different insurance policies among different countries as well. Therefore, think consciously the hidden payroll risks while you are expanding your company internationally.

Through hidden costs that you don't expect and penalties for doing things wrong, the process is always more cumbersome than expected. Establishing an office overseas is one of the easiest ways to set up an outpost because it allows the company to have a minimal presence. In this type of model, however, employees may not engage in sales or contractual matters. Employers also may choose to set up a branch office, or an extension of a parent company, that would serve a certain area, Butler said. Under this arrangement, employees may engage in core activities and sales operations, but the branch office would not be a separate legal entity and the foreign parent company would be subject to liability.

Another option is to establish a separate legal entity for engaging in business overseas. This arrangement, known as a subsidiary, provides a layer of protection between the interests of the parent company and the on-the-ground entity. There are many costs associated with international expatriate assignments, including social taxes and administrative expenses, Butler said. In France, for example, employer contributions for social security are 44 percent, compared with a typical employer contribution of 10 percent in many other countries.

Additionally, some countries cost more for companies to enter. So if you are facing these kinds of troubles, hand over your payroll affairs to professionals. Like what Talent Spot suggests, outsource your payroll administration will make your work lots easier while you expands your company.