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In previous episodes, we discussed the benefits of having a remote workforce in your company, and how to manage distributed teams across the world. After COVID hit, many companies have recognized the benefits of remote work, and are now considering the transition from an in-office to a fully-remote setting. This transition opens the opportunity for companies to find the right talent all around the globe, and Latin America, with an increasing pool of talent, might be key in this search.
With a new window of opportunity arises the challenge every company must face: how to deal with HR, payroll, and tax compliance in a foreign country? Do they need to have a country manager in every single country they recruit people in? These are the topics that Sergio covered in conversation with Carolina Mello, Regional Alliance Manager at Safeguard Global, a company that manages HR, tax compliances, and payroll in 179 countries.
🎧 Listen to the podcast right now below (also available in Spotify):
👉🏽 Here are the main takeaways from our conversation with Carolina:
- Some companies might be looking into new markets, considering more cost-efficient resources, now that they've seen that work from home is possible and that the world is shifting to that.
- Every company will have a different path in transitioning to remote because company culture plays a huge role in this.
- Remote onboarding is something that needs to be done very carefully because that sets the tone for the experience that the professional is going to have, so it needs to be done right.
Read the transcription of the interview below, lightly edited for clarity.
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Sergio: How to implement a global remote team? How can companies ensure compliance when hiring abroad? This is part of what we’ll discuss today with our guest: Carol Mello, Regional Alliance Manager at Safeguard Global.
She has a front-row seat with what’s happening with companies going remote. We will be discussing the compliance and cultural considerations that companies should keep in mind when establishing a remote workforce across several countries. Please enjoy our conversation. Carol, thanks for being here. I would love to hear directly from you what does Safeguard do.
Carolina: Thank you for having us, Sergio. I really appreciate being part of the podcast.
Safeguard Global is a company we call "the employer of record". What that means is, a lot of people are familiar with managing HR within their country through a P.E.O., which is a Professional Employment Outsource company. We do that all over the world. We are present in 179 countries and we allow companies to go to foreign markets without setting up their own entity. That means that you know they get hired under Safeguard and we’re in charge of all their tax compliance benefits and payroll — in 179 countries where we operate in —, so that gives these companies the ability to go in and out of markets very fast, and it also allows them to bring a resource on board in about 2 weeks. So that's what we do in a nutshell.
Sergio: Amazing! It's a pretty interesting time for remote work. Just a few days ago Twitter, Facebook, Square, and other tech companies announced moves towards enabling remote working a permanent way. So, my first question to you is: in this COVID-19 context, what are you seeing as the biggest shift in companies’ hiring patterns?
Carolina: I think it's important to talk about the future of work, right? People have been talking about that for a long time, but the future of work is now, that really shifted COVID-19 and I think we all saw that. We used to talk about being able to have these remote teams all over the world, which a lot of companies are doing already, but for a lot of companies, they were kind of falling behind, like they still had a very much in-office culture before COVID hit. So, we saw that people had to adapt to move very fast.
The first couple of weeks were a little crazy, as people were trying to figure out how to move all their other workers, having to go work from home. In some cases, they had the ability to do so because they had laptops, but some people had desktops, so if you think about offices all over the world-changing that, and having to make all those decisions very fast. That really became the future of work on the now, right? We're seeing that companies are now all-remote because of these regulations, and I think they're breaking up some of their old perceptions regarding remote work. And they're trying to make it work. Every company is going to have a different path because of the business that they're in. For some, they already had a culture of being remote in some instances, and for others, they’re having to adjust everything.
I also think that helps them look into new markets for resources. We've seen as companies look into their financial situation. They think about what they're going to put in place for a new strategy, an international strategy, and even there — if they're a US company, for example — what are they going to do next? In some cases, they can't really stop hiring, but they did. We saw a lot of our clients for like a month or so not hiring, but now it seems like they're all coming back to "OK we still have company milestones to hit, so how are we going to make this more efficient?" and they might be looking into new markets, considering more cost-efficient resources, now that they've seen that work from home is possible, and that essentially the world shift to that.
Sergio: Absolutely. I think it's the same pattern we have been observing at Get on Board. I would say that the culture or the intention to start hiring remotely more aggressively is there, but sometimes it's the small stuff, compliance stuff, all the friction that comes with trying to hire someone in an unknown country. So, how can companies ensure compliance when hiring up the road? Especially around contractors, which I think it's also going to be an emerging trend as companies try to get more flexible around managing their workforces?
Carolina: Yeah, so that’s what we hammer all day: compliance. And that's a word that people don't like to hear, but I do believe that if you address that ahead of time then it doesn't come back to bite you. I try to have that conversation with clients that we have, and with people that I know, to friends from startup companies all the way to enterprise-size. Contractors have been something that everybody — every company— has to use at some point in time, and the compliance is kind of like this gray area.
In California, there is a regulation regarding contractors now surfacing all over Europe. You're seeing that they're under scrutiny with independent contractors, and one thing that I think is important to highlight is that around 60% of businesses are not in compliance when it comes to contractors and most of that is due to misclassification. So, what would you say regarding misclassification as most people, like "OK what is misclassification like? I don't really get it", so every country has a different way in which they classify contractors. In some countries is as little as like 25 hours a week. If they work for your company, then they become a full-time employee. Some countries are more than that, but, however way you look at it you have to be in tune of local regulations, which again, change from country to country, so "how is the contractor being classified in that country?" is something they really need to look at.
This 60% — is the fact that — if you're in the US or in any other country in the world where your company is operating, you’re looking at that as an example. So we tend to look in the US —we’re very US-centric— how contractors work, people, 1099 contractors. So a lot of companies here tend to think that they can use the same 1099 forms and contractor information to classify their independent international contractors, and that's not true.
I think some of the things that they need to think about to prevent risk for misclassification is to evaluate the plan to work with each contractor in each of these locations. Then look at the location — essentially a law, regarding contractors — in what they can and cannot do: How many hours? What kind of benefits they have to provide if any? Are these people registered to provide these services? Also probably consult with a local HR expert while they're looking into hiring these contractors, and make sure that they're following compliance in that specific location. Also creating a standardized process to manage contractor agreements.
It is possible to employ contractors compliant, but you need to make sure they have these agreements in place in the country to also protect company property. Also, make —I think internally— sure that the hiring managers and HR teams are informed of these risks. When all day they have to do to make sure that they are avoiding that, so they have to have defined company guidelines for the process of how we engage contractors. Also maintaining these records of agreements, payment transactions in case there is an audit, and exploring the alternative employment options as well, because if these people are working full time, 40 hours a week, chances are they already misclassified.
It's really understanding that once you have that in place, and you have this strategy, and you know how to go about your contractors, they can be a great solution, it’s just not for everybody, because 60% of businesses don't have the capacity to manage that from an HR perspective. If they have contractors in one, two, six, or seven countries they really have to understand the regulation. What happens is the reason why they are misclassified is that it is very bothersome to understand all these regulations, so some of these steps that I mentioned I think will help companies if that's what they're going for, if they believe that that's the best course for their business, they can take some of these steps to avoid compliance issues.
Sergio: Well, I think this is a lot of new information for most of our listeners, and for most companies trying to navigate remote. I think this is already super helpful.
But this is not the only thing that companies going remote have to navigate, and I would say that one of the biggest ones is managing these cultural differences, because it's not only that people are working from home, people are working from different countries, and people are being present in other countries, other cultures.
So, beyond time zones — which I think is one of the most prominent issues, but not necessarily the most important — what's your advice on managing these cultural differences when working with people from many different countries? and also, what do you think are the most common rookie mistakes to avoid when trying to implement this global remote team?
Carolina: I think that the whole cross-cultural-virtual teams are a challenge to all organizations. It doesn't matter if you're a small startup or enterprise-size company. There are always things that are challenging about managing a cross-cultural-virtual-remote team because you have people — like you said — in different time zones, different countries.
There are a few things that I've seen over the years and I think they help companies try to follow the right path because every company will have a different path when it comes to that, because of the way company culture plays a huge role in this. I would say that the first thing would be trying to not replicate "to a T" the way they do things in the headquarters. There are a lot of companies going to new countries thinking "oh, this is not the way we do it in the headquarters’ country; this is what works for us." It doesn't work in that country. That is a completely different country, so you need to really learn, acknowledge, and respect the cultural differences that they bring. Also, respect and be sensitive when it comes to cultural diversity.
I think they're doing the homework ahead of time to understand the local customs, and behaviors, the expectations for that specific employee population. So, one thing I've seen that really helps companies is hiring a country manager as an advisor. That tends to be a good entry route because that person understands. So, if you're coming from a different country, and you have all these ideas of how you’re supposed to work locally, I think that person can be stirred into "well, you know that is a great idea, but we don't really do that here. This is the way we are, culturally," and I think that first hire can be very important to set the tone and to make the company understand that they're going to have to tweak their operations a little bit in order to be inclusive in that country. Establishing guidelines, getting the buy-in from the local employee population.
A lot of times it doesn't hurt to ask your local population to come up with ideas, like "what would you like to see? how can we work with you better? We're obviously a company from another country or entering…" It’s just being honest with the employees they work, and I think that goes a long way. I think that helps establish trust, as you're doing a higher number 1,2,3, and so forth. Also setting up clear roles and responsibilities, especially when you're doing that — even inside our own countries— but with the remote workforce. Especially internationally, people need to understand who they are reporting to, who they go to if they have an issue in the country: do they have an HR in-country or they have an HR sitting where the headquarter is?
Understanding all of how that's going to function is very important. That's part of also the next thing, which is over-communicating. Making sure that they're really going through the extent of repeating 1, 2, 3, 20 times, and making sure that everybody is understanding what the message is because sometimes they're like "Oh no!" people get it, but maybe they don't. There is, again, a language barrier. What we say and we think it's OK to say in one culture, is not in another. So, understanding that in over-communicating with population to prevent miscommunication essentially, and also make everyone feel included.
HR should really focus on programs that are focused on diversity and inclusion throughout the organization. So, in every country they're going to operate in, they need to make sure that that population feels included on the overall company culture and strategy, and also, thinking about localization of handbooks, not give another country Handbook to a person that comes from a country where that doesn't apply. And some cross-cultural training, I think it's very important as well. So, I think those would be the main ones.
Sergio: This reminds me one of the previous conversations we had in this podcast with Darren Murph from GitLab and he said that remote companies are actually more diverse because they keep the people close to their cultures of origin, so, in a way, their culture and their differences are kept purer when they are remote, so there is a higher opportunity for really sharing different cultural contexts. And, all you said about integration leads me to a topic that I think most companies struggle with when trying to hire remotely which is onboarding.
I think that for companies that used to have an office onboarding is fairly simple and easy. In part because part of the onboarding is done by the office itself. Bringing someone physically into the office and look at the decor and shake hands with people and all of that is gone now. So, what tips do you think it might be useful not only during this period but for companies trying to hire permanently remote workers. What would you say are some useful tips to help with onboarding?
Carolina: So, as you mentioned, right now everybody's thinking about it, because we are in the middle of a global pandemic, unfortunately, so we do have to be creative. Most companies that maintain an in-office culture are now 100% remote, due to these legislations and sheltering placements. I think for HR it's a little bit more chaotic now because of the situation we're in, but, as you said, joining an organization while everybody adjusts to that is always[…] I think remote onboarding is something that we need to be very careful because that sets the tone for the experience that the professional is going to have, so we need to make sure that it is done right.
But right now is a little bit more challenging because HR is trying to transition their workforce, and I think the first couple of weeks were a little bit more chaotic than now. People were settling into this groove. But, just alleviating your employee uncertainty, and ensure that they feel supported from the start.
An important thing to do is to plan a pre-boarding process, making sure that the remote worker — not having an office space to go to, not having people to ask questions that they have — has somewhat of a structure in place, and figuring out how to get started it's a little bit more challenging. So, setting up a pre-boarding plan I think is very important: how they're going to essentially welcome the person into the company? what are some of the steps that they're going to do to make sure that their remote worker is going to feel included from day one? And not just do a regular onboarding, like an in-office onboarding the way we have in mind, obviously doesn't work. I think it's just — and again— for different companies that are going to mean different things, so it's hard to set a hard line when it comes to developing this pre-boarding process, but I think that's something important to focus on.
Another one is to help the managers communicate expectations. A lot of times the person that is hiring might not be very involved in the onboarding, and especially when hiring remotely. We’ve seen from our experience that it is very important that the direct manager is involved in that process. That they are welcoming the new professional to the company. That they understand all the systems that they're going to be working with. And I think it falls into HR to make sure that that's being done, it's part of management training as well to understand that they are vital in that onboarding piece, so not leaving everything with HR as well. Because, at the end of the day, the person is going to communicate with that manager very regularly, so they need to be involved.
We’ve seen before where companies just leave it up to HR and, as the resource comes in, going through the new onboarding and be like "oh, OK.. well, I haven't even spoken to my manager. Yeah, it's been like a few days". So, managing that and bringing that person early into the conversation is very important. Also setting up video calls with the team. Some companies have found that it is ideal to onboard a worker a few days prior to a company-wide event, so if they're going to have something happening — back when people could meet in person — they would do that. Obviously with the current crisis that's not possible, you know, but instead, they can leverage tools like video conferencing calls to create these virtual face-to-face meetings and have the ability to include these people in these meetings ahead of time, so they feel welcome, so they can see the team, they can see other people they're going to be working with.
Another thing is double-checking international regulations — we talked about that — but just making sure that they are setting themselves up for success, that they are looking at the regulations and the country that is going to operate in; that they're going to bring their international workers, making sure that they're registered properly and everything is buttoned up to be able to employ that person in the country. I believe those are —I think— the top things we talk about when we talk about onboarding remote workers. There's many more but I think that gives it a little snippet of how we normally work, and for our clients specifically.
Sergio: Sure! Do you think that some of these rules might apply differently to small startups, where there's no HR area or someone that is probably dedicated to this full-time?
Carolina: Yes, absolutely. We see that a lot of times. They might have the CEO or the CFO very involved in these onboardings — if they are an early-stage company — and we do our best to try to guide them. We know with what we've seen with our clients, I think companies are doing a better job at it. Obviously, if you have an HR — somebody that can do that for you — that seems to be ideal, but sometimes you don't have that luxury, so you just have to wing it. And I think we have a lot of resources online, just Internet these days is a great tool for companies that don't have the HR arm to figure out like "how are we going to onboard somebody?" — a remote worker — and there are best practices that they can find everywhere, essentially online. I think that's very helpful, but again it's something that you need to make sure that you’re taking the time to create a plan.
Sergio: Absolutely. Do you think that all this change towards remote work is going to change how companies are looking at their expansion strategies? Because most tech companies, even the ones trying to go global, they are still based in the Bay Area. They just try to scale from there and now they're looking at it differently. So, do you think there are going to be some permanent changes in the way companies see themselves and see their teams when trying to go global?
Carolina: Yes, I think the global strategy has been a thing that's been evolving a lot in the last, like, let's say what? like 10 years? And companies are trying to figure out "OK, what should I do?" The norm is to be like "OK, let's set up an entity so we can get those people hired," and all of that. With some other services — as we spoke about — the kind of services we offer in other companies as well, like EOR, contractors, and all these different things.
Now you have all these different options for international expansion strategies, so we’re just figuring out what stage the company’s in. There's obviously the entity set up, as I mentioned, making sure that the tax law in the region, that you have an understanding of that tax line in that region. It can be very complex and difficult to interpret. There's also like setup costs and banking requirements, so if the company strategy doesn't require that entity set up as part of it, there are other ways to do it these days. So, I think it's just understanding how to leverage a remote workforce in what solutions are going to be best. Sometimes you do need to set up an entity, sometimes you do need to work through HR, and sometimes contractors are the best way to go.
So, just understanding that, and being able to weigh the options and see what's going to work fast for your business essentially, but, making sure that you’re looking at regulations when you trying to engage this new talent markets, it's a lot easier these days and he used to be. I think that's why trying to figure out how you’re going to go about it: is it entity set up, is it COR, is it a contractor, is it a mention. Another thing is the local talent. Looking into who's sitting in a market, what countries are you considering? what kind of regulations is present in each one of those countries? You can go into Europe, but there's like — if you consider five different countries in Europe — they all have different regulations, and some of them are very — I'm not going to say very easy, because it’s never super easy — but some of them are easier to employ than others, so that should be part of that strategy like "OK, well what's the regulation in France as opposed to the other lands? Is it easier? Is it harder? How does termination work? What kind of severance am I talking about?"
I think those are all considerations, especially when setting up an entity, because, if you have to dissolve that entity afterward, if you have to let people go for whatever reason, that can become very hard to manage — especially if you don't have an in-country HR to do so — so, understanding that is very important. Also being able to pay people on their own currency, operationalizing the entity that's the row the company just goes on. Making sure that they can put taxes and withholdings in place from payroll that all work together. If they're planning on independent contractors and they're not going to set up an entity, they still need to adhere to the local regulations, making sure that taxes are paid on the contractor side, as well as understanding the risks involved with misclassification of that country. So, that is something that when you talk about an international strategy you have to focus on that, there's just no way around it.
The employment regulations, and also the benefits: are you able to offer benefits? can you get an umbrella policy? or you're going to have to find a local provider they can help you with that? Those are all things that, when you're talking about international strategy, they need to be brought into the conversation. So, again, what kind of entity — just to recap — what kind of plan do you have: is it an entity? is it EOR? is it contractor? Is it something else?
Look at local talent, look at the wages: How much are people paying in-country? What kind of skillset can I find in that country? Is it going to fulfill my needs? And then employment regulation and benefit requirements. I think that's a good sum of things that people can consider — should consider — when thinking about global expansion strategy.
Sergio: That sounds great, and, as a closing thought, what kind of companies do you think are going to make the most out of this remote-world opportunity? Do you think there are any trades that might best prepare remote companies for success?
Carolina: I think just having a plan. I know that's a kind of a lame answer, but I think that having a plan on how to deal with this ahead of time, and, as I said, now everybody kind of figured out a plan during a pandemic time. But I think as we evolve, and as we continue to[…] I mean nobody knows when people are going to go back to work. I think some countries there may be a little bit different, but here in the USA, as you mentioned, some companies are extending the work from home until 2021, and after that, maybe it might be the new normal. So, we don't really know. I’m not sure if I have a great answer for that, but I think we're all going to adjust. Then again, as I mentioned in the beginning, I think the future work is now, it's here. I do think there are good things that can come from this fast shift into everybody's remote working, and I think companies can benefit a lot from it, looking into other markets besides the country they're into, to find those resources internationally. And I think it will all depend on their overall strategy and what their plan is. So, I think it's going to vary by industry and what kind of company is going to take the most advantage out of this new way in which we're going to work from now on.
Sergio: I think this is a great answer, it's not a lame answer at all. I completely agree, and I think it's all about intention ultimately, and embracing this situation in a deliberate way. And I think your advice is going to help a lot to ease this learning curve that most companies are facing right now. So, Carolina, again, I really enjoyed talking to you today, thank you so much for being here and being part of this conversation.
Carolina: Thank you so much, Sergio. I really enjoyed being part of the podcast and I hope folks got something out of it.
Sergio: Absolutely! Thank you.
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Check out all Working Without Borders episodes here.
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