In an increasingly globalised world, Singapore is fast recognising the importance of supporting local businesses in building and managing global teams. Budget 2024 revealed plans to invest in human capital and provide financial support for overseas expansion. Local firms are now prioritising international expansion strategies to diversify their customer base, capitalise on new opportunities and create long-term stability. As of 2023, 2,000 enterprises in Singapore embarked on internationalisation activities, a 25% increase from 2021.
Going global is necessary to stay competitive. Although local firms are confident in expanding into other markets, they grapple with understanding local employment practices and complying with local labour laws. According to a survey conducted by G-P in 2023, 39% of global business leaders who have hired employees from other countries cited compliance with local employment laws as one of their top challenges.
To keep up with the continuously evolving regulatory landscape, firms must ensure their market expansion strategies are compliant.
#1: Lack of local compliance knowledge
When establishing an entity or hiring employees in new markets, businesses must proactively identify and address potential compliance errors to ensure a seamless transition and mitigate legal and operational risks. Companies may overlook global tax obligations and country-specific statutory benefits such as income tax, medical coverage, employee pension packages and social security contributions.
Hiring global workers without a thorough understanding of legal and financial complexities like compensation to tax rules, laws around employment contracts, visa requirements and varying benefits can have costly consequences. These can range from incurring financial fines to limitations on business activities to additional barriers to approval, potentially damaging a company’s reputation.
To avoid expansion setbacks, companies need to rely on local compliance knowledge to navigate each country’s laws, labour practices, regulatory frameworks and cultural norms. One solution to accelerate establishing a global footprint and employing teams in new markets is to leverage support from reliable and reputable partners. For instance, an experienced employer of record (EOR) provider enables companies to expand into new markets quickly and compliantly, managing all aspects of global employment including payroll, taxes, benefits, human resources tasks and compliance.
#2: Underestimating risks related to employee mobility
When businesses enter a new market, they may send domestic employees overseas as part of their global strategy. There is a growing preference among younger workers in Singapore to work internationally; 51% of Singaporean Gen Z workers have planned or considered relocation for their jobs.
Businesses should consider each country’s corporate records and filing requirements when relocating existing employees. To adhere to local regulations and meet employee expectations, companies may need to modify certain policies including working hours, overtime pay, leave entitlements, and termination procedures. For example, Singapore recently introduced the Flexible Work Arrangement (FWAs) guidelines, which requires companies to consider flexible working requests by the end of this year.
As part of their compliance plan, companies should create a centralised handbook to outline current global labour and regulation policies and ensure consistent practices across the board.
#3: Not tailoring employee benefits plans
When hiring global employees, businesses must keep the playing field even for employees while also complying with local standards. Companies may overlook factors such as living costs, labour costs, and currency fluctuations in their employee benefits package.
To avoid compliance issues and attract top international talent, companies need to consider how they approach creating an employee benefits strategy from establishing a benefits philosophy, to budget, to priorities. Companies may want to offer universal benefits for all employees and add country-specific benefits based on local customs and norms.
#4: Needed awareness of ongoing regulatory changes
Employment laws are constantly evolving, and companies often fall short when staying on top of these changes. In fact, earlier this year, Singapore introduced tighter labour market regulations and stringent penalties for non-compliant employers.
To ensure organisations remain compliant with current labour laws, companies should consider leveraging a technology solution, like an EOR, to ensure compliance. Alternatively, a company would need to consider appointing members of their HR and legal teams to frequently monitor employment practices and regulation changes.
Furthermore, maintaining an organised and secure storage system for important communication records and documents, such as visa copies and employment contracts, is crucial for enforcing compliance, particularly in the event of legal complications.
Whether setting up new business entities or keeping up with changing labour laws and regulations, businesses will continue to face compliance challenges when expanding their global footprint. To secure their future and succeed globally, companies must collaborate with cross-border HR and legal experts and enhance their compliance frameworks. By taking a proactive approach, businesses will mitigate legal and financial risks and foster a culture of integrity, building trust and credibility with stakeholders across borders.
About the author
Charles Ferguson is the General Manager and Corporate Development Lead for APMEA at G-P (Globalization Partners), a SaaS-based Employer of Record (EOR) provider.
He was most recently the group chief commercial officer for Tricor Group, a Hong Kong-headquartered business expansion specialist. The Permira investee company brought him into designing and executing global sales, marketing, and product innovation strategy.
Prior to Tricor, Charles was president and general manager for Asia Pacific at ADP, and before that, he co-founded ReedHamilton, focused on talent acquisition to go-to-market strategy across industries.
