Expanding your recruitment reach across borders seems like a no-brainer. You open up access to top candidates from around the world, enrich your company’s diversity, and tap into a wider pool of fresh perspectives and problem-solving approaches. However, global hiring comes loaded with potential pitfalls and common mistakes that trip up even the most seasoned hiring managers.
From failing to see compliance gaps to mismanaging multi-country payroll, global hiring is not as simple as posting the same job descriptions on an international job board. Overlooking the small (yet important) details can lead to serious compliance consequences, not to mention misaligned expectations and an increased risk of employee churn.
In this post, we will uncover five common global hiring mistakes, and more importantly, provide you with some pragmatic solutions for steering clear of them.
Whether you’re on your first journey into international hiring or already have some experience under your belt, these insights will hopefully better equip you to navigate the complexities and build a high-performing global team that drives your company forward.
One of the more common global hiring mistakes is failing to understand how radically the total cost of employment can vary across borders.
To give an example, let’s say you’re hiring for a software developer role and hoping to find the best talent for the position, regardless of location. Based on typical local salaries for your Irish company, you’ve budgeted around €60,000 annually.
During interviews with potential candidates, you meet an exceptionally skilled developer living in France who seems like the perfect fit. Eager to extend an offer, you verify they would accept a €60,000 salary. But once accounting for higher taxes, social contributions, and other French employment costs, you realise their total compensation package would far surpass your projected budget.
To help bring some clarity to these kinds of hiring decisions, we recently conducted an extensive employment costs study across Europe.
Using the example above, we estimate that an employer would need to pay an extra €20,000 in costs for the same €60,000 base salary.
(€66,630 total costs in Ireland vs €86,707 total costs in France).
As you can see, what seems affordable through a basic salary lens rarely tells the full story. Alongside bases salaries, you also need to consider:
Tax complexities: Countries have differing tax rates and social security contributions, which as in the case of France, can skyrocket costs beyond initial expectations. On top of this, some countries impose unique taxes (for both employers and employees) which increases both the costs but also the tax filing obligations employers have. These could be anything from local city taxes in Italy to Church taxes in Germany, and so on.
Benefits disparities: Providing competitive benefits packages across countries can become costly. Healthcare, retirement contributions, insurance rates, and even transportation stipends can vary greatly by location. If you don’t account for these variables, benefits offered to international employees may fall short of local standards and fail to retain talent. Getting benefits right globally requires research and budget planning.
Administrative requirements: Some countries have mandates like pension and insurance contributions, training levies, etc. that companies are obliged to fund. For example, once a company has an annual pay bill of more than £3M, UK regulations require they contribute to an additional pension scheme as well as the Apprenticeship Levy (a monthly tax to support technical skills training programmes). These administrative obligations add up quickly and can catch companies off guard if not factored into international hiring budgets.
Carry out comprehensive cost analyses before extending any job offers to global talent. Thoroughly research taxes, compliance requirements, standard benefits packages, and other costs associated with international employees in each country you wish to hire in.
Of course, this can be an incredibly complex and time consuming process. That's why we created our comprehensive employment costs study across 32 European countries. It's a valuable tool to help you navigate these complexities and make informed decisions. You can view the full analysis here.
Alongside this, make sure you have open conversations about compensation and benefits during the interview process. Walk candidates through the entire employment package so both parties understand the full scope of benefits and financial implications upfront.
When expanding your recruitment process across borders, many companies are unsure of the best way to employ and pay people. Some default to engaging workers as independent contractors or keeping them employed via the headquarters even though they are in a different jurisdiction. Routes like these, however, can result in employee misclassification or problems with tax authorities.
Whether misclassifying workers is intentional or not, it leads to significant problems, including:
Legal misclassification cases & fines: Laws around proper employment classification are stringent across most countries. Governments actively police mislabeling of workers - cracking down on companies that wrongly label employees as independent contractors. But even without government intervention, workers are speaking up more when they believe they’ve been misclassified.
For example, this recent court case in Australia highlighted the severe consequences of misclassification. A company was fined $197,000 for mislabeling employees as independent contractors, even though they exercised significant control over their work. This essentially denied them basic entitlements, such as minimum wage, overtime pay, and sick leave. This underscores the importance of accurate classification and the potential financial penalties for non-compliance.
Employee dissatisfaction: Misclassified employees often feel treated as second-class citizens compared to properly classified staff doing similar work within the same company. This perceived inequality leads to poor morale, higher turnover, and retention issues. It also prompts top talent to leave, potentially taking sensitive company knowledge and intellectual property with them. Misclassified employees may also struggle to qualify for basic services like mortgages in their local markets without traditional employment contracts.
Reputational damage: Misclassifying your works could lead to your employer brand suffering with future job candidates in the relevant labour pools. Top talent may not wish to work at a company with a reputation for misclassifying roles abroad to cut operational costs. This competitively hinders critical hiring initiatives.
Higher rates of employee churn: Unlike traditional employees, contractors are not as tied to the company, increasing the likelihood of them leaving and taking their expertise, knowledge, and IP elsewhere.
First, clearly define roles before hiring - are you seeking a contract worker for a short-term project or an employee for ongoing work central to your business? Taking the time upfront to distinguish between temporary versus permanent needs will help guide proper worker classification.
Next, consult localised employment lawyers to understand exact definitions and regulations for contractors vs employees in all countries you hire in. Having sound legal advice is key for compliance since laws and standards can vary greatly between countries.
Generally, if a role is a core, ongoing function, it's better to bring them on as a full-time employee with proper benefits. The stability and engagement created through fair treatment pays dividends down the road.
For businesses unfamiliar with global employment, international payroll presents a major challenge. Each country has unique pay schedules, tax calculations, payroll requirements, and laws around compensation. Without localised knowledge or compliant systems in place, mistakes inevitably happen.
Inconsistent pay periods: It’s important to have infrastructure supporting multiple pay cycles for your global talent. Some countries require businesses to pay monthly, others weekly or biweekly. Can your team, systems and workflows accommodate these variations?
Incorrect tax deductions: Every country requires specific income tax and social contribution calculations. If payroll fails to deduct these accurately, you could face major financial penalties and legal violations.
Late payments: Processing delays or missed wage payments may breach employment contracts. Beyond causing frustration, consistently late compensation violates labour laws in many countries.
Language localisation: Payroll systems, payslips, and related documentation typically must be provided in the local language, as per country regulations. This extends to communications with local authorities around tax filings, health insurance, pensions, and so on. As such, operating payroll internationally usually requires translation, multilingual staff, and customisation to confirm linguistic compliance across borders. This is something many companies overlook.
Non-compliance: Payroll rules have nuanced requirements that vary significantly across countries. For example, in the UK, employers must comply with Real Time Information (RTI) reporting to HMRC. Under RTI, details like pay amounts, tax and National Insurance deductions must be communicated accurately every time employees are paid. Failure to do so can lead to penalties.
Similarly, in France, employee payslips have stringent regulations around content and clarity. These highly detailed payslips must break down all deductions, contributions, and corresponding rates so employees understand exactly how their net pay was calculated. This level of detail often means that payslips in France are often more than one page long. All of these factors make processing payroll manually difficult and somewhat risky across borders.
These payroll issues manifest as clerical errors at best, expensive legal problems at worst. They can also lead to employee dissatisfaction through perceived incompetence or lack of respect for international colleagues.
To make sure you remain on the right side of compliance, consider partnering with accounting firms or payroll providers native to each country you hire from. These local experts bring invaluable insights, helping you align with local laws and norms that might otherwise slip through the cracks.
Regular audits are another powerful tool in your arsenal. By consistently verifying calculations, deductions, bank transfers, and payslips, you can catch and correct errors early. This proactive approach not only maintains compliance but also builds trust with your global team.
For businesses looking to streamline their global operations, outsourcing payroll and compliance through an Employer of Record (EOR) can also help bring peace of mind. This helps to minimises errors by placing the complexities of international employment, including global payroll, in expert hands.
Each country has its own unique set of labour laws covering everything from employment contracts and minimum wage to overtime pay and termination requirements. Navigating these regulations is a crucial part of global hiring processes, and even small, unintentional oversights can lead to non-compliance.
Take employee termination, for instance. Most countries have strict rules about how and when you can end a working relationship with an employee. Without following the required processes for notice periods, severance, and paperwork, you might find yourself inadvertently breaking employment laws and facing some serious consequences, including employment tribunals.
It’s worth noting that the concept of at-will employment, common in the US, is rarely recognised in Europe. In most countries, dismissing an employee involves a more thorough process with specific steps, timelines, and compensation guidelines.
The Netherlands takes this a step further. There, employers need to get approval from the Dutch Employment Agency (or court) to end an employment contract outside of a mutual agreement. This means companies can’t simply decide to part ways with an employee without a legitimate reason and formal approval - a lesson Uber learned the hard way in 2020. If you plan to hire across borders, failing to recognise and abide by the varying local labour laws may result in:
Lawsuits or fines: Labour law violations lead to financial and legal consequences. Fines for non-compliance can be sizeable in some countries.
Reputational damage: Breaking labour laws in any country you operate in reflects poorly on your employer brand. Media coverage of non-compliance is damaging, especially for large or public companies who rely on perception and public trust.
When it comes to global employment, knowledge truly is power. Staying informed about local labour laws isn't just about avoiding penalties - it's about building a strong foundation for your international team and your company's global reputation.
Once again, the best practice is having strong counsel to guide you proactively on local employment laws and ever-changing regulations.
At Boundless, we operate as an Employer of Record designed specifically to minimise the risks around employment compliance for expanding companies. Our in-house teams manage payroll, benefits, and contracts while staying on top of ever changing labour laws - ensuring total compliance with no extra effort from our customers.
While the flexibility of remote work is appealing, it comes with its own set of challenges that can catch many companies off guard. Having your team stretched across countries in various time zones can turn something as simple as organising a meeting into a real pain point.
For the sake of collaboration, some team members might feel the need to log in for late-night calls or early morning meetings, just to keep everything in sync. The constant juggling of schedules can lead to frustration and decreased productivity.
The "always-on" culture of remote work can easily encroach on personal time. With notifications and emails pouring in at all hours, it's challenging for employees to disconnect and maintain a healthy work-life balance. This constant pressure can lead to burnout and decreased employee morale.
As such, one of the most common global hiring mistakes companies make is simply not setting parameters and expectations of working hours clearly enough (especially if you employ across vastly different time zones). Without clear guidelines, employees are left to navigate the complexities of remote work on their own, leading to friction, frustration, and ultimately, a burnt-out workforce.
This can also open you up to risks around employee rights - such as the various "right to disconnect" laws that many nations are now implementing.
If you want your employees to collaborate effectively across borders, it’s going to require some thoughtful planning and ongoing adjustment. Collaboration doesn’t just happen automatically - it needs to be cultivated. Here are some strategies to help your global talent stay connected and productive:
Define core aligned hours: Establish a window of time when all team members, regardless of their location, are expected to be available. This doesn't need to be a full workday - even a 2-3 hour overlap can significantly boost real-time collaboration. For instance, you might set 11 AM - 1 PM CET as your team's core hours for meetings and live discussions.
Establishing asynchronous communication norms: Encourage your team to use tools that support this style of working, such as shared documents, project management platforms, and recorded video messages. Set expectations about response times for different types of communications. For instance, instant messages might require a same-day response, while emails could have a 24-48 hour window. This helps prevent that "always-on" culture that can lead to burnout.
Right-to-disconnect policies: These policies formally recognise an employee's right to disengage from work-related communications outside of their designated working hours. This not only supports work-life balance but also ensures compliance with emerging labour laws in many countries. Your policy might include guidelines like avoiding sending non-urgent emails outside of business hours or using scheduling tools to delay message delivery.
As we’ve explored these common hiring mistakes of global expansion, there’s one critical area we haven’t addressed directly – how to approach employee pay across borders. Deciding on a fair (and realistic) global compensation philosophy can be very difficult for distributed teams.
Employment costs, market rates, and cost of living vary significantly across regions. This raises an important question: should employee salaries be adjusted based on their location, even if they hold similar roles to colleagues in other areas? Or should you strive to provide equal pay for equal work, regardless of geography? It’s a complex issue with valid points on both sides.
Many leaders want to provide the same wages globally because it signals that all employees and their work have equal value. But identical salaries may also be impossible to sustain financially as you grow internationally.
On the other hand, correlating wages more closely to local market rates helps control labour costs. However, employees may resent wage gaps for similar roles across borders. With people demanding more pay transparency these days, you need to be able to explain your reasoning.
While this isn’t necessarily a “mistake," it is a complex question that deserves thoughtful consideration - and unfortunately, there is no simple answer. As the hiring manager, you must evaluate both cultural and financial factors to come up with a global pay solution that aligns with your business needs. We wrote a whole eBook on the matter to help you make the right decision for your company.
Expanding your hiring strategy overseas has clear benefits - accessing specialised talent, driving innovation, and diversifying perspectives. But as we’ve explored, a structured recruitment process is essential to navigate the substantial legal, operational, and collaboration complexities and avoid potential mistakes.
While the pitfalls of international employment can seem intimidating, success is completely achievable by laying the right foundations.
This means investing upfront in research, planning, and understanding each challenge on a local market level. With care around compliance, payroll, benefits, and remote work norms, you can mitigate the most pressing risks.
You don’t have to tackle global expansion alone. By partnering with a compliance-focused EOR like Boundless, you can expand your talent pool and gain instant access to turnkey global employment infrastructure. Reliable experts handle cumbersome back-end details - from local employment contracts through payroll and taxes to compliance with ever changing labour laws - clearing the path for you to focus on strategic global team building.
If you’d like to learn more, get in touch today.
