As companies seek global expansion, CFOs must consider the significant challenges of deploying a multi-jurisdictional workforce. Taking the challenge on their own can bring in several risks that could have an adverse impact on their goals.
Global workforce management is crucial for companies to succeed in their international expansion goals. After all, a seamless global workforce can provide several advantages for the company, including growth opportunities, increased revenue, access to an international market, and wider recognition, among others. However, companies with global offices face a complex set of challenges when managing their workforce spanning beyond just one jurisdiction.
Simone Nardi, CFO at G-P, a global employment company, sat down with The CFO, breaking down the complexity of pursuing a global workforce and how to navigate such challenges while alleviating the pressure associated with it from the CFOs.
Global Workforce Complexity
Managing a global workforce involves more than just hiring employees in various countries. Each country represents a unique set of regulations, compliance requirements, cultural nuances, and employment practices.
“We are talking about a workforce in the global environment that means over potentially more than 180 countries. Each one of these countries is not just part of an international market but part of a local jurisdiction with their regulatory environment compliance requirements,” Nardi explains.
These differences extend beyond just regulatory compliance. The way people perceive the work environment, incentive structures, and even employment contracts can vary significantly from one country to another.
Nardi emphasises that “the complexity across all of these elements drives a lot of variability and opportunities for companies.” These complexities include understanding the local regulatory requirements, differences in taxation and incentivisation, compensation and employment structures, and cultural differences.
Challenges for CFOs
CFOs tasked with overseeing global workforce management face a daunting set of challenges. These challenges include extensive resource requirements and time investments in understanding and adhering to local regulations.
As Nardi explains, “navigating through the legal, regulatory, and compliance requirements in each of these countries, each with its unique labour laws, tax codes, and employment practices, can be overwhelming.”
Beyond compliance challenges, cultural differences also play a pivotal role in global workforce management. Nardi says that the cultural differences in how people perceive the work environment between different locations are significant.
This entails differences in incentives, how employment relationships are structured, and the cultural nuances that impact business interactions. These differences need to be understood and managed effectively.
Global workforce risks
CFOs leading a global workforce can experience several pitfalls, especially if they are not well-versed in international compliance and regulation. According to Nardi, CFOs risk being inconsistent in their compliance with local labour laws and regulations. After all, rules and regulations are always evolving, and CFOs need to ensure that they comply with the updated legislation.
Nardi points out that adhering to evolving regulations takes resources, stating, “Navigating through each country’s local regulation is challenging. Each country has its specific requirements for international payroll, labour law, tax code, and employment practices. And all these differences continue to evolve. So, the time and effort required is significant. It builds up, clearly requiring and draining resources, taking away from more optimal resource allocation.”
Failing to keep up with the updated rules can have adverse consequences for businesses.
Although overwhelming and complex, if not done correctly, businesses face potential financial and legal penalties. Nardi cautions that these penalties can range from monetary fines to reputational damage or even the loss of the right to operate in a country.
Beyond legal ramifications, CFOs also need to consider the reputational damage to their businesses borne out of mismanagement.
Nardi explains that cultural differences mean that employees perceive the work environment differently depending on the location. So, CFOs must take into consideration the working culture and incentives subjective to the region.
However, Nardi warns, “Failing to do so can jeopardise the expansion strategy of a company. It can lead to longer-term relationship difficulties in hiring more people in the future.”
Solutions to manage the global workforce
To address these challenges and avoid short-term or long-term damages, Nardi believes that turning to a global workforce management solution can help alleviate concerns for businesses by streamlining the process of managing employees in different countries.
For instance, Nardi explains that using a global workforce management solution provider can give organisations access to business infrastructure for driving international management, onboarding and offboarding processes globally.
Businesses could utilise a legal entity infrastructure (provided by the service provider) that enables them to hire employees quickly. For Nardi, speed is an essential characteristic of such services and integral to businesses.
“Speed-to-market is very important because when companies want to grow and hire, they would like to do that yesterday. If they proceed independently, they need a new location in a new jurisdiction. They need to open a legal entity or register, open a bank account, and go through an expansive, extensive and sometimes expensive process to get everything done just to hire consultants to help them understand the local regulatory environment and compliance risk,” he says.
By utilising a global workforce management solution provider, businesses can benefit from the flexibility offered by the supplier. Companies can quickly scale up or down as required without establishing new legal entities or bank accounts or undergoing extensive registration processes in every country.
Nardi declares that this flexibility allows businesses to “move from one country to another very quickly” using the available infrastructure.
Taking pressure off the financial department
One of the main advantages of using a global workforce management solution is the relief it provides to financial departments.
Nardi says that the reduction in the time and resources required for managing employees in different countries exemplifies the benefits. He notes that the solution allows CFOs to focus on growth over admin tasks, creating opportunity to optimise their resource allocation.
CFOs can channel their energies towards strategic business development and expansion instead of getting bogged down in the intricacies of compliance and regulation.
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