The positives and negatives of hiring expats

Planning on opening an international office, or relocating team members to run your company’s operations overseas, there’s a few things you should know.

Sending expats overseas is, indeed, expensive, as you will need to account for immigration requirements, tax, relocation allowances, insurances and other such payments, but, most of the time it’s worth your while.

The upsides of hiring expats for your international business

  • Quality over quantity

Hiring locals can be very hard, especially if you’re attempting to open an overseas office. Mainly due to the fact that most locals won’t understand your company’s practices. While on the other hand, sending a current employee, who knows how everything works, to train local talent, will make life a lot easier.

In effect, one talented hard-working employee might be worth three new hires. Hiring locally might seem like a cheaper option in the short-term, but the long term negative impacts of untrained hires may undermine those initially savings. Every company is different, with effective approaches varying from one to the next. For example, a mix of local and expat employees may be the right fit   for some.

  • The country of interest has a limited pool of local talent

Another reason to invest in expats would be due to a limited pool of local talent. The costs of hiring locally could prove too high, when bearing in mind the potentially limited number of individuals trained to work with certain software specific to the given industry.

  • Your overseas office must adhere to the standards of your home market

This is one of the circumstances where sending a team of expats can be most beneficial. Many manufacturing companies choose existing in-house talent to head-up their operations abroad, training local employees. They act as a General Manager, overseeing operations, ensuring that everything is compliant with the procedures of the head office.

The downsides of hiring expats for your international business

Unfortunately, there are cons of hiring expats. Here are some of the most common ones:

  • Expats aren’t cheap

The expats themselves aren’t a problem, but ensuring all travel expenses, visa applications, host or home-country tax differentials and relocation costs are accounted for will be. Expect to pay somewhere between two and five times more on an expat than you would on a local employee. Either way, you need to decide if this significantly higher cost is worth it.

  • High burnout rate

Studies have shown that expats, especially those in highly demanding roles, have a higher burnout rate. Approximately a quarter of them are brought home early due to stress levels. This down side is due to a number of factors including language barriers, being away from friends and family, the daily toll of dealing with a new culture, and the feeling of isolation.

  • Legal issues

Some companies ended up being fined or barred by certain countries because they failed to respect immigration and permit requirements. For the expat involved, the situation can be far more severe. For example, continuing to work in a country beyond your permit’s date of expiration may result in imprisonment. A Global Mobility Effectiveness Study concluded that roughly 2 out of 3 international businesses suffered avoidable non-compliance penalties when sending expats.

In conclusion

If you’re still having trouble deciding whether or not to send expats to manage your international operations, consider the following:

Outstanding employees, with company knowledge and advanced management skills, able to work well with limited resources are worth their weight in gold.

Never make a decision without fully evaluating all of the costs, regulations and implications of appointing an expat overseas. This includes accommodation, moving, expat packages, tax & social security requirements, and family support programs.

The expat will require some time and training in order to adjust to a whole new culture and language, so don’t expect everything to happen overnight.
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Author: 
Míša Benešovská

I’m a freelance journalist and copywriter, mainly covering IT industry. I’ve been fascinated by it for nearly a quarter of a century (or since I dismantled my first computer). I worked for Seznam.cz, Unicorn Systems or Mafra publisher. In my spare time, I love game consoles and keep perfecting a recipe for the best pumpkin risotto in the world.

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