UMES Global Planning for Skyways Construction Limited Paper Hello,You have already identified a country where you plan to expand your construction joint ve

UMES Global Planning for Skyways Construction Limited Paper Hello,You have already
identified a country where you plan to expand your construction joint venture.
Using this country as your venture destination, you are ready to begin the
preliminary steps to open your business. After reading the posted article “Opening in a Foreign Country; be careful” do
some initial investigations on the country of your choice regarding aspects
such as Company structure, taxation, financial systems, banking, etc. that are
described in the paper and come up with a plan on opening your business there. Global Planning
You have already identified a country where you plan to expand your construction
joint venture. Using this country as your venture destination, you are ready to
begin the preliminary steps to open your business. After reading the posted article
“Opening in a Foreign Country; be careful” do some initial investigations on the
country of your choice regarding aspects such as Company structure, taxation,
financial systems, banking, etc. that are described in the paper and come up with a
plan on opening your business there.
Write between 600 to 800 words about above subject.
Follow the below rubric for the above assignment
1. Introduction is comprehensive, gives reader good direction, ‘sets the scene’, and is followed
throughout paper.
2. Summary/conclusion is thoughtful and relevant.
3. Fundamental issues addressed in depth with original arguments and critical judgements,
demonstrating insight and creativity.
4. Current and classic primary literature sources are utilized.
5. Writing style shows evidence of individuality, unity and fluency.
6. Overall presentation of the paper is professional with no errors in syntax, spelling, etc. (i.e.
Proper English language usage), and follows APA format
APA format references at the end of assignment
Global HR News: Opening in a Foreign Country; be careful
Page 1 of 5
Search
HOME
ABOUT US
CONTENT
TALK RADIO
CONFERENCES
MAGAZINE
Opening in a Foreign Country; be careful
DARRYL A. WEISS
For more info… • news@globalhrnews.com
The world is getting smaller. Not in a geographical sense, but in a business sense. With the advent of e-mail,
video teleconferencing, the Internet and e-commerce, businesses are no longer restricted to operations in a
sole location. Improved trade, favorable tax rates, labor and centers of excellence have almost made it a
necessity to have offices or strategic alliances in more than one country.
But how does one jump into the marketplace? The purpose of this article is to provide a framework of topics
that is essential in doing business on the global level.
There is no replacement for having proper professional assistance in developing your global presence. This
assistance will take the form of attorneys, accountants, consultants, etc. However, by doing the initial work
themselves, businesses will be educated to the realities of the project, as well as reduce the number of
billable hours to consultants and outside sources.
In making the final decision to expand globally, it is always a good rule of thumb to follow the old journalism
axiom of the “5 W’s and H”: Who, What, Where, When, Why and, then finally, How? A more appropriate
planning order and the questions associated with them might be:
?
?
?
?
?
?
Why are we undertaking this operation?
What are we going to do in this country?
Where will it be located?
Who needs to be involved in the planning and execution of this operation?
When do we want this to be in place?
How do we proceed to meet our objectives?
Once the questions have been answered, you have the infrastructure of your roadmap.
Early Planning
Prior to working through the issues of opening a business, there are three issues that need to be addressed
as you prepare to go forward. First, what is the language spoken in the targeted country? Do they speak your
language or will you need an interpreter? Requiring an interpreter will add expense to the transaction.
Additionally, there is the matter of whether the interpreter understands what it is you are trying to get across
in negotiations. There may be subtle nuances to language, or some things simply may not translate smoothly.
So language, or choosing your translator, needs to be a topic of some concern.
The second issue is culture. Many a deal is blown due to one party not understanding the local cultures and
ways of doing business. It may stem from something as simple as a handshake, to where business is
transacted. Sending a female to conduct negotiations may doom a contract from its initial discussion. Not
bringing a gift or bringing the wrong gift can be nearly as disastrous. Prior to going to the country, it is
advisable to receive some instruction on cultural awareness to avoid most social faux pas.
The last issue, religion, may also be a part of the first two. Religion may play a part in when and where the
discussions are held.
A brief lesson in local customs and practices is well worth the money to place negotiations on the right track
from the onset.
Once you have your basic fundamentals in place, it is time to address the more pragmatic issues involved
with developing a foreign entity.
Country Considerations
When selecting a country in which to do business, there are many considerations for the foreign investor. Has
your country established diplomatic relations with the country?
The presence of diplomatic relations will generally be an indication that there are treaties in place for doing
business. These treaties will have an effect on taxation, trade limitations, etc. It will also provide a local
consulate or contact for the home country that can be used for making introductions, assisting in arranging
meetings with certain government officials, and lend clout in the case of legal issues.
It is important to know whether there are any environmental regulations that will affect the way you do
business. If you are opening a manufacturing facility, what are the restrictions on the disposal of solid and
other wastes, air quality, etc.? Complying with local regulations may add more to the cost than you had
planned. It may also require liability insurance for the company, and you as an individual for any violations.
http://www.globalhrnews.com/story.asp?sid=158
CONFERENCE CITIES AND DATES
Bellevue/Seattle metro
29 March
San Francisco
Wednesday, 4 April
Mannheim, Germany Thursday, 19 April
Copenhagen
Tuesday, 24 April
Phoenix
Thursday, 17 May
Atlanta
Tuesday, 22 May
New York
Tuesday, 12 June
Toronto
June 8
Energy NorthAmerica,
1
November
Houston
Basel, Switzerland
29 November
Paris
04 December
3/18/2012
Global HR News: Opening in a Foreign Country; be careful
Page 2 of 5
—– PAST CONFERENCES —–
Does the country offer any incentives to you for doing business? Many times a country will offer a company
tax incentives, reductions in fees for building permits, licensing, etc.
Is there a limitation on imports or exports? Depending on the site chosen and the relationship to your home
country, the limitation on what you can and cannot export or import may have an adverse impact on your
overall business plan.
If you are going to build a new facility, there are a number of concerns prior to breaking ground. The
environmental issues mentioned above may play a part in the certificate process. Additionally, what permits
and inspections are required?
A final note about preliminary research will include the requirements for product registration. Is the country in
which you are about to begin doing business a party to any treaties that acknowledge intellectual property,
trademarks and copyrights?
Brasil
London
Geneve
Rome
San Francisco
Vienna
Züerich
Miami
Houston
WashingtonDC
New York
Paris
San Diego
California’s Silicon Valley
LA / Southern California
Feb
Sep
April
May
June
Sep
Sep
2009
2010
2011
2011
2011
2011
2011
3 Oct
9 Nov
Nov 2011
Nov 2011
Dec 2011
26 January
1 February
7 March
BOOKS
Implementation
Once you have your initial results from above, you are ready to begin the preliminary steps to open your
business.
Company Structure
Working with a local law firm will be an essential step in registering your business. You will have to decide
how to structure the company. Will it be a wholly owned subsidiary, will it be a division, or will it be a public
or closed corporation? The structuring will have repercussions downstream, as it will affect how you structure
your accounting, intra-company pricing, etc.
The structure of the entity may be driven by its overall purpose. For example, if you are opening a company
in the UK, and you need to obtain what is known as a “List X” rating for defense work, the company will need
to be a registered company in the UK.
Additionally, are there any restrictions to the makeup of the officers and senior staff? In certain countries,
you are required to have a local citizen as the Managing Director or as a member of the Board.
Financial Systems
Generally, there is an order to the flow of opening a facility. Many of the required procedures will follow a
certain order that proceed like dominoes. For example, you need a company registration number to obtain a
tax number. You need both the registration number and the tax ID to open a bank account. Finally, to set up
your payroll and pension schemes, you need all three prior steps.
You will also need to determine the pricing strategy for inter-company transfers of products and services.
While most countries allow a discount for the exchange of goods and services, the tax and treaty structures
may limit you to discounts similar to those you would provide to a valued customer.
Banking
It is always better to be referred into a financial institution. Talk to your local bank and see whom they would
recommend in the country of choice. If there is already a working relationship between the banks, there may
be a better fee structure for transfers, loans, lines of credit, etc.
If you are trying to set up any sort of special procedures, or lines of credit, it will sometimes be worth your
while to go to the bank’s main headquarters prior to visiting the local branch. Many times, if you are deviating
from normal procedures, it has to be approved at the main office. The headquarters may not be in the same
city where you are establishing your operation, but you will save time in the long run by gaining approval on
your account structure, then having the headquarters refer you to the local offices. By going directly to the
source of approval, you have eliminated one step.
Payroll
Many companies try to save costs by doing their international payroll in house. Unless your payroll
department is conversant with the required Social Insurance contributions, pensions, taxes and other
requirements of a foreign country, you are asking for trouble. Additionally, most U.S. payroll and HRIS
systems cannot handle foreign data (addresses, currency differences, Social Insurance numbers, etc.).
Depending on the size of your operation, you may want to review the services of a payroll service or contact
a local accounting firm that offers payroll as a part of its services. A service will contract to run the payroll,
make the tax payments, bonus payouts, pension, and insurance withholding and contributions. They can also
provide all year-end forms required for individuals to file their own taxes.
Insurance
A review of the country’s requirements for insurance is very important to the overall cost of opening and
operating an office. First of all, is the company required to carry insurance? Next, what types of insurance and
risk must be covered?
Before contracting with new carriers, you need to review the international umbrellas your home country’s
insurance coverage provides. In some cases, you will be required to write the insurance in the new country.
However, the more you can write under your current policies, the more cost effective it will be.
The same applies for your Director and Officer, Errors and Omissions, and Employment Practice Liability
polices.
Taxation
Taxation is a key-planning component when planning the overseas operation. The company will need to be
aware of how taxes are calculated, if there are federal and local taxes, and what the filing and payment
requirements are. Is the tax year in the foreign country different from the tax year in the home country?
Does the country require an audited statement at regular intervals from the company?
If your company’s fiscal year is different from the date of incorporation in the foreign country, may you
change the accounting year to match yours to maximize accounting practices, standardize reporting, and
require one audit instead of several?
http://www.globalhrnews.com/story.asp?sid=158
3/18/2012
Global HR News: Opening in a Foreign Country; be careful
Page 3 of 5
From the operating standpoint, what allowances are there for depreciation and deductible items?
Is the country a party to any tax treaties that will guide your accounting and reporting structure? For
example, where may business losses be deducted, in the home country or in the foreign country?
Human Resource Issues
The human resource function is one often overlooked until late in the process, yet it is one of the areas
fraught with pitfalls for the unwary company. The issues of labor, employment, terminations, unions,
benefits, social insurance, pension and compensation are heavily regulated. One of the best bits of advice to
follow is to “stop thinking like a (fill in your country here).” A simple example of this is the offer letter. In the
United States, most offer letters are one to two pages in length. They lay out the salient points of the offer,
remind you that it is employment at will, and then close.
However, in many other countries, employment at will is not a reality, and there are statutory guidelines as
to what has to be in the offer. There may be a requirement to provide each employee with a terms and
conditions (T and C) letter that covers the entire employment relationship in some detail. The T and C’s may
run as few as three to four pages for rank and file employees, to more than 20 pages for senior management.
I am reminded of the manager from the United States who was interviewing a candidate for a position in their
German subsidiary. The manager extolled the virtues of the company’s benefits plan, the generous matching
to the 401(k) retirement plan, the “generous” holiday plan, etc. At the end of the day, the individual was
given the standard offer letter for managers in the company. He followed up with the Human Resources
Department, asking what his benefits were, would he be paid monthly, from where would he be paid, did they
know that German Statutory leave was greater than what they offered and, finally, where was his “real” offer
letter.
Recruitment
After the question about the availability of labor has been reviewed, the next step is to recruit them.
Recruiting methods will differ by country. Some areas of the globe do not have as ready access to the
Internet as others.
When advertising in a foreign country, there are several considerations: the best day of the week to
advertise, in what format should it be, and does it have to be in the local language.
In the U.S., the best day to advertise is Sunday. However, in different countries, there may be a different day
for specific disciplines. For example, ads for computer professionals might run on Thursday, healthcare on
Tuesday, and administrative professionals on Saturday. Working with your advertising agency should provide
the best days for advertising.
The next issue is in what language the ad should run. If you are trying to hire for local sites, it should run in
the local language. When having ads translated, you need to ensure that the message printed is the message
you want, as some things do not translate well.
How and where will the responses be sent? Will you have a local repository or will they be sent to your home
country? Remember, the resumes may arrive in the local language.
When and where will the interviews be held? Language may be an issue once again. Additionally, be aware of
what questions you may and may not ask in that country. In the U.S., we are governed by strict guidelines as
to the questions that may be asked. In various foreign countries, photos may be taken and any question is
fair game, job related or not.
Notice periods also vary by country. In the U.S., we are accustomed to having our new hire begin
employment within three to four weeks. Other countries have very stringent requirements as to the amount
of notice required prior to leave taking. The notice period may be as little as 4 weeks, or as much as a year or
more depending on statute and employment contract. In statutory cases, the employee may face civil fines
for not providing the correct notice period. The waiting time for your new employee may have a direct impact
on your new operation commencing operation.
Benefits
Benefits cover a wide scope of areas: time off, maternity leave, health and life insurance, and pensions. As
illustrated in the example above, what appears to be a good plan for one country may not apply at all, or be
well below the statutory minimum requirements in another country.
While a country may have a socialized medical system, many progressive companies are offering additional
coverage to attract and retain employees. This practice used to be limited to management employees and
above. However, in the increasingly tight market for technical talent, companies are offering extended
benefits to the general employee population.
Health benefits will vary from country to country. A buy-up program allows an employee to be placed in a
semi-private or private room over a ward. It may also offer the employee the choice of a treating physician,
rather than who is on-call that particular day. In addition, in some places, they will receive preferential
treatment, as the provider knows they will receive payment faster from a private insurer rather than the
public plan.
Prior to making a foray into a new country, it is strongly advised that employers review the statutory benefits
plans to assure the company will be in compliance with any contributions they are to make. It will also allow
you to accrue the necessary expenses to cover various leaves of absence, illness and disability.
If the company is operating in more than one country, then global pooling might be attractive. Simply put,
pooling allows a pooling of lives in more than one country to an aggregate number to receive a better pricing
arrangement while providing the individual coverage required in each country.
Executives may also have an increased benefit package. Their fringes may include club memberships, drivers,
cars, phones, computers, and topped up life, health, and pension contributions that are more tax
advantageous than other forms of remuneration.
http://www.globalhrnews.com/story.asp?sid=158
3/18/2012
Global HR News: Opening in a Foreign Country; be careful
Page 4 of 5
Compensation
One of the biggest mistakes a company can make is converting its local wages into the currency of the
foreign location. Generally, it will translate very high or very low for the local market. Calculating salaries in a
foreign country needs to be done in the same manner as at home: rank the job and analyze it in the local
market based on requirements, education and years of experience.
Another pitfall is the number of months paid to an individual in a foreign country. Depending on the country,
employees may receive between 13-17 months salary for 12 months work. The differences may be
adjustments, bonuses, or just tradition. Many American human resources professionals have been caught
short in salary negotiations because they did not realize until too late the number of months salary that was
being negotiated.
Local surveys may be purchased from Human Resources organizations or international consulting groups.
In addition to base compensation, there may be other sums of money, or in kind options, that are more tax
advantageous for the company to offer. For example, meal allowances, company cars, clothing allowances, or
mobile phones might be included in the salary package. When you negotiate the base compensation, it is
critical to know the full extent of the package.
One final note for multi-national companies is the location of payment. It has been a practice of some
companies to spread the allocation of salaries for certain levels of manageme…
Purchase answer to see full
attachment