| Any US company
considering an expansion into Europe does not do so
lightly. On the assumption that a market exists for
the company’s products or services, many other
factors need to be considered in settling on an overseas
location. A significant proportion of US companies look
to the UK as the obvious platform from which to take
on the European market.
Such a decision is made, no doubt, partly because:
- We have reasonable tax and social security rates,
when compared with Continental Europe
- We have less draconian employment laws than Europe
- We share a similar language
- We show numerous repeats of Friends
- Cricket is similar to baseball (well at least they
both have a bat, ball and fielders)
Having chosen the UK as the location for a European
headquarters, a company must ensure that its staffing
strategy is effective. A key decision is how to initially
staff the new operation, as this will drive the initial
phase of operations. The company needs to establish
the right balance between existing employees and talent
from the local market.
Assigning US-based employees to
UK
It is likely that a company will decide at first that
it will be beneficial to transfer some existing US-based
employees to establish the UK business. This will ensure
that the objectives, experience and culture of the company
are transferred across the Atlantic.
In making such a decision, a company needs to understand
that a significant cost is attached to assigning a US
employee to the UK. Personal tax, social security and
cost of living in the UK are generally higher than in
the US, and the company will have to make good the differential
– unless, of course, it expects employees to be
worse off and still fully motivated! It is possible
to minimise the costs of sending someone on assignment
with careful planning, such as controlling the timing
and length of the assignment and structuring the compensation
package to take advantage of local UK tax breaks.
Whatever planning is implemented, an employee assigned
from the US will still be more expensive than a local.
Purely from a monetary aspect it is important, therefore,
that the assignment is successful. Both employer and
employee should agree a game plan from the outset. Consider
the following:
- Both parties need to understand and agree the objectives
of the assignment
- The employee should understand what the company
expects to be achieved during that assignment
- The company should clarify how success will be measured
- The employee needs an indication of how a foreign
assignment will affect his or her career development
prospects
It is also important that the additional costs of
the assignment, such as housing, relocation expenses,
tax equalisation and schooling are treated as exactly
that – a necessary cost of doing business internationally,
rather than as employee compensation. If such additional
costs reflect a direct reimbursement of actual assignment-related
expenses, no additional monetary benefit accrues to
the employee.
It follows, then, that the employee should not be penalised
in the bonus round and pay review process. While it
is acceptable that assignees should be held to more
exacting levels of performance given their additional
costs, if they are judged to have met those expectations,
then they should be rewarded appropriately and without
regard for assignment expenses.
It is vital that the company takes the necessary steps
to ensure, as far as possible, that it selects the right
person for the assignment. Any failure could be costly
for the company and disastrous to individual career
prospects. There needs to be recognition that the individual
has the right attributes to undertake the position to
be filled and to meet the exacting standards required,
but this goes beyond mere technical skills. This evaluation
should also consider whether the individual (and accompanying
family members) are suitable for an international assignment
and how the assignment will affect their career path.
Is the family able to make the cultural shift required
– and appreciate the relative merits of cricket
and the country that invented it?
Hiring locals
Even if the company decides to have US home-based employees
set up the European operation, it will soon be looking
to the local job market to fill key positions as the
operation grows.
Although the UK’s employment laws are not as onerous
as those in Continental Europe (at least not yet!),
there are certain legal requirements to be met, like
providing employees with written contracts of employment
that set out basic terms and conditions of employment.
Careful consideration should also be given to whether
any additional terms should be included to protect the
company’s interests, such as post-employment restrictions.
Depending on the number of local employees, the company
will be required to provide:
- A UK pension plan (although company contributions
are not required)
- A formal disciplinary process
- A grievance process
- A Health and Safety policy
An employer in the UK should also introduce other
employment-related policies and procedures to avoid
potential confusion and to help resolve issues, both
formal and informal.
These would include:
- Attendance management
- Race, religious, sex and sexual orientation discrimination
- IT use
- Maternity and paternity leave
- Sickness
- Data protection
The company also needs to establish a number of underlying
employee-related principles and processes, such as:
Compensation philosophy
Broadly speaking, it is likely that the compensation
approach existing in the parent company will be an appropriate
starting point from which to build a local structure.
However, pay and benefit levels and retirement and equity
plans will need to take into account the local marketplace
and legislation to ensure that they form an appropriate
and attractive overall value proposition to prospective
employees. Thought should also be given to the retention
aspects of the compensation structure, as the need to
retain key employees is critical when a company is starting
up.
Performance review process
Any organisation needs a formal staff appraisal process
to allow it to manage, reward and develop its staff
effectively. Again, any existing process in the US is
likely to be a suitable starting point for a local solution.
However, amendments, particularly to the desired objectives
to make it more relevant to a start-up operation, should
definitely be considered. In addition, to allow this
process to form an integral part of the management of
staff it must be robust. It is essential in any staffing
disputes and tribunals that the employer has followed
rigorous processes, as set out in UK employment law.
Training and development programme
As with all companies, to get the best out of employees,
time and effort needs to be invested in their development.
A structured training programme that is linked to the
results of the performance review process and to the
objectives of the local operation should be designed
to facilitate its growth and success.
Summary
Whatever the mix of assignees and locals, it is critical
that a company invests time and effort in drawing up
an effective staffing strategy. Building the right team
and retaining them is key to any company’s success.
For a US company expanding into Europe, the issues become
even more complex. The right level of advice and support
can help minimise the “curved ball” (or
“googlie” as we cricketers would say!) and
help achieve a successful move into the international
employment market.
Coppergate International is an advisory company that
specialises in both domestic and international human
resources related matters, as well as UK and US personal
tax for individuals. Our core services include:
- International assignment design and implementation
- UK human resources support and advice
- Immigration advice
- US and UK tax planning and compliance for foreign
nationals
For more information, please contact
:
Nigel Sellens on 020
7539 9920 - n.sellens@coppergateinternational.com
or
Madeline Fox on 020
7539 9916 - m.fox@coppergateinternational.com
www.coppergateinternational.com
|
