For many companies, the idea of expanding into a new market can be intimidating. Where would you even start? Although you don’t have to turn too far to garner an opinion on the subject these days, where you turn to for true guidance and expert clarity is a challenge. Recently, the focus on global expansion has been concentrated on hiring “Work from Anywhere” personnel in lower-cost labor markets with growing population centers. These global workers are becoming increasingly accustomed to third-party employment. But what about hiring talent in the United States?
According to a study published by Crunchbase, nearly 140,000 workers in US-based tech companies have been laid off so far this year, much higher than the 93,000 workers whose tech jobs were slashed during 2022.
This leaves a mass of highly skilled workers looking for their next challenge. And who’s to say it can’t be from an international employer?
The United States offers a unique and complex challenge for employers, especially those based abroad. With 50 states comes the equivalent hurdle of managing the laws and regulations of 50 different countries.
When you consider separate federal and state tax laws, income tax laws, the challenges with employer-provided healthcare in the US, the IRS (Internal Revenue Service), the DOL, workers compensation, The Affordable Care Act, Dependent Care, 401k, salary benchmarking…etc… it can feel overwhelming. This is why having a trusted expert help shape your strategy and prepare you for long-term success is critical.
HSP Group, the customer-preferred provider of global expansion software and services, has helped hundreds of global companies navigate these complexities. Here are three practical ideas to simplify your expansion into the United States.
1. Prepare for success today, and pick the right people solution:
This is a wildly overlooked component of global expansion into any market, and no place more so than the United States. This means that you should have a strategy that scales with your company.
The last thing you want is your market entry strategy to handcuff you and delay opportunities for growth acceleration.
A wonderful way to achieve this is by leveraging the quick-to-market strategy of hiring workers through an EoR (Employer of Record) provider. The flexibility and peace of mind you gain from outsourcing employment liability has massive value for the right company.
But this idea is about preparing for success, so how does an EoR provider prepare you for the agility suggestion a few sentences above? The key is partnering with one that allows you to scale without business disruption.
Eventually, you will want to set up your own entity, potentially in the near term. The question becomes how and when, and how to make a smooth transition when graduating from EOR. This is where expert guidance and holistic thinking are critical.
2. Think about the people you plan to hire:
Thanks to our friends at Crunchbase, we know that there are many very skilled tech professionals ready to be hired in the US. So, what can YOU do to help level the playing field and position yourself as an attractive employer?
No doubt many of these workers are coming from the world of growth tech, where “free pizza Fridays” and a company t-shirt no longer count towards culture credit.
These workers experienced best-in-class healthcare and significant employer contributions for employees and their families. This is in addition to robust 401k plans with an employer match. And that’s just scratching the surface.
Organizations that hire in Brazil, France, or the Netherlands may think these expectations seem “light” as they are compulsory benefits. However, unpredictable healthcare premiums and minimum group policy standards and how difficult they can be to secure can be shocking. This is particularly true if the US is your first port of global expansion.
These can often be unplanned costs, which might otherwise bar first-time employers from offering the types of competitive plans found typically with EoR providers. Here is why: the EoRs buy in bulk.
OK, it’s not Costco, but an EoR brings tens, if not hundreds, of thousands of workers to a healthcare provider under their policy, dispersing plan risk across that larger group. This allows them to secure much better rates. Consequently, an EoR has access to a much richer menu of options than what a smaller employer plan can secure.
Is the time right to transition?
What should you do when the time is right to transition from an EoR, where no entity is required, to a more cost-efficient solution appropriate when you have your own infrastructure? For many, the solution may be moving to a PEO (Professional Employment Organization).
With a PEO, your entity becomes a “co-employer” with the 3rd party PEO, meaning you retain (often) even more of the benefits of using an EoR, but with a fraction of the cost.
For those who enjoy the outsourced benefits of employer liability combined with strategic HR support, PEO is a solution that doesn’t truly have a market cap in terms of value.
Even if you register an entity early in your path to scale, the benefits of leveraging a PEO remain. Our expertise is particularly useful when the solution and strategy are combined with the evaluation of the people you hire.
3. Be prepared to “stand alone”:
Now you have successfully grown and scaled your company in the US. That is terrific! That’s no small task. But now you want to significantly ramp up your employee base, bring HR in-house, and broaden your US people/culture strategy.
What a great problem to have!
No sweat for companies who followed the two ideas we’ve already discussed. When you have the right people solution, it leads you to the right entity solution. And when the right entity solution matures, it empowers you to “stand alone.” Allowing for a move away from fully outsourced or “Managed Global Expansion.”
Offering stand-alone payroll and benefits with an in-house HR leader in place is a tremendously viable future state for a “new to the US” company to achieve. Companies that evaluate these steps are significantly better prepared for the challenges, risks, and opportunities that come their way.
What is constant across all three of these ideas is the potential to keep your healthcare provider intact. A simple notion to most, but just ask the family expecting their first child how valuable it is to know their employer has planned for this, and that plan allows them to keep their doctor “in-network.”
It all goes back to the timeless adage from famed investor Warren Buffett, “someone’s sitting in the shade today because someone planted a tree a long time ago.” Plan now and reap the benefits later.
That’s sensible advice whether you’re making a financial plan, building a bridge, or hiring your first worker in a new country.
Take the next step
Global expansion is tricky. It requires a sound strategy and a capable advisor to help support the evolving needs your company will experience as you scale. As an international company hiring into the US for the first time, you don’t have to solve all these challenges alone. HSP Group has turnkey people and entity solutions designed to scale with you, from initial hire to IPO. Contact us today to learn more.
