International Employee Benefits: Everything You Need to Know

July 28th, 2023

Multinational companies have it a lot differently when it comes to benefits packages. Tax compliance, cultural differences, and local labor laws all play a role in how an organization manages its total comp on a global scale.

Standardizing employee benefits for each region and managing their differences is totally doable. This article tells you exactly how.

A quick look: International employment for U.S.-based companies

Worldwide, multinational enterprises (MNEs) in the U.S. employ more than 42 million workers. Hundreds of thousands (or millions) work in China, Mexico, the U.K., India, and Canada, among dozens of other countries.

According to data from the American Enterprise Institute, most business doesn't happen in the States. There are dozens of U.S. firms that hire, sell, and invest more overseas. Coca-Cola, for example, has 92.4% of its assets and 88.33% of its workforce overseas.

But they've been doing this for decades. It makes complete sense that companies with global presence would have a larger footprint in all other combined countries than in the originating one (especially considering the amount of outsourced production, services, and design happening around the world).

The huge difference, now, is remote work.

In the 2010-2020 decade, there was a 400% increase in the number of employees working remotely at least once per week. A Gallup survey from June 2022 found this figure solidified two years later — five in 10 U.S. workers were working on some sort of hybrid model, while three in 10 were working completely remotely.

Of the countless microtrends the pandemic created around remote work, the bottom line is companies started to realize, "We can reach the same productivity with Zoom calls and Slack chats as we do with an office."

All of a sudden, new startup founders, HR teams at mid-sized companies, and C-suite execs of established organizations realized that they could hire pretty much anywhere with internet.

So they did. It isn't just multinational conglomerates working with non-U.S. employees anymore. It's any business that wants to create a culturally diverse workforce, access a wider talent pool, or hire top tech talent in places where it's cheaper.

The current landscape for international employee benefits

Now, 66% of businesses outsource at least one department. Express, for example, primarily hires software developers and data analysts in Costa Rica.

In addition to the companies that actually sell a product in their new region, thousands of U.S.-based businesses, large and small, hire remote workers all over the world — especially from India and Latin America.

Building a culturally diverse team brings tremendous untold value in the form of new ideas, insights, energy, and worldviews. It also expands your talent pool. By a lot.

For your current employees, unlocking the power of international hiring also means they can relocate without having to quit their jobs.

It's easier now, too. Every organization hiring in foreign countries still has to partner with an employer of record (EOR) or create a subsidiary in the country. But they don't have to invest in office space or stress too hard about how to onboard or manage employees.

But it's not all sunshine and rainbows. Hiring an international workforce can actually be very risky if you're unfamiliar with local labor laws, payroll, taxes, and benefits.

Established MNEs like Coca-Cola have been doing it for decades. But if you're hiring overseas because it's cheaper or you want to enter a new market for the first time, you need to know what you're getting yourself into.

Every country has different employee benefits requirements.

Quite literally, no two countries are the same. This poses a huge challenge for HR teams concerned with tax compliance, profitability, and the overall well-being of their team.

For example:

  • In the U.K., every employer is legally required to provide a pension.
  • In India, there's a government-mandated paid maternity leave of 26 weeks for the first two children.
  • Mexico requires a Christmas bonus of at least 15 days' worth of pay in December.
  • France has a generous vacation policy of five weeks.

If you're hiring in multiple countries, you have to keep track of dozens of regulations, including every employee's nationality and how their salary is paid. When it comes to the specifics of each benefit (e.g., what's included in health insurance), those details can change with each region.

These regulations not only vary from region to region but often change over time. If you're building an international team, it's your job to stay on top of each country's latest laws and regulations.

International benefits have implications beyond legal

For your U.S. employees, you should offer more than just the legal bare minimum. Similarly, you need to offer a competitive employee benefits package if you want to attract (and retain) the best overseas talent.

Beyond what's legally mandated, there are customary benefits in different countries that employees will come to expect. In China, for example, it's common to offer a 13th (or even 14th) month bonus in celebration of the Lunar New Year.

When you offer international benefits, you need to learn what these benefits look like in each country. Otherwise, you'll struggle to compete with local companies for the best talent.

Your international team members will also want to know that their benefits are on par with those of their U.S.-based counterparts. If your competitive advantage lies in bringing top talent from around the world — and not just cheaper labor — it should show in your benefits package.

Working with local vendors can be tricky

Juggling multiple benefits vendors in the U.S. is hard enough. In foreign countries, the challenge is even greater.

You need to research local vendors, shop for the best options, and manage contracts in a language you may not be familiar with. Once you find the right vendor, it can still be hard to make sure everyone gets their benefits on time and correctly.

Tax compliance varies wildly from country to country.

The word "tax" is enough to give some of us a headache. Multiply that by a dozen places you have employees. Then tack on a few additional steps you'll have to sort with the IRS.

The U.S. has pre-tax and post-tax benefits. Other countries are no different. And since certain employee benefits are required by law, you'll also have to know which ones to deduct from payroll, how much to deduct, and when.

In the U.K., for example, employers and employees must contribute 8% of the employee's salary to their pension scheme. Of this, a minimum of 3% must come from the employer.

Creating an international employee benefits package

Given the intricacies of an international workforce, you have to carefully consider your budget, culture, and goals before designing a benefits package.

1. Evaluate cultural norms

Start by assessing the needs and priorities of each team member.

  • Which benefits do they value most?
  • Are there any unique requirements for certain groups of employees (e.g., parents, millennials, senior citizens)?
  • What kinds of fringe benefits are standard in each area?
  • How does local culture impact benefits and expectations?

Unless you're building business in a country you grew up in, have lived in for a long period of time, or have a lot of personal experience with, you'll have an inherent lack of cultural awareness.

Whether the country is new to you or not, it helps to work with a consulting firm specializing in international employee benefits services. They'll advise on what to offer, how much it should cost, and where to find the best vendors.

2. Start with your health benefits

Aside from the legal requirements for employee benefits, health benefits should be your first priority. They're the most expensive and important ones you'll offer — they're a critical deciding factor in recruitment, retention, and your employees' overall happiness.

Offering international health insurance

Most U.S. health insurance companies have limited (if any) network availability outside the States. If you have to offer insurance, you'll need to find a plan that supports the specific countries you're hiring in. Since most will have limited coverage, this becomes increasingly tricky when hiring in more than one country or jurisdiction.

Your international employees also won't have the same needs as domestic ones. American employers frequently encounter this when working with foreign countries with a national health care system.

In many countries (such as the EU member countries and the U.K.), a lot is covered through their public health care system. But across Europe, some countries provide universal coverage, while others have limited coverage for certain services. In some places, healthcare is funded through taxes, while in others, funding takes place through social security contributions or a combination of both.

Using Compt, employees in different countries can choose their local vendors and create a benefits plan that fits their needs. This eliminates the management headache of finding a plan covering multiple countries, managing all kinds of paperwork, and figuring out the fine print.

Health and wellness stipends for your international workforce

Group health insurance won't always be a requirement, but you can still provide health support for your international employees.

In lieu of traditional insurance, consider offering a flexible health stipend they can use for out-of-pocket expenses like:

  • Medical consultations, co-pays, and treatments
  • Prescriptions
  • Dental check-ups
  • Eyecare
  • Physical therapy
  • Chiropractic care

Stipend reimbursements are added to your employees' paychecks (and with Compt, they're tax-compliant). That means you can manage your domestic and international reimbursement approvals in one place.

A tip from the pros: You can offer the same monthly allowance or reimbursement terms to every international employee, or you could change them based on location, job title, and employment type. Keep in mind the country you're doing business in may have anti-discrimination laws — double-check how similar your international benefits need to be to the ones you offer in the U.S.

Lifestyle spending account (LSA)

A simple way to create a complete benefits package (including healthcare) for your international employees is to offer an LSA. Think of it like an HRA or a Flexible Spending Account (FSA) but with more flexibility.

With an LSA, employees get a lump-sum allowance for their out-of-pocket health expenses and can decide how to spend it. They may use it towards gym memberships, digital therapies, alternative treatments, child care — whatever they choose.

According to our 2022 Perk Study, the highest spend category in LSAs was health and wellness, but internet, cell phone bills, food, professional development, and plenty of other categories all see sizable proportions of funds.

As an employer, you'll have the ability to choose what's eligible and what's not. Ideally, you should create a wide range of spend options to make it as flexible as possible.

3. Offer employee perk stipends

If you want to do international employee benefits right, you have to think about the extras. Perk stipends are sums of money employees can use for things like professional development, entertainment, and leisure activities — all of which help them balance work with their personal lives.

Especially when you're dealing with a new country and unfamiliar working dynamics, offering perk stipends gives them the control to decide how to spend their money.

Here are a few of our favorite employee perks for international teams:

Health and wellness stipends

In the U.S., 83% of large companies offer a wellness program. A health and wellness stipend is a fantastic way for your company to bring a new level of care to your international employees.

With a monthly health and wellness stipend, your employees could cover:

  • Gym memberships
  • Online fitness classes
  • Meditation apps
  • Massage therapy and spa visits
  • Nutritional supplements and vitamins
  • Mental health care services

You can set up an approval process to ensure your employees use the stipend for approved activities. Or, you can give them 100% freedom over how they spend the stipend.

Professional development stipends

Why would someone want to work for an international company in the first place?

For some, the appeal lies in gaining international experience, learning new skills, and advancing their career. According to a new survey from The Conference Board, 58% of employees would leave a company for another that offered these things.

As an international company, you're already ahead of the curve. And as a U.S.-based firm, you have a huge opportunity: few organizations outside the U.S. invest in this initiative. American companies spend $166 billion on leadership development annually (nearly half of the global spending).

With a professional development stipend, your international employees could access:

  • Online classes and certifications
  • Professional coaching and mentorship programs
  • International conferences and workshops
  • Language learning apps
  • Business books or subscriptions

Your foreign employees may want to work for U.S. companies to eventually move there themselves. Offering professional development as part of your international employee benefits package could help them learn skills they need to make that transition.

Remote work stipends

If you're hiring office roles overseas, you're almost certainly doing so remotely. Unless you're building a team of more than 15, there's no reason for you to buy/rent office space in your new country.

A remote work stipend is designed to cover the costs associated with working from home. This includes internet, home office expenses, technology, and coworking space memberships/reimbursements.

Other considerations for total compensation

Beyond stipends, there are other considerations to make when creating a total comp plan for employees in different countries. Here are some of the key ones:

  • Contractor vs. employee status. Many overseas employers use 1099 contractors instead of full-time employees in those areas to save on taxes. For an inclusive and equitable approach to international employee benefits, it's best to offer stipends to everyone putting in the same number of hours for your company. However, employers working on a contract-to-hire basis or with part-time employees may limit benefits to full-time employees only.
  • Local holidays and vacation days. Depending on the country, you will need to adjust your PTO policies to conform with local laws. That means providing more vacation days in some areas and compensatory leave for public holidays not observed in the U.S.
  • Local laws and taxes. We can't stress this enough. Every jurisdiction is different in how they approach tax deductions, healthcare, and employee benefits.
  • Currency conversion rates. Software can handle this automatically, but it's still important to keep an eye on exchange rates to understand how your employees are really being paid.
  • Relocation and housing stipends. If you're hiring locally, this may not apply to you. If your workers need to uproot their lives and relocate to a new country, you should consider offering a relocation stipend or housing stipend to help them cover the costs.

Don't set up international employee benefits without Compt

You seriously don't want to set up international employee benefits without software designed to handle it.

Your other option includes:

  • Spreadsheets
  • Guessing games
  • Complicated tax forms
  • Paperwork nightmares
  • Hiring the wrong people and missing out on great ones
  • Inaccurate data and missed payments

Compt helps you build, track, and manage international employee benefits packages on one platform. Your international employees can use it to choose local benefits vendors, spend stipends on qualifying items, and access their own personal employee benefits portal.

On the backend, it automatically takes care of everything tax-related automatically. No matter what kinds of benefits you offer, Compt scales with you.

See how it works.

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