Blick Rothenberg

Managing the process of employing staff in a new territory

21.05.2015

When looking to expand beyond the UK and employ staff in multiple countries, our clients seek advice on both practical and technical issues. We manage the entire process for clients as they expand and an example of how we provide support is detailed below:

Fact finding
Over the past three to four years, one client has hired staff in over 20 territories. We began with a fact finding exercise to ensure we understood the nature of the recruitment and plans for the business in each territory. We then spoke to trusted local specialists in each country (often through our association with BKR International) to understand the key issues, usually starting with the trigger points that create a
permanent establishment.

Creation of a permanent establishment (a taxable corporate presence) varies between countries. For example, in Germany the signing of a lease, even for a brass plate with the company’s name on, is given much more weight than it would be in most other European countries.

In other parts of the world it may be that a permanent establishment is not required but regardless of this it becomes necessary from a practical perspective. It is not possible to register a payroll in Malaysia unless you have an entity reference number, so establishments are inevitably formed.

Finding the best options for our clients
After determining whether an establishment is required, we consider the different options available to allow our clients greater flexibility. It may be beneficial to set up an establishment with a lower initial cost and filing requirements rather than a company (e.g. the “RFI” status in France).

We highlight other matters away from direct taxation and payroll requirements. For example, in Australia there are requirements for superannuation funds (individual pension plans) which typically have to be funded from a local bank account.

Banking is an area where the requirements for certain payments to be made locally will vary, as will the flexibility for payments to be made from a bank account in the name of a third party. In some cases payments need to be in a specific format and requirements for local officers for the entity may vary.

Highlighting cultural/legislative issues
Finally, we highlight cultural or legislative issues that may impact the daily running of the business. In the US it is typical, even for very highly paid employees, that salary payments are made fortnightly rather than monthly. This is a cultural rather than legislative practice. In Russia it is a requirement that there are two payments per month. In practice these are very often structured so that one payment is of one rouble. These practices may be different from custom at head office and so they need to be highlighted in advance.

All of these considerations, on a country by country basis, can be made by our team here in the UK to streamline and simplify the process for our clients as much as possible. We can then go on to manage the ongoing payroll and accounting requirements as needed.

For more information, please contact your usual Blick Rothenberg contact or Jim Brown, partner on +44 (0)20 7544 8777 or at jim.brown@blickrothenberg.com