global HR, international compliance, international trade, GEO

Tim was a chemical engineer just starting his career.  He was working for a beverage additive company in Milwaukee, USA. Having already studied abroad for a year at the Instituto Tecnológico y de Estudios Superiores de Monterrey (México), Tim was open to the idea of moving to east Germany when his company proposed it. He and his four engineer colleagues went to investigate setting up a production facility near Dresden. Why Dresden? The German government was providing incentives to foreign companies to invest in the former East Germany to build up the economy.

Tim was excited about this opportunity to help his company expand internationally, but one thing kept nagging in the back of his mind. The company hadn’t done any paperwork to get Tim and his colleagues work visas for Germany. Even as a novice to the work world, the lack of proper documentation was a clear risk to Tim as a project engineer. Tim brought it up to management and to the HR department. “We’re working on it” – was the response.

Tim stayed in Germany for six months helping the team to evaluate facility options. But the company still didn’t seem to care about the glaring compliance issue. Tim decided it was time to move on to another job at a company where he wouldn’t be put in this type of compromised position.

Later that year, the German authorities confronted the American team, asking to see work visas and other registration paperwork. The company was issued hefty fines. A few of the staff had returned to the U.S., but the German government caught up with the last two engineers as they were leaving. They were initially detained and individually fined and required to leave Germany.

 

Why would a company not issue work visas to staff working overseas?

This beverage additive company was obviously negligent of their duties under local laws as well as to their employees. But up until a few years ago, companies had to form an in-country subsidiary to legally employ workers in Germany or any other country for that matter. That involves registration processes, a series of fees, legal work, and who-knows-what-else. It can be a time-consuming process that also locks a company in to doing business in that market until the entity is dissolved (which also costs time and money).

The Milwaukee company was not sure if the Dresden project was going to even be successful. It turns out that it wasn’t.  So they took a chance with their employees to avoid registration. But it was a big risk not only for the company, but for those employees as well. This was in Germany – a country of clear-cut rules. What if this had been Bolivia or Egypt where government application of rules is not so consistent?

 

GEO can keep your global project staff compliant

Now companies don’t have to register a foreign entity to send their project engineers and other staff to work overseas. They also don’t need to know the exact local employment laws either. A few years ago a new service was born – GEO (Global Employment Outsourcing). In this service, the GEO company hires your employees in the foreign country where they’ll be working and assigns them back to your company. The GEO company is the Employer of Record, providing payroll services. The employees are paid in the local currency and your company pays in one of the major world currencies like US dollars, British pounds or Euros. The GEO makes all the proper payments to local government for any social costs and stays fully compliant with local requirements.

The cost of GEO is typically far less than country subsidiary registration and eventual country exit. It’s ideal for implementation projects and researching a new potential foreign market. GEO was pioneered by Safeguard World International, and has spawned a new industry.

 

Final word to internationally deployed project staff

If you don’t already know, be sure to check your employment compliance. All countries have rules related to how much time someone can stay in country working without applying and receiving the right work permits. Most companies do not yet know about the GEO compliance/payroll option, I encourage you to share that with your employer if you suspect a compliance issue.

Tim, the young chemical engineer, did the right thing. He told his superiors and HR department. In the long run, it’s not worth working for a company that would put you at financial and legal risk in a foreign country.

 

As a footnote, today Tim is a successful Vice President of Marketing and Sales for a growing US Midwest engineering firm. He travels extensively for work around the world.

 

Becky DeStigter, The International Entrepreneur

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