As we enter a more globalized market, we see companies investing in satellite offices to secure a place within local markets. Doing this maximizes their presence locally and establishes their spot as a global company. Satellite offices are also utilized to reach various areas and expand market reach. However, some companies do not understand the risk of doing this, especially when they try to establish a presence in a country, they’re not familiar with.
Establishing an office in an unknown environment is always difficult. But doing so without doing a robust risk assessment can be dangerous. At the very least companies need to be aware of local laws. The most often overlooked and damaging laws tend to be local employment laws.
Local Employment Laws
Employment laws are the laws that help protect the rights of workers. These are laws created to prevent abuse, discrimination, and promote a better working environment. Generally, most employment laws tend to cover topics such as payments, working conditions, safe environments, fair wages, benefits, and working hours. Employment laws also set restrictions on working long hours, unjust pay, and harsh working conditions.
While employment laws echo the same sentiment across various countries, the local employment laws can differ when it comes to specific details. These minute differences can have big and costly impacts when foreign companies are not informed or aware of them. For example: observing various holidays, traditions, cultures, and minimum wages can be difficult to navigate. More often than not, some companies may think they are being scammed due to the native policies in countries where they set up satellite offices.
Why It Can be Hard to Navigate Local Employment Laws
The simplest answer is because you are not a local. People often assert that it is easy to research and learn the local employment laws — and while this may be true, most simply don’t bother. Researching such local rules and ordinances is hard and time-consuming so most companies simply don’t.
The Philippines, for example, an end-of-the-year bonus law that is akin to a Christmas bonus. Under Presidential Decree No. 851, it is mandatory that employees from the private sector be given an additional bonus salary before the year ends, hence the “13th Month Pay”. If an employer fails to provide the 13th-month pay, they are subject to penalties deemed appropriate by the government.
However, if you are not a local, there is little chance of you knowing about this kind of thing because it is normal and therefore no one considers that other people wouldn’t know about it. And to accommodate all these things, your policies and rules will need to change to align with the rules in each and every country in which you establish satellite offices.
Why Observing Local Laws Are Important
Governments take employment and labor laws violations seriously. Once in violation the government does not care about why the violation occurred, just that it did happen. This is why observing local labor employment laws is important for foreign companies who are wanting to establish their own satellite offices. Any violation of these laws can result in significant penalties, termination of business operations, and in even jail.
Companies will deal with:
1. Fines And Penalties
Often, violating local laws will result in fines and penalties. Companies are required to pay for damages and provide money for the disgruntled employees. This can be very costly and in a worst-case scenario, can put the company into bankruptcy. The real consequences of violating local employment laws are deeper and can hit harder than having to pay penalties.
2. Declining Employee Morale
Whenever companies receive employment labor law violations, employee morale declines. Most of the time, employees seek new employment to get away from a company that has violated the laws that protect their rights. Some might think that leaving instantly is drastic, but put yourself in your employee’s shoes. Would you stay at a company that you cannot trust to prioritize your wellbeing and your rights as an employee? For most employees, it is better to find a job elsewhere with an employer that can and will take care of them.
3. Damaged Company Reputation
Aside from being a public relations nightmare, violating labor laws will harm the value of your company. From the outside, people will view your company as not worth much if you won’t even take proper care of your employees. Even aspiring new hires will skip over your company if they learn of the indiscretions your company has made.
Be Careful! Find A Better Way
If you really want to establish a satellite office for your company and you don’t want to accidentally violate local employment laws, then there are avenues that you can explore to stay on the safe side. Specifically, the best way to properly establish your company is through outsourcing and finding a local partner that will help you navigate your target country.
Outsourcing is a business practice wherein companies contract out a business function through a third-party source. Your outsourced company will effectively run a part of your office with no need for you to stress over them. So, if you outsource a local company, you will prevent any kinds of accidental law violations because the team is local to the area and are more familiar with their laws. Creating a partnership with an outsourced company will guide you on everything you need to observe regarding their laws and culture. Furthermore, they will help you establish and run your satellite office.
More often than not you won’t even need to handle any specific details because your partner can and will do it for you. From creating inclusive policies to making sure that local employment laws are being observed– your outsourced company can do it all!