Why international human resource management is important in international business?

International HR Management (International Human Resource Management) is a crucial concept for any business that has expanded globally or is thinking about doing so. Here we explain what international human resource management means and explain how to implement it within your organization. 

The Definition of HR Management 

What is HR management in itself? One commonly accepted definition is “HR management refers to those activities which organizations use to effectively and efficiently manage their employees” (See, for example, Dolan et al., 2007 (Spanish) as well as Bornay-Barrachina 2019). Thought of in this way, human resource management includes: 

• HR Strategy
• If there is no HR strategy across a company, individual line managers will hire and manage their own workers in line with their own needs. An HR strategy ensures that there is consistency across an organization, and that HR is lined up with the strategic goals of the company. 

• Employee Recruitment and Selection 
• HR takes care of recruitment (whether personally, or by advising line managers) and ensures that this occurs consistently with the HR strategy. 

• Training 
• Ongoing training of staff across a company is required both for business performance (e.g., training on company sales processes), and for compliance (e.g., training on health & safety and data protection). HR ensures all staff receive the required training.  

• Performance Management 
• Sound business practice, as well as employment law in some countries, mean that good performance and poor performance need to be methodically supervised across the company. HR ensures a consistent approach to performance management which may include compensation/remuneration policies and dismissal policies. For an excellent breakdown of the importance of performance management see Mckinsey’s Performance management: Why keeping score is so important, and so hard. 

• Employee Complaints/Whistleblowing 
• HR ensures that the business has a process in place to deal with customer complaints, as well as any ‘whistleblowing‘ with respect to wrongdoing across the organization. 

Does HR Management Have Oversight of Contractors?

There is an argument that restricting HR management to employment-related issues is too narrow.

An increasing proportion of an enterprise’s workforce are now contractors or freelancers, rather than employees. And while the two types of labor are distinct, they both need to be considered as part of an international HR strategy.  Find out more about the pros and cons of engaging contractors rather than employees in What Are the Advantages and Disadvantages of Using International Contractors? 

To cover contractors, we might say that HR management is concerned with the efficient and effective management of an organization’s workforce, rather than employees. 

International human resource management looks at how international enterprises effectively and efficiently manage their global workforce. 

Three Useful Tools for International HR Management

International HR management takes the core aspects of HR management and applies them across a global enterprise. Getting global HR management right is a key plank in international market success. However, when applying this approach across your global enterprise, some useful tools to keep in mind include:

• Intra-Group Transfers/Secondments
• Transferring staff from head office/your operational base to new global locations can make for efficient HR management. This is an important part of ensuring that staff in a new location are acting in line with company-wide expectations. International transfers are also sometimes highly sought after by staff. These transfers are often best facilitated by using a special three-party contract, a ‘tri-partite agreement‘.

• The Right Balance of Contractors and Employees
• Sometimes enterprises begin overseas operations with contractors rather than employees. There are substantial compliance risks to this including permanent establishment risk (the risk that your enterprise will be ‘on the hook’ for corporate tax in that country), as well as ’employee misclassification’ risk (the risk that your organization will be liable for incorrectly classifying an employee as a contractor).  Find out more about employee misclassification at How to Convert Contractors to Employees.

• Engage a Global Expansion Partner
• A global expansion partner, such as a Global Professional Employer Organization (Global PEO), can support your International Human Resources strategy by ensuring that your business is in full compliance with local tax and employment laws. Furthermore, Global PEOs often have an international recruitment function which ensures that you have the best staff in place for your new global business operation. 

Conclusion

International HR management is the oversight that an international company applies to its worldwide workforce. Through global HR management, an organization applies an HR strategy across the entire business, as well as a consistent approach to employee selection, training, performance management and employee complaints.

Horizons supports organizations with global HR management by becoming the ‘Employer of Record’ for a client enterprises’s staff. Horizons recruits, onboards and provides ongoing HR support for, your international workforce.

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