Labor management required for overseas expansion

Basic knowledge of labor for overseas employees
Payroll Design
place of assignment and tax treatment in Japan
Special enrollment system for workers’ compensation insurance for overseas workers
social insurance
For overseas employees to have a comfortable time at the place of assignment
Summary

Basic knowledge of labor for overseas employees

Japanese employees are often dispatched from the head office to work overseas. It is also necessary to reduce labor costs and localize products through local employment, but it is highly necessary to have Japanese employees for management and administration at the start.

In this way, if you have an overseas office, it is necessary to perform labor management based on the laws and regulations of your overseas assignment. Overseas, we will comply with local labor laws, and will not be subject to regulations or receive rights under Japanese labor laws.

However, it is not possible to make them work excessively far beyond the limits prescribed by the Labor Standards Act of Japan, and appropriate consideration is required to ensure that they can work overseas in a comfortable condition. Of course, we cannot violate labor laws overseas.

Labor management for employees working overseas must enable them to work and live safely and without dissatisfaction or anxiety in the new world. Let’s start by investigating the local laws and regulations of the host country in order to know the regulations different from those in Japan.

Payroll Design

When you expand your business overseas, the problem of salary should be considered as labor management. In designing salaries for employees assigned overseas, it is necessary to consider that the standard of living in Japan will not decline.

Overseas, prices and tax rates are different from those in Japan, and if you have to take out social insurance in the host country, you also have to pay social insurance premiums. In addition, certain types of payments involve the risk of exchange rate fluctuations.

Basically, there are many companies that adopt a method of adjusting overseas salaries so that they can receive the same level of pay as in Japan without incurring losses based on the idea that “principle of no loss and no gain”. In particular, companies that have expanded into countries or regions where prices are particularly high have adopted the “purchasing power compensation” method.

It is a method to decide the wage based on the wage level in Japan and the cost of living index and exchange rate in the country. Other methods include “separate building system” “combined method”.

place of assignment and tax treatment in Japan

One of the things to consider in relation to overseas business expansion is taxes on the salaries of overseas employees. The place to pay the tax based on the salary of the person who is transferred overseas is either Japan or the place where the person was transferred, depending on various requirements.

Basically, the key point is which country’s “resident” will be.

First of all, in the case of a short term assignment, it becomes a “resident” in Japan, and both the salary received in Japan and the salary received abroad are subject to taxation in Japan. On the other hand, overseas salaries are taxed overseas, but due to double taxation, the 183 day rule applies in countries with tax treaties.

This is a rule that if you stay less than 183 days, you will not be taxed abroad.

In Japan, long-term assignments are considered “nonresident” and are taxed at overseas locations. However, in the case of an executive, basically the tax payment will be in Japan no matter where he is transferred.

Since the method of taxation varies from case to case, companies considering overseas expansion need to prevent problems such as double taxation and tax evasion by issuing a letter of appointment to employees who are scheduled to be dispatched.

Special enrollment system for workers’ compensation insurance for overseas workers

Overseas employees will not be covered by Japanese labor laws and will not be covered by workers’ compensation insurance. For this reason, employees who are transferred overseas are subject to the work-related accident compensation system in the country where they are transferred, and are compensated under the system in the country where they are transferred.

However, in Japan and other countries, there are problems such as differences in compensation contents of the workmen’s compensation system and insufficient compensation contents. There is a “Special enrollment system for workers’ compensation insurance for overseas workers” to solve these problems and prevent inequality between Japan and the host country.

In order to use it, you need to apply to the Labor Standards Inspection Office under the jurisdiction of the company. Application is essential for the health and safety of employees assigned overseas and for compensation in case of emergency.

social insurance

Social insurance premiums pose a risk of increasing the burden on overseas employees. There is a risk that there will be a double payment of social insurance premiums in Japan and overseas local social insurance premiums, and that the amount of local social insurance premiums will be higher than in Japan, which will put pressure on the lives of the new employees.

There is also a risk that the tax burden at the host country will increase due to differences in tax rates in each country.

In general, companies are taking measures to ease the financial burden imposed by overseas operations, such as increasing salaries and paying the company’s share. In some cases, it is necessary to consider whether to continue or abolish social insurance in Japan.

For overseas employees to have a comfortable time at the place of assignment

Overseas expansion often gives important roles to employees working overseas. So, while it’s a challenging job, it tends to put a lot of strain on your mind and body.

In addition, there are times when people complain about a significant change in the working and living environment compared to when they were living and working in Japan.

It is a part of labor management to maintain a comfortable working environment by controlling such burden, dissatisfaction and anxiety. It is also necessary to follow local customs and laws when you are assigned, but it is also important to compensate for any significant differences in your living level or working conditions in Japan.

It may be difficult depending on the company’s policies and funds, but it is essential to create an environment in which overseas employees, the key persons who succeed in advancing overseas, can fully demonstrate their capabilities.

Also, in principle, we cannot order an overseas dispatch without the consent of the employee if it is not specified in the employment rules or the contract or oath at the time of employment. In order not to cause trouble, you should prepare the rules of employment in advance if you are planning to expand overseas.

Summary

As described above, when expanding overseas, it is necessary to start from scratch with a fresh understanding of the systems that are common in Japan, such as local labor laws, salary systems, taxation, workers’ compensation insurance, and social insurance.