Tag: global expansion

International Subsidiary vs. Branch – What to Set Up

If you are looking to expand your company into foreign markets, one of the most important questions you have to ask yourself is whether you want to establish into the new territory as a subsidiary, or a branch? This is a crucial part of the planning process in business expansion.

Your answer to this question depends on a few factors, such as the opportunities you perceive in the new market, as well as any regulatory or cultural challenges you may want to tackle in your new territory or country. Other questions you may want to ask yourself during this decision time include:

  • What is the establishment process like – do you need a legal entity in the country first before setting up other processes, like payroll?
  • What is the process for acquiring work permits and residency permits for employees?
  • How long will it take for the company to be able to legally do business?

If your questions are more specific to the country you want to expand, check out our Country Guides. If you want to know more about the main differences of these entity types, you can read more about it below.

What are the main differences between a subsidiary and branch?

When deciding on whether you want to open a branch office versus opening a subsidiary company in a new territory, you will need to consider three points:

  1. What your primary business interest(s) will be
  2. What your goals are for the entity you choose
  3. How you will handle taxation and liability

The requirements for the incorporation of a branch and subsidiary will vary according to the country, but the main requirements include: a local address, incorporation documentation, and representatives of the parent company. The requirement for a local bank account also varies according to the payroll laws of the country you are expanding to. Share capital is only required for subsidiaries, but not for branches.

The characteristics of both entities are in the table below:

Understanding what makes both the branch and subsidiary distinct from the other makes a huge difference in making the decision for your business’ expansion.

However, one also needs to know the benefits and drawbacks of each entity type, before deciding which one is the best choice for you.

What are the pros and cons of a branch?

Pros:

  1. Parent organization maintains a greater level of control: A branch office receives all instructions from the parent company, as well as reports to it in all its decision-making processes, providing the parent company with greater control.

  2. Easier to integrate due to the same the laws and policies of the parent company/head office: Since a branch must be incorporated under the documentation of the parent company, the policies and culture of the parent company are easier to implement into the branch’s operations.

  3. It costs less to establish: Branches to not require any share capital to be provided beforehand, and the set-up costs to set up are considerably less than those of a subsidiary company.

  4. Offers the parent company greater tax benefits: In a majority of cases, any revenue that is earned by a branch office are handled by tax treaties signed between the country of the parent organization, and the country of the branch (eliminating double taxation). So, any taxes that the branch office has to pay are handled by the parent company, who can benefit from the taxation laws and benefits of the branch office’s location.

  5. It is the simplest form that a business may take for business expansion: A branch is often the simplest and safest way for a company to expand its brand into a foreign country and explore new markets. Other company types require more regulation, documentation, and compliance measures.

Cons:

  1. More difficult to explore new business opportunities for parent organizations: A branch is restricted in its business activities, so the lack of independence creates more difficulty in market exploration.

  2. If branch has legal problems or debts, a parent organization is liable: Parent companies are completely liable for any of the branch’s debts, fines, or legal settlements, which also increases the risk of the expansion.

  3. Finding employees for the branch: This depends on the country’s labor and migration laws, but finding employees is a lengthy and demanding process, especially if you are transferring employees to the new branch.

What are the pros and cons of a subsidiary?

Pros:

  1. Subsidiaries are independent of their parent company: A subsidiary is a separate legal entity, so it may conduct business more flexibly and easily, form partnerships, and explore new markets with little to no restrictions from the parent company.

  2. A subsidiary adds more accessibility and greater credibility to the parent organization: In most cases, foreign clients, service providers, and banks prefer doing business with a subsidiary for both legal and financial reasons, creating better accessibility to your business and sector.

  3. A subsidiary is more flexible than a branch: Subsidiaries enjoy a greater degree of flexibility in the issuing of transferring of shares to third parties (such as investors, partners, employees etc.), as well as the public stock exchange.

  4. Can explore more economic opportunities in a foreign country: A subsidiary can explore new markets in a foreign and need not necessarily stick to the same market as the parent company.

  5. May take advantage of cost efficiencies in a foreign country: Parent companies that open foreign subsidiaries can often take advantage of the country’s manufacturing and labor costs.

  6. A subsidiary offers greater liability protection for the parent organization: Since a subsidiary’s legal identity is separate from the parent company, that offer the shareholders of the parent company greater legal protection. They have no liability in the case of legal problems or debt of the subsidiary.

Cons:

  1. Subsidiaries cost more to establish and open: Subsidiary incorporation procedures are significantly higher than those of branches. Subsidiaries must have their own documents (including translations and legal advice), business or trade licenses, bank account, office space, payroll system, and more – which accumulate in costs.

  2. Face regulatory and cultural challenges: If you want to open a subsidiary in a new territory, you must carefully study the cultural, political, and regulatory environments of that country – as they will all have a significant effect on how the subsidiary will work. Shareholders or directors who live in the country can help the parent organization better understand how things work.

  3. Costs can be high in case of regulatory and legal problems: If a subsidiary falls into certain issues in terms of profit or revenue, there are more intricate legal and financial questions involved, especially when the legal system or language is not one you or your company are familiar with.

Contact us today to learn more!

Choosing between a branch and a subsidiary office in a foreign territory can be a difficult and complex issue – particularly if you are invested in expanding into new markets as quickly as possible.

It not only takes time to decide on the course of establishment and type of operation, but it also takes time to do the research and understand the different laws, rules, and customs of the country and how they do business.

However, there is a faster and simpler way to sort this out. Through Bradford Jacobs’ Global PEO and EOR models, we combine legal expertise and high-quality international HR.

We use our global infrastructure to help companies onboard teams in over 100 countries, without the need to set up a subsidiary or a branch office.

For more information about what we can do for your company’s expansion, contact one of our consultants today.

Italy’s New Green Pass Law: What It Means for Workers and Businesses

Italy announced that it will be making the EU’s Green Pass mandatory for all private, public, and self-employed workers in order to access their place of work, as of the 15th of October. This will have far-reaching effects on the workers and businesses of Italy, with penalties in place to ensure that workers are not at risk of spreading COVID-19 as the country moves towards economic recovery.

This Decree has been met with the backing of most employers’ federations as well as union leaders, with procedures in place to ensure that testing for unvaccinated workers are both accessible and affordable.

Here is how the Green Pass will affect workers, businesses and the penalties and exemptions of this Law Decree.

What is the Green Pass?

First defined by the European Regulation 2021/953 and now Italy’s Law Decree, the Green Pass is a certificate which may be in either digital or in print which has been issued by the Italian Ministry of Health’s national platform. It may be issued if an individual possesses any of the following certifications:

  1. A COVID-19 vaccination certificate – for those who have completed the vaccination cycle. This pass is valid for one year from the date of the last vaccine administration.

  2.  A negative test result from a molecular/antigenic COVID-19 test that has been issued in the last 72 (molecular) or 48 hours (antigenic).

  3. A certificate stating the recovery from COVID-19 which has been issued in the last six months.

This requirement for a Green Pass applies to both private and public sector workers, the self-employed, and workers in training or carrying out voluntary work.

Exemptions

However, there are exemptions to this Law Decree. The Green Pass requirement does not apply to workers that are unable to get the COVID-19 vaccine – they must, however, provide a medical certificate stating their exemption.

In the case of individuals involved in the justice system – lawyers, magistrates, witnesses, etc. – access to the public courts will not require a Green Pass, but they must have a Green Pass in order to access other public places, such as a law firm.

The Penalties – Fines, Suspension, etc.

The main penalties for not following the regulations of the Law Decree are fines on both the employer and worker, as well as worker suspensions. In this case, suspension involves no right to compensation or any other type of payment, until they provide a valid Green Pass. However, employers are prohibited from dismissing their suspended employees – no sanctions may be imposed on workers, and job retention rights must be maintained. The sectors, however, implement these penalties differently:

  • Private workers who do not possess a Green Pass or are unable to produce a Green Pass will be considered to be under ‘unauthorized absence’ and will be suspended from their workplace.
  • Public workers will be marked under unauthorized absence from day one but are only officially suspended after 5 consecutive days of not providing a valid Green Pass.

If the regulations or provisions are breached, both the employees and employers may be fined by the authorities with the following penalties:

  • Workers: a fine from 600-1500 EUR for those who access their workplace without a Green Pass.
  • Employers: a fine from 400-1000 EUR for those who have not implemented the proper verification procedures for the Green Pass.

For how long will this be required?

Italy is still under a ‘state of emergency’ and this Decree is only valid until the official last day of this implementation, which is the 31st of December 2021.

However, there is a possibility of the date being extended to sometime in 2022, depending on how the country’s vaccination rate and number trends of COVID-19 cases.

How this affects workers

Italy has the second-highest number of COVID-19 deaths after Britain, with more than 130,000 deaths since the pandemic surfaced in Europe in 2020.

The Law Decree has been introduced to ensure that the spread of COVID-19 (as well as its new variants) are kept to an absolute and manageable minimum while the country tries to recover from the difficulties wrought on its population and economy.

The Green Pass implementation has now crossed into the realm of working spaces. Back in August, the Green Pass was implemented for access to frequented public spaces such as train stations, cinemas, restaurants, gyms, and swimming pools.

In order to apply for and receive a Green Pass, you must follow a few, but simple steps:

  • Acquire a residence permit and/or National Health Card
  • Take a COVID-19 test, COVD- vaccine, or recover from COVID-19 and alert the authorities
  • Once done, an issue of the certification will be sent by either email or SMS, where it can be accessed through any of the following digital portals:
    • The Digital Identity portal (Spid/Cie)
    • The Regional Electronic Health Record File
    • Downloading either the Applmmuni or App IO apps
  • However, if you do not have access to any of these digital resources, you may simply contact your GP, pediatrician of free choice, or regional pharmacy, who will provide it for you.

The certificates are available in English, Italian, French and German.

With regards to self-employed workers, co-working spaces will be subject to the same requirements as other workplaces (for checks, but not suspensions).

For testing, the government has implemented a price cap for COVID-19 tests – for workers, at 15 EUR, and EUR 8 for minors. These are imposed on pharmacy-administered rapid antigen tests. Those that are medically exempt from vaccines may get tested for free.

In the case of unvaccinated employee testing, employers have may provide these tests to them for free.

What about migrant workers?

Due to the labor shortages affected food supply chains during the height of the COVID-19 pandemic, many European countries, including Italy, began to regularize undocumented migrants.

A regularization scheme was launched in May 2020, but it was soon evident that the scheme contained numerous flaws, including a limited selection of eligible sectors that migrants can apply for, serious delays, and excessive bureaucracy to work through.

Migrants waiting for their regularization remain vulnerable – without access to healthcare, as well as (until recently) a COVID-19 vaccine.

Reservations for a COVID-19 vaccine require a code from Italy’s national health cards, which are issued to those that have a residence permit. To combat this, migrants are issued with a “temporarily present foreigner” (STP) code to obtain access to healthcare services, including vaccines.

However, this has not been implemented across all regions of Italy – so access to the COVID-19 vaccine varies for migrants, according to their region.

How this affects workplaces

Workplaces in Italy are also affected by the Green Pass Law Decree. Employers in Italy are required to:

  1. implement and define their operating procedures for employee organization and Green Pass checks, including their spot checks.
  2. Identify those who will be in charge of workers’ Green Pass checks before they enter the workplace, as well as reporting any violations.

An additional decree will be issued by the Prime Minister, with more guidelines detailing the regulation of carrying out Green Pass verifications.

For small businesses, a suspension of an employee may mean more to the business than a large one. The Decree takes this in mind, by providing a specific procedure which allows small businesses with less than 15 employees to temporarily replace their suspended workers.

Suspension is initiated on the fifth day of non-presentation of a Green Pass, and employers may enter into temporary contracts to replace the suspended workers for a maximum of 10 days.

For suspended employees, their suspension is effective for the duration of the temporary employment contract of their replacement.

There has also been talk of introducing databases in place of daily Green Pass checks. The Education Ministry has developed a centralized database for school which requires schools to enter their employees’ green pass status, which not only helps with employee privacy

Conclusion

The Green Pass Law Decree presents a challenge to both employees and employers as the country and the world are progressing towards a normality of work and the workplace, after a year and a half of economic uncertainty.

Penalizations and suspensions will have an effect on businesses, so it is vital for employers to ensure that the workplace is functioning as best as it can, with a primary focus on employee safety.

Enforcement of the decree is crucial for businesses to run as smoothly as they can whilst the country recovers.

For more information about the work culture or businesses in Italy, check out our PEO Guide to Italy, or contact one of our consultants today.

What is a Global PEO?

When a company is looking to begin their global expansion, the process can be exciting, but it can also be overwhelming. Expansion involves a number of procedures, such as payroll, recruitment, and incorporation. But, international law and red tape can intervene in these plans.

A PEO, or a Professional Employer Organization, is also known as a co-employer. They take care of all areas of employment in a new territory, so you don’t have to. Payroll, benefits, and other HR responsibilities for the employees of a client’s company are all handled by the PEO. They make sure that the work you do for your business is easy and hassle-free.

A PEO offers cost-effective and tailor-made solutions for your international expansion and be up-and-running in a new market within hours – with your goals in mind. Find out below how a PEO works, how it can work for you, as well as the benefits that you can get out of using a Professional Employer Organization.

How does a Global PEO work?

PEOs are experts in all areas of international employment and global expansion – which include, but are not limited to:

  • Human Resources & Compliance: A PEO’s staff must decipher and implement a variety of labor laws, to ensure that the companies stay compliant in all types of the country’s regulation that apply – including local, state, and national laws. When regulations change, the team must research the possible impacts, as well as make the necessary adjustments.
  • Benefits: PEOs must also coordinate location-specific benefits with health insurance companies – which can include medical, dental and vision. Benefits being given can also include commuter benefits, flexi-spending, and sick leave. PEOs offer flexibility when it comes to employee compensation.
  • Payroll & Tax: PEOs must calculate tax contributions, make direct deposits to the employees’ accounts delivered on-time, and other issues that are related to Payroll.

The staff must keep well-informed in all these areas, and stay updated about changes in local laws and regulations in countries where PEO services are offered/where the employees are located.

The starting blocks for global expansion

PEO works to make the starting blocks for a client’s expansion goals. An important part of the PEO’s work include handling the legwork and risks of their client’s expansion, whilst you focus on your company’s success.

A global PEO not only performs the required tasks, but they also work as your strategic partner. They form part of your expansion team and will guide you in your next steps for acquiring the best results, as well as the best people on your team.

International employees may also be able to use a global PEO as their Employer of Record (EOR). If you have an international employee, they would be legally employed under the global PEO. They will take care of almost all administration and compliance, but you would be responsible for their day-to-day activities.

If you have any more queries about how a PEO works, check out our most Frequently Asked Questions on our Global PEO or What is PEO pages.

Who should use a Global PEO?

A global PEO can be utilized by any company – no matter their size or industry. All you need as a business owner are global expansion goals and dreams, and we can handle the rest.

Business owners of small and medium-sized companies can use PEO services by outsourcing their Payroll, HR, and administrative tasks whilst they focus on what they do best. Large companies may also benefit from the services of a Global PEO. They can continue their expansion and global reach without worrying about the costs, time and resources on administrative and recruitment needed to reach their goals.

If you are a business owner and you are looking for:

  • Opportunities in global expansion
  • To test potential markets in new territories
  • To find international talent without the hassle of handling immigration procedures and payroll administration
  • Have ambitions goals for expansion, but lack the finances and resources to get there at present

Then a PEO is the best service for you!

What are the advantages of a Global PEO?

A Global PEO is a service that supports many employees and businesses worldwide – over 4 million employees in the world have been hired through a PEO – and includes the following benefits:

  1. Saves time, money, and resources
  2. Cuts risks and reduces lawsuits
  3. Takes charge of employee benefits to ensure the happiest employees
  4. Streamlines expansion as well as hassle-free withdrawal
  5. Tests new markets at no great risk to you
  6. 24/7 support
  7. Happier Employees

What does Bradford Jacobs provide?

At Bradford Jacobs, we know business expansion can be complicated. It is our goal to provide the best solutions that are tailored for you and your company’s expansion goals.

We are a Global Professional Employer Organization service provider, benefitting from a network of PEOs all over the world. We believe in a world of globalization, and want to see it happen for you, too!

By using our global network, you can turn international freelancers, contractors, or consultants into a dream team – with employees from anywhere around the world.

We provide a number of services, including:

  • Employer of Record Services (EOR) – if you want an employee in a specific territory, or the employee you chose cannot be moved to where you want them to go, you can benefit from our EOR services. They are registered under Bradford Jacob’s payroll, but you are responsible for their tasks and day-to-day activities.
  • Outsourcing Payroll – Our teams ensure that employees’ taxes, social security contributions and benefits are paid compliantly and on time. No issues for you or your employees, wherever they are.
  • Recruitment – We assist in building your company’s global workforce, without the hassle of complex international onboarding processes. We make sure that your employees are happy with their conditions and benefits.
  • Global Mobility – Whether you need visas or to relocate your current workforce, we are experts in immigration laws and requirements. We can help you build up, reduce, or move your workforce from any country, and to any country you prefer.
  • International Knowledge of Compliance – When you use our PEO services, you have access to our team of experts. They have extensive knowledge of international laws, regulations, and cultural practices of a number of countries.
  • Continuous Support – our team will work tirelessly to ensure that your plans are going well. We also anticipate any new developments within your company, industry, and market to keep your business keeps thriving in its expansion.

If you would like to see more of how our PEO services work according to the country, then check out our Countries We Serve page.

Contact us

Using the services of a Professional Employment Organization is a great asset in globalization and global expansion. At Bradford Jacobs, we want to hear your story, ideas, and goals – and make them a reality.

Contact us today to see how we can help you achieve international expansion.