Seven Key Considerations When Hiring New Staff in Asia

Hiring in Asia isn’t easy, irrespective of which country you’re operating in or whether you’re hiring local or expatriate workers. Identifying and hiring new employees in Asia can often be complex and time consuming. Compliance, immigration and turnover rates are just some of the distinct challenges companies face. As a result of these challenges, it’s wise to be cautious when making Asia-focused expansion and hiring decisions. To help you become more familiar with the unique challenges associated with hiring in Asia, we’ve outlined 7 key considerations to keep in mind:

  1. Ensure your business model works before setting up in Asia
  • The cost of setting up operations in Asia, including hiring staff, can be high. Determine whether your business model and strategy will work locally before setting up operations.
  • The business sector and Asian governments are closely intertwined. Therefore, it’s important to align your corporate strategy with national political visions for the economy.
  • A PEO rooted in Asia can help you position your business for success via cooperative relationships with local private or public sector companies.
  1. Relationships remain a constant in an economically diverse region
  • Asia provides a good source of skilled and unskilled labor where employment regulations are, in some cases, a work in progress.
  • It’s important, therefore, to work with a local partner to ensure you’re familiar with local labor markets.
  • Many westerners undervalue the relationships of a local partner. Your local distributor or JV partner’s network is of supreme value and begins working for you from day one.
  • Ensure the terms of any future separation from your local partner are well understood, in order to avoid a difficult separation in the future.
  1. Employer contribution rates vary, and contractual arrangements are short
  • Employer contribution rates are generally lower in developing jurisdictions and higher in more developed ones, providing cost-savings opportunities for strategic planners.
  • Your management team and legal counsel should understand that contractual arrangements in Asia are often short and vague (in some cases, a one-page term sheet).
  • Explain in advance the different complex Western-style contractual approaches as being a product of the standard global legal practice of western companies – and therefore not a reflection of your trust in the relationship.
  1. Hiring can be more expensive
  • As labor movement across Asia is limited by cultural and jurisdictional diversity, companies must seek to balance the costs of retaining local versus foreign talent.
  • However, the processes for hiring new staff across the various jurisdictions in Asia is similar, which offsets some of the increased cost of lower labor mobility.
  • The cost of foreign talent is made higher by permits and tax equalization. Cost-conscious employers, therefore, should seek to retain local nationals when possible.
  • Notably, most of Asia has no at-will employment and mandatory statutory severance, which increases labor costs.
  • In some countries like Japan, Taiwan, and Korea, you can’t terminate without an extensive process, so a mutual separation is preferred.
  • Ensure you understand up-front all the costs associated with any employment decision.
  1. Localized cultural awareness is essential to successful hiring
  • Asia consists of numerous jurisdictions, each with its own unique traditions and work culture. As a result, a one-size-fits-all approach will not work.
  • For example, hiring and firing in Hong Kong is relatively easy while it’s more difficult in Japan.
  • Cultural adaptability is also unique and vitally important in different ways in each jurisdiction. Hiring for a stable work culture, therefore, is very important.
  • Ultimately, it’s vital to deploy an HR strategy tailored to each jurisdiction while remaining true to your company’s overall vision.
  1. The importance of compliance
  • Employers face risks when hiring from large candidate pools in different labor markets with unique employment regulatory systems.
  • In some cases, companies hire foreign independent contractors in order to avoid dealing with complex compliance issues. It’s important, however, to avoid an ad-hoc approach and instead remain fully compliant with local laws and regulations.
  • With a proactive compliance strategy, you’ll protect your business from risk.
  1. Non-financial incentives are becoming more important
  • Asia is seeing an increased interest in incentives such as flexible work arrangements.
  • In some countries, statutory benefits are insufficient to attract top talents.
  • Therefore, employers should seek to offer supplemental benefits where feasible.
  • A PEO can help you secure cost-effective volume benefits while also attracting top talent.

Looking forward

Hiring talents is a key consideration for the success of any business expanding into Asia. As it is often expensive and must be done in full compliance with local regulations, you should consider retaining an international PEO with deep Asia expertise to help you reduce set-up costs, avoid risks and secure an optimal workforce.