Why should you Switch from Local Entity to PEO post pandemic?

When you expanded sometime back to a foreign country, it must have made complete sense to establish a local legal entity in the new country. It would have been more straightforward at that time to set up an entity as a subsidiary while directly employing people to your new company. Having the brand exposure with a physical presence in the region, entering into contracts within the country, simplifying tax obligations and arrangements are some of the benefits of directly expanding with an entity. It may have seemed like the more obvious choice at that time, but the pandemic has changed everything for corporates including expansions. 

By setting up an entity, companies look at different ways of managing operations and employees, in most cases in a more expensive way. Many companies send existing employees to the new country to manage operations on their behalf, while some look at different relationships – getting individual and independent agencies to carry out the operations. Then there are certain instances where a company would acquire a smaller company within the country or look at a joint venture which will operate on a profit share and shared control.

Many corporates are looking at cost savings, cost reductions and even shutting down foreign branches to sustain businesses in the long run. Instead of shutting down, many companies are also looking into transferring the foreign entity to a global PEO (Professional Employer Organisation). There will be a significant cost saving in transferring to a PEO while this process can be done fast, cost effectively and compliantly within days. Maintaining multiple subsidiaries will be a huge burden on the operational cost in the long run therefore global PEOs such as ExroAsia offer their low cost services for companies to maintain their global officers through a PEO.

Switching from a local entity to a renown PEO in the region will give you multiple benefits including saving thousands of costs and cutting down on your operational time. Global PEOs such as ExroAsia manages payroll, HR, recruitment and employee compliance and labor issues. While a global PEO can administer payroll at a lower cost, there will be reduced compliance cost with no requirement to engage lawyers or tax advisors as this will be managed by the PEO itself. Further all HR related tasks, employee responsibilities will be managed centrally by the PEO while the company leadership can engage in more strategic decision making.

How Global Expansion can be Cost-effective Post Pandemic.

The pandemic brought in some unforeseen challenges to many economic giants in the world. Across the globe, some predict a downturn of the economy for certain countries there are forecasts for some which are expected to bounce back. Despite economic challenges businesses must survive and carry on vigilantly. While every market got affected in some way, there are certain industries and companies who managed to see the light at the end of the tunnel by taking advantage on such industries and markets.

There are many Asian countries who has survived Covid-19 outbreak without much impact and certain countries seem to have a promising growth even through the pandemic times. While Asia sustained, Europe has bounced back with operations running as usual. One of the reasons as to why operations run smoothly, is because the outsourced services to Asia has not taken much of an adverse effect throughout the past few months. Although there are travel bans that took place during this time, it did not decrease the amount of opportunity for the Asian job market. While it was sustainable for many countries to carry on with their Asian expansions and operations, many are looking at a larger expansion while even considering few countries at once. The exit costs for these markets remain low whereas the annual maintenance costs are comparatively cheaper with low labor costs.

Companies are considering different ways of expanding instead of setting up an entity completely which takes many months with a lot of effort and a high investment. There are many methods how expansion plans can still take place despite all changes at a low cost in the post pandemic landscape. Businesses consider safer and easier options overseas without having to travel since the concept of remote working has been comfortably absorbed by many markets during this time. While setting up an entity restricts many aspects, International PEO (professional employer organisation) has been the most preferred option for many companies. While International PEO does not need the company to establish an entity, it can save the cost by around 60% with a quicker turnaround time to set operations up. They can hire people, take care of HR and other compliance and statutory requirements while making the expansion process smooth and hassle free. Since there is no permanent presence in the country, the company can opt to exit as soon as they need if they feel that the business is not viable.

Many businesses look for the right partner to expand their operations, a solution which can mitigate the risks and lets the company expand with confidence. ExroAsia has many years of experience with a team of experts on board who can support your growth journey. Drop a message if you would like to have a chat.

Right Time to go Global? Here are few Things to Consider

We have been dealing with mutations and aftermath of a Pandemic for many months now. Let’s face the reality, Covid19 is here to stay for a foreseeable time. Hindering or postponing operations can only be short term not a wise choice in long term as anyone else, we all need to accept the reality and terms of the New Normal. While there are industries and companies who got hit badly, there are organisations who thrived through the pandemic, inventing and reinventing products and services or be it internal processes. If Covid19 cannot be eradicated any time soon, and if businesses have to operate as usual, how should we handle our overseas expansions is a decision that has to be taken with careful consideration. Here are few areas to consider when making a decision whether it is the right time to go global.

Stay alert to how they manage the pandemic

Many countries faced severe consequences including developed countries like the UK and USA. Certain countries managed to curb the growth from early stage, certain countries tackled the worse stages differently. It is important to understand the resilience of the people within the country and how the government, middle class and the economy stabilizes in and out of the pandemic.

Monitor trade trends

Watch out for the countries that show an economic growth during these few months. Understand how the growth occurs whether it is an event base growth or if it is a sustainable growth. Have a few trustworthy sources to monitor these identified countries regularly to track the changes and approaches taken to manage the growth during this period.

Steady infrastructure is a must

It is extremely important to evaluate the state of infrastructure within the country and monitor the progress of plans on major infrastructure changes that might take place within the near future. Is there a good transportation system in place, ground transport and logistics to be in a state to ship goods? The state of airports, distance to travel within main cities to airports are important areas to consider.

Having the correct cost structure in place

While certain companies outsource services from other countries, some may directly invest to market products, while some companies would invest in low cost labor or production facilities. It is important to understand the cost structure that could take place with inflation and other economic conditions in long term and forecast results.

Recruit the right employees

When going global, one of the key things to focus on is global competence. Whether it is for marketing, sales or customer service; having employees who can cater to the requirements is everything. It is important to map the global competencies that is needed before hand with skill sets and look at recruiting the ideal profiles that would suit the job and company.

Interested to know more on global expansion? We are here for a chat. Inbox us to schedule a time for a quick call.

10 Questions to ask Potential EOR Companies

Many people define an Employer of Record (EOR) as a third party entity placed in between the client and employee. The EOR carries out payroll and basic HR functions on behalf of the client, while managing legal and statutory requirements is one of the key tasks undertaken by an EOR.

While EOR is the registered employer for employee they do not undertake any supervisory, management or strategic role within the employee’s company whereas the employer makes all decisions pertaining to the employee however EOR might execute certain decisions made by the original employer. An EOR carries out many tasks which include arranging visa and work permit for employees, providing registered entity for managing a locally compliant payroll, equipped to meet country’s labor law pertaining to employee contracts and permits, advises the client on notice, pay and termination rules and be the mediatory between the client and government authorities. 

There are few things to be mindful of when looking for an EOR company before expanding. It is important to choose the right EOR partner when expanding to an unknown territory altogether.

Here are few questions that you need answers to from your potential EOR companies before signing an agreement.

  1. Are they equipped to run a local payroll in the host country with statutory compliance?
  1. Does the employment contract they use tally with your company’s interests?
  2. Have they worked with companies similar to yours so they are capable of understanding your needs?
  3. What is the EOR’s service history and performance record?
  4. What is their employee strength and team that they will assign you to?
  1. Is the EOR service the core business of the company, or is it one of the service offerings?
  2. What is the contract minimum length for your company and the notice period for termination?
  3. What other services do they offer apart from EOR?
  4. How are their fees and rates set, and what is the timing cycle for invoicing and payments?
  5. Can they give references and do they have any case studies?

Having answers to above questions will give you clarity on their services, experience and knowledge on EOR also give you a clear understanding on what sort of team and experts will manage your employees within the country.

Choosing the correct EOR is important not to fall into trouble specially because you are dealing with the country’s labor law and statutory requirements with many authorities. It is important to have a partner who will carry out the services efficiently and effectively while maintaining your company reputation.

If you are looking for an EOR partner within Asia, ExroAsia team can help you with your requirements. Schedule a session with our team to understand what services they offer to ease out your expansion.

What is an Employer of Record and Why is it Important for You?

When a company hires an employee, the responsibility of all tasks of the employee including payroll, HR related tasks and legal and labor requirements must be taken up by the employer. But not all types of companies want to take up the responsibility of dealing with the liability of managing employees. This is where the solution lies in signing up with an Employer of Record (EOR).

What is an Employer of Record?

An Employer of Record is an organization which serves as an employer for tax purposes, undertaking the responsibility of the legalities and statutory requirements of the employee while managing payroll and other related tasks of the employee allowing the employee to work for their client.

Tasks managed by EOR

The Employer of Record handles many areas which include below functions:

  • Processing payroll
  • Filing taxes
  • Handling compensation
  • Issuing statutory forms for EPF and ETF
  • Processing time sheets
  • Creating and maintaining employment contracts
  • Employee onboarding (new hire)
  • Maintaining certificate of insurance
  • Completing and storing legal and statutory requirements
  • Doing background checks and screenings
  • Offering and administering benefits
  • Termination of employees

Benefits of having an Employer of Record

Using an Employer of Record saves time that is spent on manual HR and payroll related tasks especially if your business has relocated to another region. These mundane tasks take up time and energy, outsourcing these would only save time to invest on strategic input. It is cost effective, and it allows the employee to manage and follow the industry’s best practices when outsourced to experts. If your business is in multiple regions, EOR can centralise operations and manage functions smoothly. EOR can completely take care of your employees legal, statutory and payroll requirements even if you are not experienced, neither you need to spend time in learning and complying with laws and regulation in multiple countries.

However, this does not mean that the employer is not responsible for their employees, the company will be responsible for health, workplace safety and compliance where as an EOR will be responsible for employment admin related areas along with payroll compliance and tax laws.

Getting an Employer of Record for your company

As an employer, it is crucial to have your employees classified correctly, paid accurately, sand managed compliantly to avoid unnecessary lawsuits and issues. Even if you manage a global enterprise or a start-up, ExroAsia is equipped to offer an EOR solution customized for your requirements. Message us for a free consultancy session.

5 Things You Must Know About Employee Statutory Requirements in Sri Lanka

Sri Lanka is a nation with a mixed economy where both private sector and government sectors employee Sri Lankans and foreigners. Sri Lanka welcomes foreign investments, and to support this several free trade zones, regulations and easy access schemes have been established. The economy is based on agriculture, apparel, and services such as BPO, KPO whereas many investors look at expanding to Sri Lanka due to its strategic location.
When doing business in Sri Lanka, it is important to understand and be aware of the employee statutory requirements. Listed down below are a few important things to know according to experts at ExroAsia.

Entitlements when working in Sri Lanka

Minimum wage: Monthly minimum wage for all employees irrespective of the industry is LKR 10,000 whereas the minimum daily wage is LKR 400.

Working hours: Daily working hours including meals and rest should not increase 9 hours per day and 45 hours per week.

Pay cycle: Wages can be paid daily, weekly, biweekly, or monthly on a working day, wage period should not exceed a month.

Overtime: Overtime should be paid 1.5 times higher than the average hourly rate not exceeding 12 hours per week.

Leave

Saturdays and Sundays are considered public holidays including a holiday for the full moon day monthly, therefore Sri Lanka gets 125 holidays per year. All public holidays, Saturdays, and Sundays are considered Bank Holidays.

Public holidays: An employee who works a minimum of 28 hours per week is entitled to one and half days paid holiday in that week or the week after.

Annual leave: An employee is entitled to 14 days of annual leave for each completed year of service.

Casual leave: An employee is entitled to 7 days of casual leave for each year except the first year of employment, during the first year the employee gets one day of paid leave every two months.

Maternity leave: A female employee is entitled to 84 days of paid leave and cannot be dismissed based on pregnancy or any other illness related to pregnancy.  

Sick leave: Every employee is entitled to a total 7 days of sick leave within a year.

Paternity leave: Paternity leave is limited to 3 days for government sector, where the employee must take this within 3 months of the birth of the child.

Taxes in Sri Lanka

Tax year: The tax year is from 1st April to 31st March of the subsequent year. Companies need to pay in quarterly installments in advance. Companies can also apply for different accounting period.

Personal Income Tax:

Residents: The income tax rate for a resident is between 4% and 24%, depending on the level of profits and income earned each year of assessment.

Employees: The employer is required to deduct tax under a withholding scheme, termed as ‘PAYE’ (Pay As You Earn) tax.

Corporations: The corporate income tax is 28% (Tax rates of 14% and 40% apply to profits from specific businesses)

Employee Statutory Benefits

Insurance: Employees are generally given an insurance cover by employer.

Bonus: Paying a bonus is entirely at the discretion of the employer.

Retirement: An employee can retire at the age of 55. 

Pension: It is payable to men from 55 and women from the age of 50.

Employee Provident Fund: The employer and employees contribute to the Employees’ Provident Fund (EPF) and Employees’ Trust Fund (ETF). The minimum contribution should be 8% by employees and 12% by employers in EPF, and 3% by employers in ETF.

Termination

Notice Period: 1 month

Probation Period: The probation period will not exceed one year in the case of employees in supervisory or technical capacity and six months in any other employee. The employer may further extend in some cases for a maximum of 3 months.

Things you Need to Know About a Shell Corporation

In simplest terms, a shell corporation is a legal entity which exists only on paper without a physical officer or employees. They have financial assets, however they do not create products, recruit employees or generate revenue in any manner.

What is a shell corporation?

A shell corporation has no significant business activity, they do have financial assets however they don’t create products or recruit employees. They do store money for different purposes and engage in financial transactions while these corporations can be used for money laundering purposes and illegal activities. Shell corporations exist in a variety of names including international business corporations, investment companies, phantom corporations, mailbox firms, or letter-box companies.

What do shell corporations do?

Mainly what a sell corporation does is to hold funds and manage financial transactions for another company. Shell corporations can hide the identity of their owners by setting up anonymously allowing businesses to engage in financial deals without revealing themselves.  Shell corporations are formed in tax havens (countries with few or no taxes with laws against disclosing bank information), so these companies can enjoy low taxes while having access to foreign markets.

Why are shell corporations used?

While they are mainly used to fold funds and withhold taxes they also act as an offshore company where you can move a part of your operations to another country to take advantage of low taxes. Apart from an offshore company, a shell corporation is also used to hold money temporarily, to register as an IPO – initial public offering, invest in a foreign market and to protect assets from law and regulation. 

Why you should not consider a shell corporation for your business

Getting support of a shell corporation as an offshore corporation definitely has its own set of benefits, but it could also attract a lot of bad publicity. While using a shell corporation to also hold money or assets can bring in benefits purely on a shorter note where damage is higher. Specially selecting a shell company as an umbrella company may affect your business continuity adversely. It is important to do a proper background check before getting onboard as it is necessary to have certain presence when it comes to long term decisions. Shell company’s ownership is hidden and this could be a big risk when you put your company’s assets and reputations inline as there are many instances where shell corporations have gotten into money laundering and illegal activities.

8 Categories of Residence Visa in Sri Lanka

A residence visa is given for non Sri Lankans to get residence facilities under special circumstances. To obtain a residence visa, you need to enter Sri Lanka on an entry visa issued by a Sri Lanka diplomatic mission abroad. Entry visa will be issued by the Embassy only upon approval by the Controller General of Immigration and Emigration. You must mention clearly that you wish to apply for a residence visa when applying for the entry visa and submit the necessary supporting documents. 

A tourist visa cannot be converted into a residence visa. There are eight categories which would fall under residence visa. It is important to understand the category that you belong before applying for residence visa.

  1. Employment Category

Under this category, project professionals who work on government projects or projects carried out by the Board of Investment (BOI) of Sri Lanka and their dependencies, professionals employed at banks, volunteers, professionals who work for Non-Governmental Organisations, Professionals employed at an institution or organisation under Diplomatic Missions in Sri Lanka or professionals employed in private companies including their dependents.

2. Investor Category

Investor category includes people who are willing to invest monetary capital in Sri Lanka, and investors who have already invested in Sri Lanka, and professionals who engage in business activities in Sri Lanka.

3.Religious Category

Religious category includes Religious leaders and members of the clergy, who can apply for visa under the Religious category.

4.Student Category

This category includes university students, students in educational institutes approved by the government and students in other institutions in Sri Lanka.

5. Registered Indians covered by the 1954 Indo-Lanka Agreement.

6. Ex- Sri Lankans and their dependents

7. Family Members of a Sri Lankan

Family members include spouses and Children holding foreign nationality.

8. Diplomatic and Official visa
When the length of staying in the country is less than 90 days, diplomatic and official passport holders must apply for a short-term diplomatic or official visa.

Need to understand more about visa applications and procedure? ExroAsia can support you with the process while you worry about your business operations. Drop us a message for more details.

Sources:

http://www.immigration.gov.lk

https://www.un.int/srilanka/srilanka

4 Things to Check When Selecting an Umbrella Company in Sri Lanka

Many companies who are looking at expanding into Sri Lanka face with two challenges. Whether or not to start and entity, or to tie up with an umbrella company who can take up the entire set up and administration hassle away from you. Many opt for an umbrella company who would deal with the complex tax and regulations on behalf of your company. Second and the most important would be to select the right umbrella company for your company. Finding the right umbrella company could be a challenge itself, which is why ExroAsia has listed down few things to consider when selecting an umbrella company for your expansion in Sri Lanka.

 Track Record and Experience

It is important that the Umbrella Company you choose has a good track record, clients who can vouch for them with good references and feedback in different subject matters. It is easy to start an Umbrella Company but it is not easy to be in the business for long unless they are ethical, proficient and follow required procedure while serving clients all across the globe.

Expertise in Labor Law and Regulations

Like every other country, Sri Lanka has its own set of regulations and legal compliances for labor. Labor department in Sri Lanka always considers the employee perspective and is known to be partial towards the employee if there is any breach in regulations and bylaws. Any setup or entity in Sri Lanka needs to abide by the strict regulations and statutory compliance to operate smoothly in the long run. It is important that the Umbrella Company has a team who are experts in local labor laws and regulations.

Have a Board of Local Directors Who are Qualified and Suitable to take on the Responsibility

In Sri Lanka statutory obligations go beyond corporate liability into personal liability for the directors and therefore, it is important to have local directors within the country. Directors who would be able to take ownership of the liabilities and deal with labor issues. It is necessary to do a background check on the directors as there haves been instances where companies have appointed individuals without a suitable background, as namesake directors, and ended up in a disaster.

Don’t opt for a Shell Company in Sri Lanka

A shell company is a corporation that only exists in paper, without a physical office or actual employees. While a shell company might serve the purpose for many other entities in different instances, it is not advisable to select a shell company as your Umbrella Company. It is necessary to conduct a proper background check to see if the company exists in the given address, if there are physical people living in Sri Lanka who would take up responsibility for your company’s compliance and employees.

Before making a decision, it is required do a thorough fact check on the company, local directors, and financial status of the company, history and track record. After all Umbrella Companies are there to support your expansion, to make it smooth and hassle-free and not to expose the client to future liabilities.

Speak to our experts at ExroAsia for advice on Umbrella Companies or consultancy in expansion.

Your Guide to set up a Business in Sri Lanka

Post-civil war, economic growth and strategic location are only few factors for anyone to make a decision to set up a business in Sri Lanka. With a lot of opportunities, Sri Lanka aims to become a middle income country with long term plans and sustainable development. With Sri Lanka’s growth over the years, many businesses and investors have expressed their interest to set up businesses within the country and therefore government put up a plan to support the investors in every way possible.

There are multiple ways to set up entities, however here is a basic guide to follow.

Understand the industries of ownership

Different industries have specific and different regulations when it comes to ownership, there are some industries which is specifically reserved for Sri Lankans, some allow up to 40% ownership and there are certain industries which allow 100% ownership for a foreigner. It is important to identify which industry to step into considering the assets and resource pool that the country has to offer. There are government and regulatory bodies which would support large scale projects, while there are experts such as ExroAsia who would support the decision with research, documentation and managing the entire process.

Understand the different business entities in Sri Lanka

It is important to understand the different business entities in Sri Lanka and the process before starting on the documentation. There are unincorporated business types as well as incorporated business types in Sri Lanka. Many go with incorporated business i.e. private limited companies, public limited companies and companies limited by guarantee. Many foreign companies look into opening subsidiaries or branches in Sri Lanka which makes the process easier. Choosing the right type is important, once that is done the next step would be to register the name of the company.

Getting the right documents and incorporating the business entity

Once the legal status is classified under the Sri Lankan law, the capacity of the company, scope and details then begins the registration process. It is necessary to get a company secretary designated within the country before the company registration. Every company needs to have a company secretary and a director once that is sorted, it is required to submit documents to the Registrar of the department of companies. Next begins the entire process of tax process, documentation, and register with tax authorities and obtain a tax identification numbers and Inland Revenue department. Registering with labor department, obtaining EPF, ETF numbers are mandatory to start.

If you need guidance for setting up a business in Sri Lanka, ExroAsia can support with the entire process taking away your hassle. Inbox us if you need an appointment.