Good recruitment translates. However, setting up in a new country requires more than clients, contacts, candidates or good practice. Recruiters need to pick their way through local legal issues and fully understand the financial risk.

When energy sector recruiter Acre Resources wanted to establish a presence in the US to capitalise on its international business, it wanted to have a consultant on the ground without the risks of starting a new company or opening a location.

Andrew Cartland, managing director of Acre Resources, told Recruiter the company is currently training an American consultant.

“We won’t open an office initially. It’s likely there will be a great deal of home working and then, once we get a grip of the market, we will start to ramp up and look at office space,” says Cartland.

Tim Smith, tax partner at chartered accountants and business advisers Baker Tilly, told Recruiter a common approach is to set up a branch or sales office, rather than establishing a separate company in a new country.

“Sometimes it’s quite speculative and it’s easier to stop a branch; if you set up a company you have all the issues of winding it down and making sure you don’t have any liabilities,” says Smith.

Any losses made by the branch can then be claimed against tax paid in the UK. As a new location will normally lose money at first because of set-up costs and the time taken to generate business; it allows the company to absorb any costs.

“A very common thing is to set up as a branch first. In the start the business will make a loss because of set-up costs. You can set them against tax and once it’s more established you can look to set the business up as a local company,” says Smith, adding that the local company can then carry the risk.

Before branches are set up recruiters can even grow business abroad, by appearing as if they have a local presence using websites, addresses and phone numbers which direct traffic back to the UK.

Anthony James, sales director at telecoms firm FLR Spectrum, told Recruiter: “You can have a presence in Australia, like a PO box, and then route all traffic to the UK [from phone calls].”

Once business has been set up, a permanent presence can be launched using the original contact details.

Often countries will stipulate that part of a business must be owned by a local national, meaning recruiters will have to source a local partner. However, if a company wants to enter a new region, business can be generated through trade visits before a permanent partner is found.

Jane Ashford, general manager of Links Qatar, which helps companies establish a presence in the country, told Recruiter: “You can’t do it on a ‘fly in, fly out’ basis, companies are not keen on dealing with someone who doesn’t have a local point of contact.”

One option is to use a company which can act as a local partner, having a 51% share in the business, without taking a pro-active management role.

“It’s a safer option and you can manage your own business,” says Ashford, adding if a local partner is chosen companies need to go through the correct due diligence process.

Adrian Treacy, European director of executive and IT recruiter Arrows Group, told Recruiter the company is doing research on an office opening in the UAE, but was hesitant to move into a joint ownership scenario after hearing horror stories.

“The problem is that someone owns part of your business. We met someone who had been in business 20 years when they [the partner] pulled out,” he said, adding if the company moved there it would probably start on a “fly in, fly out” basis to service existing international clients.

To capitalise on recruiters’ contact lists and current clients, it is essential the new location has access to the company’s database.

Cartland says: “I think it’s essential there is access to all our systems, including the database and the shared drive. The way we have set it up means there’s effectively the same system as if the consultant were sat in the UK office.”

Recruitment software often already includes the functionality to work abroad, including currency and bespoke language interfaces.

Sandy Scott, group managing director of payroll services provider SAFE Computing, told Recruiter its software is already configured to deal with other countries payroll requirements.

“For a lot of countries, for example in the US, it’s already integrated for bureau payroll, and for other countries we can develop the interface and functionality,” he says.

Databases which are hosted in the head office can be accessed through thin client technologies, which process the data locally and transmit a screen grab to a local location, reducing the amount of data which needs to be sent.

Mike Brind, operations director of recruitment software provider ITEC Systems, told Recruiter: “Normally our clients have a central server at their head office and they will use a thin client technology like Citrix to dial into their main server remotely.”

Mike Bowyer, business development and marketing manager at software provider Microdec, told Recruiter entire databases can also be replicated from location to location automatically, providing instant access and backing up the information.

“We offer replication. You can have a locally managed database which is duplicated in other regions; any time you add any data it duplicates in each location.”

Brian Sullivan, chief executive of CTPartners, which recently opened an office in Mexico City, told Recruiter IT administration is done from its UK-based headquarters.

Knowing about the local legal issues is essential for recruiters operating in new regions, regardless of whether they have established a local company, an office or simply have a sales person based in the region.

To understand the nuances of local labour law, Sullivan says the company will find a legal advisor based in the country: “We use a global network to find accountants and lawyers.”

Cartland says researching local legal issues was crucial during the planning stages, especially as the US is notorious for litigation. “The key thing is to have a good legal partner on the ground, someone who knows the US and the particular state you are in,” says Cartland, adding the company looks for firms which can provide advice on every legal issues from trademarking to tax and accountancy expertise.

A crucial part of opening a branch abroad is ensuring the company’s culture is translated to the new location. Cartland said the company had put the consultant who is opening the its branch through an intensive UK-based course. “We will immerse him in the culture. Our business space is very specific and if the way our consultants present themselves doesn’t transfer to a new office its unlikely the office will be successful.”

Recruiters have opportunities to expand overseas through new and existing clients. However, with opportunity comes risk and agencies often take a piecemeal approach to building a presence overseas. In this situation marketshare can be gained with little or no long-term financial risk.