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Today, globalisation has created a more uniform regulatory landscape across jurisdictions as international standards are adopted. That said, it can’t be denied that significant variation between countries and continents remains.
According to the Global Business Complexity Index 2019 by TMF Group, it is easier for a local firm to incorporate than a foreign-owned one. Domestic companies face an average complexity score of 4.3 out of 10 when incorporating, compared to 5.6 out of 10 for multinational firms.
When looking into the causes of complexity, four key themes emerged in the research:
- Local rules, regulations and penalty systems.
- Frequent change in legislation.
- Managing accounting and tax.
- Setting up processes to manage hiring, firing and paying employees.
Multiple sources of complexity in hiring, firing and paying employees
Zooming in on the last point, around half of TMF Group’s specialists (42%) reported that labour laws are difficult to understand and comply with in their jurisdictions.
Additionally, the mean complexity score across all jurisdictions for hiring before legal incorporation came in at a high 7.5 out of 10.
When it comes to recruiting, challenges may be faced while setting up in a new jurisdiction as well as in hiring workers from overseas.
In terms of employee benefits, some employee benefits are required by law almost everywhere. This includes minimum wage (mandated in 89% of jurisdictions), maternity leave (87%), redundancy pay (87%), vacation leave (84%), overtime (80%), and sick pay (80%).
Additionally, certain benefits are more commonplace in some regions than others. For example:
- In APAC and EMEA, a 13-month salary (a mandatory annual bonus) is required in only 21% and 16% of jurisdictions respectively. While in the Americas, this is a legal requirement in 71% of jurisdictions.
- In pension provision, a fund must be offered in 79% of its jurisdictions in APAC, compared to 63% in the Americas and 50% in EMEA.
- Additionally, some jurisdictions demand relatively unusual benefits, including transportation allowance (16%) and life insurance (11%).
Other challenges include varying reporting requirements as well as the powerful influence of unions in 29% of jurisdictions.
At the same time, managing a disciplinary process and firing an underperforming employee is complex in over half of jurisdictions, with radical differences around the globe. For instance:
- In EMEA and APAC, businesses must typically give three to eight weeks’ notice.
- In the Americas, employees can be fired with less than a day’s notice in 52% of jurisdictions.
The most and least complex places to do business in Asia Pacific
Note: The higher the rank, the more complex and vice versa.
Global rank: 2
Global rank: 9
Global rank: 20
Global rank: 25
Global rank: 27
Global rank: 28
Global rank: 42
Global rank: 44
Global rank: 46
#10 Hong Kong
Global rank: 56
Global rank: 59
#12 South Korea
Global rank: 61
#13 New Zealand
Global rank: 64
Global rank 65
Global rank: 73
The Global Business Complexity Index was compiled using research conducted among TMF Group’s specialists in 76 jurisdictions. Complexity is measured in terms of how complicated and unpredictable a business environment is – and how difficult it is to understand and operate in.
An in-depth survey explored three areas: rules, regulations and penalties; accounting and tax; hiring, firing and paying employees.
The data for each jurisdiction were statistically weighted and combined to produce an overall complexity score and ranked index.
Follow-up interviews were conducted with specialists from the ten highest and ten lowest ranking jurisdictions, exploring their business environments and investigating scores in greater detail. Experts were asked to score the complexity of several issues on a scale of 1 to 10, with 10 being the most complex. Mean scores were calculated on the same scale.
Note: ‘Jurisdiction’ means an area governed by a set of laws. A country can include several jurisdictions which, from a business point of view, are separate. For example, Curaçao is part of the Kingdom of the Netherlands but it is an entirely separate jurisdiction to the Netherlands.
Infographic / TMF Group
Photo / 123RF