Companies still underestimate the impact foreign workers can have on profit and turnover growth, a new study of SMEs in the Netherlands, Belgium and Poland claims.

20 April 2006

AMSTERDAM - Expat workers exert a positive economic impact, but companies still underestimate the importance they can have on profit and turnover growth, a new study claims.

The study by ING bank investigated four forms of internationalisation in small and medium-sized firms (SME) in Flanders, the Netherlands and Poland and focuses specifically on businesses involved in Industry, Transport and Logistics and Construction in each of the three target regions.

Internationalisation is defined as opening a branch in another country, foreign partnerships, expat workers and offshore outsourcing.
The results negated many prejudices, revealing the number of workers with a foreign passport in comparison with a company's total workforce remains quite limited.

Not surprisingly, of the three countries surveyed, Poland had the smallest percentage of expats in its workforce, with only 3 percent of the workers in small businesses (20 to 50 employees) are expats, compared to 5 percent in medium-sized (50 to 200 workers) businesses.

In Flanders, 25 percent of small and medium-sized companies have expats as employees, which increases to 30 percent in the manufacturing industry. Again, most foreign workers in Flanders come from Western Europe.

In the Netherlands, approximately 10 percent of small companies and 25 percent of medium-sized businesses in the Netherlands have foreign workers.

In Poland cooperation is the main form of internationalisation for SME's. Most expats in Poland come from Central and Eastern Europe, but expats who fill management functions in medium businesses come largely from western Europe reported ING.

The reasons for Polish bosses to hire expats are mainly to import skills, and, unlike the Netherlands and Flanders, low wages aren't an issue.

In Poland companies don't expect large profit growth as a result of hiring foreigners due to the low numbers of expat workers. Plus "most expats often receive a larger wage than an average Polish worker," ING said.

An unexpected finding was that Polish workers find that cultivating knowledge of the expats' culture more important than it is for Dutch and Flemish workers.

In Flanders and the Netherlands the transport and construction industry is increasingly looking towards Central and Easter Europe as potential suppliers of labour the report shows.

In the Netherlands, the lower cost associated with foreign workers is the main reason for the construction and transport businesses to 'import' workers from abroad. "SME businesses find foreign workers are more prepared to take low-skilled and heavy work for which it is hard to find Dutch people," the report said.

However, in the industry sector in the Netherlands, the most important reason for recruiting foreign workers is not cheaper labour costs, but know-how. 

In Belgium, the construction industry most often cites the cheap cost as labour as a prime motivation for its recruitment of immigrant workers, but know-how is still the most important consideration.

The report reveals that in almost 25 percent of cases, immigrants are employed because Belgians cannot do the required tasks or simply refuse that type of work. Plus a number of employers in Belgium believe that the work ethic of foreigners is better than that of Belgian employees and company managers are in general pleased with their foreign staff.

In all three countries, the overwhelming majority of the businesses surveyed are full of praise for their experience of hiring expat workers. The critical success factors, according to the participants, are communication, support of the foreign personnel, the reliability of the expats and knowledge of the laws and fiscal barriers.

"The work permit system was seen as by far the most obstructive factor in hiring foreign labour. Most employers who discussed this issue would prefer to see the permits disappear," ING said.

Restrictions imposed by the Netherlands, Belgium and other western European countries on hiring workers from the newer EU member states in Central and Eastern Europe can remain in place to 2011 at the latest.

The ING report says that when the movement of labour is freed up the net effects will not alter much: jobs may be lost in some areas, while the influx of foreign workers into a greying society will be solace in the tightening labour market.