The GC Playbook: Compliance, Challenges, and Solutions
Discover the potential of distributed teams with this global hiring compliance guide.
Miranda Zolot, general counsel at Oyster, explains how to navigate the complexities of global hiring compliance to unlock the benefits of a distributed workforce while mitigating risks with strategies and best practices.
The advent and adoption of cloud technology continue to open the doors to a more distributed workforce. Not only are remote roles attractive to employees, but organizations also realize the benefits of hiring distributed teams, such as access to diverse talent, cost efficiency, extended operating hours, and cultural intelligence.
The tech sector has been at the vanguard of remote work, most often using contractors or BPO, though these traditional, non-employer models are becoming more scrutinized around the globe. This shift is leading more and more companies to hire talent as employees. The breadth of talent is immense, and hiring directly can be extremely cost-efficient once global organizations navigate employment risks.
The biggest challenge stems from the complexities of cross-border hiring. With each jurisdiction having unique rules and regulations, it’s more complicated than ever for business leaders to manage compliance.
Let us uncover tips and best practices for companies to traverse the legal landscape of global hiring. Leveraging these insights, your organization will be armed with the tools needed to embrace distributed work and gain a competitive edge in a rapidly changing and interconnected world.
The Realities of Legalities
Before we take a deep dive into global hiring compliance, here are a few best practices that all multinational organizations should have on their radar:
- Identify your goals: Once the reason for global expansion is identified, e.g., scaling into a new market, providing a new service, cutting back expenses, etc. The model for structuring the business will become clear.
- Keep hiring simple: No one-size-fits-all model for global expansion, but all companies should prioritize simplicity. For example, clearly defining job skills and removing unnecessary qualifications opens access to a wider talent pool.
- Save where you can: Avoid the hefty law firm bills in scenarios where a third-party platform can be used for employment agreements, surveys, salary benchmarking, etc., saving funds for when law firm expertise is critical, like corporate tax advice.
Lead With Compliance
Employee-centric companies put great effort and resources into finding extraordinary talent worldwide. Yet, much fail to understand the importance of compliance with tax and employment regulations to keep that talent working safely in each country and jurisdiction where they hire.
As you might expect, each jurisdiction has specific tax considerations, which can vary greatly. Consider just a few:
- U.K. employers have to withhold national insurance contributions (NIC) and the apprenticeship levy.
- In Germany, the solidarity surcharge is an additional tax that supports the development of Eastern Germany.
- Australian employers need to consider superannuation contributions, similar to retirement savings.
- In Brazil, employers must also consider taxes related to the 13th salary, which is a mandatory annual bonus.
Organizations often don’t take the time or effort to conduct ongoing audits of their workers’ contracts. As regulations change or the employee’s roles and responsibilities evolve, liability can also change for employers.
Establishing a system to review employment agreements and contracts regularly is critical to ensure that they remain accurate and fair to both the company and the worker while remaining compliant with current regulations.
See More: How To Adapt To Shifting Background Check Regulations
Key in on Classification
Hiring contractors allows companies to be flexible and nimble with their talent strategy. However, misclassifying workers as contractors when they’re doing the work of full-time employees can lead to monetary liabilities and penalties and an increased permanent establishment risk. To ensure you aren’t unknowingly putting your company (or your people) at risk, evaluating each contractor’s role in each country is crucial.
The specifics may vary between roles and regions; here are a few basic guidelines to help determine how to classify workers:
- Business Intent: What is the business intent for hiring this person? They might be a contractor if hired to accomplish a specific task or project. But if their role is to provide ongoing operational support, then they’re likely an employee.
- Duration: What is the duration of the task this person is being hired to do? Perhaps they are filling in until you find someone full-time, or they are supplementing staff during a seasonal rush. Specified durations typically indicate a contractor, whereas workers brought on indefinitely are more likely employees.
- Control: How much control or supervision do you have over this worker? If you tell them where and when they must work, that indicates an employee rather than a contractor. Also, if they are limited to providing services exclusively to your company, they are more likely to be considered employees.
- Integration: How deeply integrated is this person in your organization? Do they have a corporate email address and systems access identical to full-time employees? Are they included in company social events or regular meetings? The more integrated into the daily workings of your business a contractor is, the more likely they should be classified as an employee.
Seeking guidance from tax and legal advisors in each jurisdiction is the best way to ensure compliance when hiring globally, but in most cases, it’s not practical or even feasible keeping up with 50+ in the U.S. alone is a daunting challenge!
Technology can help fill the void as today’s human resources and global employment platforms can provide up-to-date local knowledge that can help you avoid worker misclassification and other costly compliance mistakes.
Build Strength Through Security
The same technology that makes a global workforce possible can also be one of your biggest liabilities. Working in the cloud means that every laptop, tablet, phone, or smart device your workers use is an endpoint in your network, creating potential vulnerabilities.
Furthermore, with workers using their technology, you must consider the data security and privacy regulations that apply to how your organization handles worker privacy.
Beyond the technical aspects of securing your data, employers must understand the intellectual property, privacy, and data security regulations in each jurisdiction they operate within. Organizations can protect themselves with strong contracts that lock down your partnership agreements, confidentiality, non-competes, and other terms vital to safeguarding your company’s intellectual assets. SaaS tools can help reduce the burden of producing these contracts, providing up-to-date, jurisdiction-specific clauses and terms that protect you while remaining compliant.
The Workforce of the Future is Global
Trends like remote work and improved technology make global talent marketplaces more accessible and appealing. Yet, as the worldwide talent pool evolves, compliance and tax regulations are becoming more nuanced. Meeting these tax and compliance challenges will be a significant part of finding, onboarding, and managing workers across multiple countries and jurisdictions.
With careful planning and the right tools and technology, you can provide your employees with excellent benefits and a great work experience while remaining compliant in each region. An organization that keeps compliance top-of-mind prioritizes its people.
What steps have you taken to promote global hiring compliance in your workplace? Let us know on Facebook, X, and LinkedIn. We’d love to hear from you!
Image Source: Shutterstock
MORE ON ORGANIZATIONAL COMPLIANCE
