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Oyster General Counsel Miranda Zolot explains how to navigate the complexities of global recruiting compliance to unlock the benefits of a distributed workforce while mitigating risk through strategies and best practices.
The emergence and adoption of cloud technology continues to open the door to a more distributed workforce. Not only are remote roles attractive to employees, organizations are also realizing the benefits of hiring distributed teams, such as access to diverse talent, cost efficiencies, extended hours and cultural intelligence.
The tech industry has been at the vanguard of remote working, most often using contractors or BPOs, although these traditional non-employer models are coming under increasing scrutiny globally. This shift has led to more and more companies hiring talented people as employees. The breadth of talent is enormous and direct recruitment can be extremely cost-effective once global organizations address employment risks.
The biggest challenge comes from the complexity of cross-border recruitment. With each jurisdiction having unique rules and regulations, managing compliance is more complex than ever for business leaders.
Let us uncover tips and best practices for companies in the global recruiting legal landscape. Leveraging these insights, your organization will be equipped with the tools it needs to embrace distributed work and gain a competitive advantage in a rapidly changing and connected world.
the reality of legality
Before we dive into global recruiting compliance, here are some best practices that all multinational organizations should focus on:
- Determine your goals: Once the reasons for global expansion are identified, such as expanding into new markets, offering new services, cutting expenses, etc., the model for building the business becomes clear.
- Keep recruiting simple: There is no one-size-fits-all model for global expansion, but all companies should prioritize simplicity. For example, clearly defining job skills and eliminating unnecessary qualifications can open up a wider talent pool.
- Save as much as possible: Avoid huge law firm fees and save money where a law firm’s expertise is critical (e.g. corporate tax advice) where third-party platforms are available for employment agreements, investigations, salary benchmarks and more.
Compliance leadership
Employee-centric companies invest significant energy and resources in sourcing great talent around the world. However, many people fail to understand the importance of complying with tax and employment regulations to ensure talent is working safely in every country and jurisdiction in which they are hired.
As you might expect, each jurisdiction has specific tax considerations, and they vary widely. Consider just a few:
- UK employers must withhold National Insurance Contributions (NIC) and Apprenticeship Levy.
- In Germany, the solidarity surcharge was a surcharge to support the development of East 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 do not take the time or effort to conduct ongoing reviews of their employee contracts. As regulations change or employee roles and responsibilities change, the employer’s responsibilities will also change.
Establishing a system for regular review of employment agreements and contracts is vital to ensure they remain accurate and fair to the company and workers, while complying with current regulations.
See more: How to adapt to changing background check regulations
Type category
Hiring contractors can make a company’s talent strategy more flexible and agile. However, misclassifying workers as contractors when they perform jobs as full-time employees can result in monetary liability and penalties and increases the risk of a permanent establishment. To ensure you don’t unknowingly put your company (or your employees) at risk, it’s critical to evaluate each contractor’s role in each country.
Specifics may vary by role and region; here are some basic guidelines to assist in determining how to classify workers:
- Business intention: What is the business intent of hiring this person? If hired to complete a specific task or project, they may be a contractor. But if their role is to provide ongoing operational support, they are likely to be employees.
- period: What is the duration of the assignment for which this person is hired? Maybe they’ll fill in until you find someone full-time, or they’ll fill in during seasonal peaks. A specified term usually means a contractor, whereas a worker hired indefinitely is more likely to be an employee.
- control: How much control or supervision do you have over this worker? If you tell them when and where they have to work, that shows they are an employee and not a contractor. Additionally, if they are limited to performing services exclusively for your company, they are more likely to be considered employees.
- Integration: How integrated is this person within your organization? Do they have the same company email address and system access as full-time employees? Do they attend company social events or regular meetings? The more integrated a contractor is into the day-to-day operations of a business, the more likely they are to be classified as an employee.
When recruiting globally, seeking guidance from tax and legal advisors in each jurisdiction is the best way to ensure compliance, but in most cases it is impractical or even unfeasible to keep up with 50+ requirements in the U.S. alone Yes, this is a difficult challenge!
Technology can help fill this gap, as today’s HR and global employment platforms can provide up-to-date local knowledge to help you avoid worker misclassification and other costly compliance mistakes.
Strengthening through security
The technology that enables a global workforce can also be one of your biggest liabilities. Working in the cloud means every laptop, tablet, phone or smart device an employee uses is an endpoint on the network, creating potential vulnerabilities.
Additionally, you must consider data security and privacy regulations that apply to how your organization handles employee privacy when employees use their technology.
In addition to the technical aspects of protecting data, employers must also understand the intellectual property, privacy and data security regulations in each jurisdiction in which they operate. Organizations can protect themselves through strong contracts that lock in partnership agreements, confidentiality, non-competes, and other provisions critical to protecting the company’s intellectual property rights. SaaS tools can help ease the burden of crafting these contracts, providing up-to-date, jurisdiction-specific terms and clauses to protect you while maintaining compliance.
The workforce of the future is global
Trends such as remote working and improved technology are making the global talent market more accessible and attractive. However, as the global talent pool grows, compliance and tax regulations become more nuanced. Addressing these tax and compliance challenges will be an important part of finding, onboarding and managing employees across multiple countries and jurisdictions.
With careful planning and the right tools and technology, you can provide employees with excellent benefits and a great work experience while maintaining compliance in every region. Organizations that prioritize compliance prioritize their employees.
What steps are you taking to promote global recruitment compliance in the workplace?let us know Facebook, Xand LinkedIn. We’d love to hear from you!
Image source: Shutterstock
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