Maintaining compliance in an ever-shifting, increasingly globalized world has its own peculiar challenges which will only grow more complex as time marches on. By understanding these top challenges, you can better situate yourself to take advantage of the opportunities they bring with them.
New Market Compliance
A 2016 study concluded that “87% of U.S. companies believe international expansion is a necessity for long-term growth.”
The Covid pandemic may have highlighted issues associated with increased globalization, but it also underlined its inevitability. We are more aware of the global supply chain than ever before, and practically anyone can interact with it in meaningful ways through the internet.
And with each new territory with which your business interacts there are a bevy of new laws and regulations – and the onus is on you, the owner, to successfully navigate them.
Tax calculations and regulations are documented in native languages, and the regulations surrounding labor vary widely within foreign markets. For instance, in Mexico, new hires must be registered with the government within a five-day window whereas in Spain such registration must be completed before employment begins.
Violations in this realm can incur immense costs.
While on-the-ground support is clearly the best scenario, it might not be scalable for your enterprise. Couple that with the rapidity with which businesses are expected to grow, and even the most experienced HR departments can feel the strain in grappling with international compliance.
While international compliance poses some obvious challenges, domestic compliance has issues all its own. Different regions and municipalities have their own laws which are being continually updated. Failure to comply with these tax deadlines can result in massive penalties and fines.
So how do you know where to focus your attention? The stakes with payroll compliance are high, and the particularities of the provinces vary.
Uruguay, Argentina, and Chile require employee signatures of pay-slips upon receipt. Overlooking this would leave you open to lawsuits for lost wages.
Italy requires an Italian bank account to pay monthly statutory tax returns. Ignorance of this fact would lead to a massive headache on the due date.
However, the legal aspect of compliance is just half the battle. Compliance failures can erode workforce morale in spectacularly short order. How long can an employee be expected to wait for their wages? A few hours? Days? Your reputation is at stake if you miscalculate.
One survey showed that 49% of American workers will be looking for a new job after just two payroll errors. Now you’re increasing recruitment allocations to fill existing positions.
International benefits policy requires careful consideration.
First, acquaint yourself with the statutory requirements in each country. Bonus points if you’re fluent in the local language as many governments will detail these statutory minimums on their websites
Here is a prime opportunity to consider your current spending on benefits. Though the U.S. requires substantial coverage from large employers, most countries have some degree of state-provided healthcare coverage. Thus, offering prime, private health insurance to global workers may prove redundant and costly.
The demographics of your workforce can also significantly shift your benefits calculus. A senior director in the U.K. may need supplemental private healthcare for their family, whereas a single salesperson in France might opt for reduced healthcare coverage and opt instead for a richer profit-sharing package.
While gender inequality dominates the headlines, so too does the definition of family and the practice of family leave.
The U.S. design of shared parental leave is markedly different from the 52 weeks shared between parents in Denmark. Considering these differences complicates more than the compliance itself, it also complicates the allocations of resources in response to cultural relationships to regulations.
The liability insurance you provide your employees will vary from country to country. Most have different schedules of resources for such insurance. However, many global organizations have begun adopting private insurance protections even in nations with established plans. This does more than appease legal responsibilities, it also addresses ethical responsibilities.
An organization’s culture should promote the well-being of everyone involved, regardless of their geographic location. Assessing insurance liabilities is a basic way to address the effectiveness of your employee protections.
Termination Policies and Practices
There are only two certainties: death and taxes. With a particular lens, terminations can fall into both categories.
Incorrectly managed terminations can be unpleasant for all parties involved.
“At-will employment” exists only within the U.S., a streamlined termination function that is not to be found elsewhere around the world. Therefore, when considering terminations abroad, there are a multitude of procedures and processes that must be adhered to if you’re to maintain compliance.
Theft or other criminal acts are simpler to navigate during termination regardless of the geography. Laws are effective guidelines for proper behavior. The difficulty comes in issues tethered to employee performance or disagreements. Different places have different requirements for legal termination of employees based on performance. Most will require documentation and evidence, and in some places, it can take up to a full year to legally terminate an employee.
There are instances where a justification can be made, but there are still notice periods and severance pay mandates that require proper attention.
Retirement and Pension Plans
The U.S. workforce is aging rapidly. While the covid pandemic coaxed some people to accept retirement, Gen Xers and Baby Boomers still make up 58% of the workforce. With this concentration of older workers comes interesting resource planning – the pensions for an anticipated exodus.
There are no hard and fast international rules about retirement age, it is useful to consider how different countries approach retirement. France allows workers to claim retirement after reaching the age of 62, but who may also gain a higher pension by working to the full-rate retirement age of 67. The U.K. recently rewrote pension laws to require employers to contribute at least 3% into an employee’s private pension scheme.
This reflects a growing global trend – statutory requirements of private businesses to allocate resources to employee pension funds.
Global HR compliance is unavoidably challenging and complex. However, by facing it head-on, business owners may be able to take the advantages presented by shifting global sentiments, winning victories for themselves and for their increasingly global workforces.
Launchways is here to support you and help you navigate international workforce compliance issues.