At a time when stateside workers are hard to find, global hiring presents a tantalizing opportunity for U.S. employers. Yet hiring talent abroad can be difficult to navigate. Already complicated decisions about whom to hire become more complex when international labor laws are at stake. Differences in mandatory benefit contributions, employee contracts, and business registration requirements can make anyone’s head spin.
And it’s missing the minute details that can get companies into trouble when hiring global employees and contractors. Even though international labor laws can often be tricky to decipher, there are some basic factors companies should consider. Before you give up without even trying, let’s discuss four things to keep top of mind when it comes to compliance.
1. Payroll Requirements
Businesses that only hire locally know that domestic payroll requirements are challenging to manage. Bringing employees from other countries on board means compliance becomes more elaborate. To start with, your company usually needs a legal entity to onboard workers who live in another country. Establishing a local entity and going through a nation’s registration process could take several months or longer.
Fortunately, you can work with an employer of record service that hires international employees on your behalf. An EOR handles global payroll and becomes the legal employer. With an EOR, your business doesn’t have to set up legal entities in each country you want to hire from. The EOR helps you comply with separate countries’ labor laws, including payroll withholdings and contributions.
These include employee and employer contributions to national healthcare programs, retirement plans, and disability benefits. Since withholdings and contributions typically vary between nations, keeping track of everything can get complicated fast. It’s easy to overlook differences between your business’s required contributions for one employee in France and another in Australia. Working with an EOR ensures everything’s kept straight.
2. Employment Contracts
Because of at-will employment laws in the U.S., some businesses might be unfamiliar with employment contracts. However, at-will employment doesn’t exist in most other countries. Instead, organizations must draw up employment contracts according to each nation’s standards.
Certain criteria can dictate the language in which a business writes the contract. An employee’s hourly pay or salary may need to be in the country’s local currency. Other details of the employer-employee relationship, such as a job description, might go into a written contract as well.
For example, employee contracts in Germany must include start dates, the length of any probationary periods, and annual holidays. Additional crucial details, such as termination procedures and work hours, are also written into that country’s employee contracts. Becoming familiar with a nation’s contract requirements and including them in written documents is essential for labor law compliance. This includes following any laws relating to termination and dismissal.
3. Independent Contractors vs. Employees
Not all businesses begin their global expansions by hiring full employees. Some venture into international waters more slowly or on a trial basis. Collaborating with independent contractors in other nations is a typical way to do this. Freelancers or contractors can provide local expertise and insights to companies that want to explore and test global markets.
Other businesses may need skill sets on a project-by-project basis, and the perfect candidate happens to live across the globe. In these cases, bringing the person on as a contractor may be more cost-effective and efficient. Be aware, though, that worker classification laws can also vary between countries. Hiring and paying someone as a contractor means companies need to know the difference between freelancers and employees in each nation.
Businesses can’t simply rely on their knowledge of U.S. worker classification laws. In some countries, classification laws can be obscure and may require assessments on a case-by-case basis. Sweden, for example, does not clearly define what legally makes someone a contractor versus an employee. Contractors in Sweden usually determine their work hours, but that’s not all there is to it. While there are general factors to evaluate, businesses must consider each case’s particular circumstances.
4. Working Conditions and Norms
In the U.S., it’s not uncommon for some employees to work over 40 hours a week. It’s also typical for some employers to email, text, or call workers after hours or on weekends. These practices may not be accepted — or even legal — in other countries. Unions and collective bargaining agreements might also govern global employee-employer relationships in ways you’ll need to take into account.
This includes maximum weekly and daily working hours and overtime schedules. Employees in other nations may work less than 40 hours a week or max out at 40 hours. Overtime could be against the law for specific positions and industries. Companies might also have to grant a certain amount of paid time off, including lunch breaks, holidays, and vacations.
Knowing the norms and standards in the countries you hire from is critical to compliance and the employer-employee relationship. While it may be unusual for U.S. employees to take a two-hour lunch, this might be the norm in Italy. Reprimanding staff members for following these customs can violate collective bargaining agreements and damage relationships. It’s best to double-check your policies to see whether you need to adjust them for specific countries.
Acing International Labor Law Compliance
From a compliance perspective, hiring international workers is an entirely different ballgame. The more countries you hire from, the more complex it can get. Even so, onboarding employees or contractors from one nation can be just as complicated.
Vast differences between payroll requirements, employment conditions, worker classification laws, and standard working conditions make small details important. Sometimes the idea of navigating the specifics makes companies think twice about hiring internationally. But cutting your business off from rich sources of the talent you need isn’t the answer. Working with an employer of record is an effective way to remove barriers and make compliance seamless.
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