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Identifying challenges in the hiring process: A look at top compliance issues worldwide

Risk & Compliance
CXC Global7 min read
CXC GlobalMay 14, 2024
CXC Global

Understanding the global hiring landscape

It’s no secret that globalisation is a continuing trend in economic, academic and commercial environments. Organisations are seeing globalisation as the key to consistent growth, diversification and financial security especially given the ability today, to hire talent located almost anywhere.

And thanks to the broad adoption of cloud-based technology a distributed workforce has become a much easier reality for companies keen to globalise. Not only are remote roles more attractive to workers, but benefits of hiring distributed teams are incredibly tangible. Benefits such as access to highly specialised and experienced talent, a diversity of workers, increased cost efficiency, extended operating hours, and the development of advanced cultural insight within the business.

According to the World Economic Forum: A global talent pool can help organizations adapt to evolving market needs and achieve higher levels of performance and revenue.

In an increasingly competitive global environment, shifting your hiring strategies across international borders is crucial for survival.

Why?

Because it doesn’t matter if your strategic planning is exemplary, no business can be prepared for certain market conditions. At a global level, think about the impact of the pandemic. Or at a local level, think about IR and workplace relations laws that tend to change regularly. But resilience can be built into your business through the engagement of a global talent pool.

Key compliance challenges overview

They key to building a successful global talent pool, is the surety of workforce compliance. And this is where organisations can get unstuck in their mission to globalise.

If an organisation fails to understand the tax and employment regulations of a remote jurisdiction, their efforts to globalise their workforce will inevitably fail. And the issue with compliance isn’t only the multitude of rules across different countries or jurisdictions. It’s also that these rules change regularly. There’s no option to set and forget with a global workforce.

Today, we’re looking at what makes the hiring process challenging for the development of global workforces and the importance of compliance to ensure your globalisation efforts succeed.

Major compliance challenges in international hiring

Navigating varied legal systems

Organisations looking to globalise their operations and workforce, are required to become familiar with the workplace and IR laws of the jurisdictions in which their workers are based. However, as is often the case, companies can be laisse faire with compliance, tax and employment regulations, breaching laws and making the engagement of remote workers untenable (or worse, illegal).

As you can imagine, every jurisdiction across the globe has differing employment laws. For example:

  • In Brazil, employers need to factor in the ‘13th salary’ which is a mandatory bonus, equivalent to an additional month’s salary (hence the name) for all workers.
  • In Germany, companies must pay a ‘solidarity surcharge’ which is an additional tax that supports the ongoing development of Eastern Germany.
  • In Australia, employers are required to factor in a minimum 10% of a person’s salary to contribute to the worker’s superannuation. This is similar to retirement savings.
  • In the UK, employers are required to withhold the National Insurance Contributions (the NIC) and the apprenticeship levy.

Not only do employers need to understand local employment laws. They must also regularly audit employee contracts to determine compliance. If the laws change, or the worker’s responsibility changes, employers can quickly fall foul of compliance laws.

Therefore, it’s crucial to set up a system for regularly reviewing employment agreements and contracts to maintain accuracy, fairness, and compliance with current regulations. This protects both the company and the employees.

Tax compliance across borders

International taxation law is one of the most complex – yet crucial – issues to navigate for organisations with a global workforce. These laws cover the regulations that dictate the taxation of income and related financial transactions, on a global scale.

Considerations for organisations with a global workforce include a multitude of factors all of which contribute to the dynamic nature of international tax frameworks. They include:

  • Residency of workers
  • The risk of double taxation
  • Transfer pricing
  • Worker classification type
  • Variations around income thresholds
  • ….amongst others

There are three main factors to consider when it comes to international taxation. These are:

The home country: This is the country where the organisation is based. The home country will impact how the organisation’s global income is taxed.

The host country: This is the country where the company’s remote operations are located, and therefore where international workers are located. The host country is also able to tax the organisation’s income.

International tax treaties: Some countries have entered into tax treaties to prevent the potential for double taxation. Broadly, these treaties determine how income is allocated and how tax is applied, between the home country and the host country.

Organisations with cross-border employees need to establish a robust plan to ensure tax compliance across both home and host locations. Ideally, this plan will include:

  • Worker education: providing the best resources to ensure your workers understand their tax obligations.
  • Offering tax support: providing support to workers to ensure they remain compliant in their tax filings. This might include connecting them with tax experts in international tax laws.
  • Compensation: working with international tax professionals to ensure salary packaging is optimised for both the employee and the employer.
  • Conduct regular compliance checks: a regular audit procedure will ensure compliance with tax obligations of your international workforce.

Immigration and work permits

Each country has its own work permit and visa requirements for new workers arriving from overseas. So, it’s critical that your organisation understands the differing requirements for getting legal authorisation for your workers to locate to another country.

And the most effective first move, is to check with the consulate or embassy of the host country.

Launching in a new market without the requisite visa and work permits, will severely slow down, or potentially end, your business expansion. Therefore, you need to understand and be very clear about your organisation’s scope of work in the host country, and what information the host country requires before expansion happens.

Managing risk and ensuring successful global compliance

Building robust compliance frameworks

Managing compliance of a global workforce requires a systematic approach, with robust checks and audit procedures. Because although the hiring and managing of a global workforce can be challenging, being exited or litigated against in a jurisdiction because of non-compliance will not only be costly, but will be damaging to your business reputation. It’s your goal to build healthy relationships with your host country.

After you’ve attained the right visas, follow these best practice strategies for maintaining workforce compliance:

Build a Human Capital Management (HCM) framework: As a multinational corporation, your HCM and data collection system will be more intricate, and complex compared to a single country operation.

For example, employees in Australia might be governed by a specific collective agreement, while workers in the U.S. could be affiliated with an industry labour union.

These variations can complicate employee management.

To tackle these challenges effectively, ensure you comprehend the types of workers and HR procedures in place at each location. Additionally, familiarize yourself with your employee data and systems, particularly if you are dealing with multiple HR, time, and attendance systems.

Be risk aware: With a more complex HCM and data management practice, compliance risks – like payroll, for example – will become more evident.

It’s a great idea to delve into the challenges typically faced by multinational organisations, in your host country. Look at where these challenges stem from, and how you can mitigate them for your operations before they occur.

What you’re doing here is recognising how to identify host locations that are high risk, and those that are less so.

Concurrently, determine if your HCM system is fit for purpose. Multiple systems in multiple locations is a complex set-up, and potentially fraught with knowledge gaps for your global HR and business leadership. Instead, one system that oversees your global workforce would simplify workforce management, while providing risk profile transparency for all host countries, in one location.

Know your limitations and work to mitigate these: Having identified areas of risk, you’re equipped with knowledge to streamline compliance processes and minimise risks associated with your expanding global workforce. Finding the right HCM system is tantamount to a global HR partner that keeps your workforce compliant, helps you maintain a low risk profile, while allowing your multinational business to expand. Let’s explore the role of technology further…

Leveraging technology and partnerships

Technology is the crucial ‘right arm’ of companies expanding globally. Upgrading and consolidating your HCM systems will not only help you maintain global workforce compliance, but also, given the regular changes to international immigration laws, a quality HCM technology stack will keep up with these changes, while supporting your payroll for all categories of workers.

A technology solution that delivers multi-faceted functionality will streamline your talent processes, help your business to maintain compliance and assist with immigration requirements. The key functionality for you to consider include:

  • Automated payroll: a payroll system that covers all the currencies of your global footprint, consolidated under one platform will provide incredible efficiencies, reports and insights to streamline your global workforce management.
  • Compliance management system: a tool to help you track all facets of talent compliance including employee training and the management of compliance documentation.
  • Compliance training: a software tool that helps companies manage compliance risk.
  • Employee management: software that oversees daily HR operations, communications, workforce updates and more.

In addition to technology, developing partnerships with a global employment organization will allow your business to round-off a watertight talent solution, in your international expansion. The local experts of global employment organisations can help you find the best talent locally, they’ll ensure the staff you hire from offshore locations are best suited to your business needs and offer broad-based outsourcing which will ultimately negate the need for sending home-country workers, to offshore locations.

Optimising global hiring practices for compliance

With the rising trend of remote work coupled with advancements in technology, global talent marketplaces are becoming more accessible and attractive for expanding companies. However, as the global talent pool changes, navigating intricate compliance and tax regulations is essential. Overcoming these tax and compliance obstacles will play a crucial role in recruiting, integrating, and overseeing employees in various countries and regions.

By implementing strategic planning along with appropriate tools and technology, you can offer your employees exceptional benefits and a positive work environment while adhering to regulations in each country and jurisdiction. A company that emphasizes compliance places its people at the forefront of its priorities.

Continuous adaption to changing international workforce rules is crucial for a successful global operation. And streamlining your compliance processes will eliminate the challenges of hiring in a globalised environment. Contact CXC today, for a local talent and payroll partner operating in over 100 countries.


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About CXC


At CXC, we want to help you grow your business with flexible, contingent talent. But we also understand that managing a contingent workforce can be complicated, costly and time-consuming. Through our MSP solution, we can help you to fulfil all of your contingent hiring needs, including temp employees, independent contractors and SOW workers. And if your needs change? No problem. Our flexible solution is designed to scale up and down to match our clients’ requirements.

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