The international talent marketplace allows your organization to access employees anywhere around the world. However, one concern for both clients and contractors in compliance with local laws and regulations. Meeting these requirements can not always be as straightforward for either entity.
Consequences for non-compliance actions include either employee complaints or unexpected government audits of the local entity.
In light of these factors, we have put together a list of the top five most common compliance mistakes to avoid when hiring international contractors.
1. Misclassification of worker’s employment status
A common mistake companies make is classifying their employees as independent contractors thus, avoiding the entire burden of meeting employment regulations. For most companies, this usually occurs when first hiring employees abroad and in the initial stages of interaction. When engaging in short-term work projects, this does not present an issue. However, when your contractor is a formal employee under local criteria, you must be aware of the risk of misclassification.
It is possible to differentiate between a formal employee and an independent contractor. A formal employee is one that is paid a fixed amount at regular intervals, is provided with work equipment, and is often expected to work a set number of hours. The implication is that your company would be expected to provide unpaid benefits, past-due contributions, and potential fines.
2. Violating the host country’s employment and contract laws
As a foreign employer, it is necessary to understand the in-country regulations as the local employee would be favored in any dispute or claim. Each county has its own employment and labor laws, for example, notice periods for termination, a compliant employment contract, over-restrictive non-competition clauses, and other rules designed to protect employee rights differ from country-to-country.
3. Statutory entitlements and benefits
Without being aware of the in-county entitlements and benefits, you cannot make an accurate job offer. Statutory entitlements and benefits differ greatly among countries. Sometimes, these additional requirements can mean a 50% increase in overall compensation costs. Examples of these benefits include health insurance, fully paid maternity leave, vacation leave, or mandatory pension contributions.
4. Payroll
Incorrectly running payroll or failing to make required withholdings or contributions can affect the employee’s take-home pay, social security benefits, or pension funds. Misunderstanding the in-county contributions can mean being non-compliant with payroll.
This issue can be avoided by understanding the in-country contribution list and payslip. However, this process can be complicated and time-consuming.
5. Immigration and visa requirements
The responsibility of work permits or resident permits falls on the employer. For this reason, it is important to understand if your employees are expats. As the legal employer, you have to ensure you comply with all local immigration rules. This might entail sponsoring their visa with a legal entity in-country, a task better outsourced to a third party.
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Try RemotePassTry RemotePassThe international talent marketplace allows your organization to access employees anywhere around the world. However, one concern for both clients and contractors in compliance with local laws and regulations. Meeting these requirements can not always be as straightforward for either entity.
Consequences for non-compliance actions include either employee complaints or unexpected government audits of the local entity.
In light of these factors, we have put together a list of the top five most common compliance mistakes to avoid when hiring international contractors.
1. Misclassification of worker’s employment status
A common mistake companies make is classifying their employees as independent contractors thus, avoiding the entire burden of meeting employment regulations. For most companies, this usually occurs when first hiring employees abroad and in the initial stages of interaction. When engaging in short-term work projects, this does not present an issue. However, when your contractor is a formal employee under local criteria, you must be aware of the risk of misclassification.
It is possible to differentiate between a formal employee and an independent contractor. A formal employee is one that is paid a fixed amount at regular intervals, is provided with work equipment, and is often expected to work a set number of hours. The implication is that your company would be expected to provide unpaid benefits, past-due contributions, and potential fines.
2. Violating the host country’s employment and contract laws
As a foreign employer, it is necessary to understand the in-country regulations as the local employee would be favored in any dispute or claim. Each county has its own employment and labor laws, for example, notice periods for termination, a compliant employment contract, over-restrictive non-competition clauses, and other rules designed to protect employee rights differ from country-to-country.
3. Statutory entitlements and benefits
Without being aware of the in-county entitlements and benefits, you cannot make an accurate job offer. Statutory entitlements and benefits differ greatly among countries. Sometimes, these additional requirements can mean a 50% increase in overall compensation costs. Examples of these benefits include health insurance, fully paid maternity leave, vacation leave, or mandatory pension contributions.
4. Payroll
Incorrectly running payroll or failing to make required withholdings or contributions can affect the employee’s take-home pay, social security benefits, or pension funds. Misunderstanding the in-county contributions can mean being non-compliant with payroll.
This issue can be avoided by understanding the in-country contribution list and payslip. However, this process can be complicated and time-consuming.
5. Immigration and visa requirements
The responsibility of work permits or resident permits falls on the employer. For this reason, it is important to understand if your employees are expats. As the legal employer, you have to ensure you comply with all local immigration rules. This might entail sponsoring their visa with a legal entity in-country, a task better outsourced to a third party.
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