Employment law is constantly evolving, and companies going global need to understand the different laws present in each country in order to better avoid potential risks. Navigating foreign employment laws is a challenge, making compliance one of the most common hurdles companies face when going global. One of the most challenges aspects of which is trying to achieve employee contract compliance.
The purpose of an employment contract is to clearly articulate the terms of the employer-employee relationship and protect the interests of both parties. A strong foundation helps create a stable working relationship and puts companies in a better position to avoid challenges surrounding contract compliance. The most common of these challenges include employee misclassification, termination hurdles, and required country standards.
To achieve employment contract compliance in global markets, companies need to follow the steps below:
Step 1: Gain a Basic Understanding of Labor Laws
Employment contract requirements differ from country to country. For example, companies based in the U.S. that are accustomed to “at will employment” will soon discover that this practice is not common in other countries. Quite the contrary — most countries have very stringent employment policies, especially in regards to termination, that must be adhered to and incorporated into all employment contracts. Even a seemingly trivial mistake can open an organization up to sizable termination liability, severance payments, penalties, and more.
Beyond these straightforward requirements and other mandatory social programs, certain countries require workforce training and complex safety regulations to be written into the employment agreement. It is advised for companies to work with an in-country expert to help them craft compliant employment agreements.
Step 2: Clarify the Difference Between Employees vs Contractors
Many companies going global choose to engage with an independent contractor rather than hiring full-time team members in order to save money and avoid setting up an entity. While this alternative might seem like an easy way to save time and money during global expansion, it is commonly known for being a compliance trap. Independent contractor status is fragile, with a large number of contractor arrangements being tested in labor courts across the globe. In most cases, the courts prove that the contractor was not operating 100% autonomously, also known as contractor misclassification.
Companies can avoid costly misclassification by ensuring the team member is operating as a true contractor. This means that the person is working completely autonomously, is not given any employee benefits, does not work on a strict schedule, and provides their own office and equipment.
Step 3: Align HR Policies with Foreign Employment Contracts
It’s likely that an organization has policies in place for properly dealing with how employees are managed and engaged with. When going global, companies often struggle to translate their HR objectives in a way that is effective in global markets.
As companies move into foreign countries, it is important to adjust their employment contracts accordingly in each country. Employment contract requirements vary from country to country and companies need to begin by learning what needs to be included in their employment contracts abroad. Beyond complying with labor laws, global employment contracts need to be aware of the cultural expectations present in the country, nd learn how those will affect the way they draft their employment contracts.
Step 4: Include Supplemental Benefits in Employment Contracts
Companies need to find unique ways to attract the best employees for their team when hiring in foreign markets, and that is often done by offering a competitive benefits package. Employees today are looking for companies that go beyond compensation to offer a comprehensive supplemental benefits package that includes benefits such as additional insurance, ample time off, and educational opportunities. Companies can begin by learning what is provided by the government in their new country, what employers are required to provide, and what is expected by the types of candidates the company wants to hire. By setting up a well-structured benefits administration, a company can be better positioned to attract the best possible talent.
Step 5: Partner-Up
Companies embarking on their first global expansion can better navigate global markets by working with global employment experts that understand the challenges of going global and help ensure compliance. One way companies have successfully maintained compliance during global expansion is by onboarding team members through an International PEO (Professional Employer Organization). International PEO is a global employment solution that allow companies to efficiently and compliantly hire employees in foreign markets, without having to set up an entity right away. International PEO handles onboarding, risk mitigation, payroll, benefits, and everything that make going global hard. When trying to achieve employment contract compliance in global markets, an International PEO can help companies of all sizes meet the requirements for employment in any foreign market.
Maintaining compliance during global expansion shouldn’t be a challenge. Reach out to the experts at Velocity Global to learn how our International PEO solution can streamline your entire expansion process into over 185 countries. Give us a call today!