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Labor Law Compliance and the Risks Associated Internationally

By February 25, 2016March 24th, 2023No Comments

You found your target market, and you’re ready to set up shop, but do you understand the labor law compliance? If you’ve done your homework, as we advise, then you should have a broad understanding of how to manage international employees. The problem - the laws and regulations that you may know now will change. Without assistance from an in-country expert, you may run into compliance traps that will cause big headaches for your team. Below are the issues with labor law compliance and an option that can help.

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Countries have complex labor law systems, and labor law compliance is equally difficult.

Each country you operate in has its set of labor laws that you must follow to remain compliant. For example, according to the European Commission Department of Employment, Social Affairs and Inclusion directives in the EU regulate weekly working time, 28 mandatory paid holidays and discrimination prohibitions, just to name a few. There are many complicated regulations to manage, and this is difficult for mid-size companies that are trying to manage a global expansion. The EU’s labor laws are also complicated by the Treaty on the Functioning of the European Union, which essentially excludes direct regulations on wage, dismissals, and collective bargaining according to the Foundation of for EU Democracy. The lack of direct regulations may complicate the contracts you create as an employer.

Labor law compliance is constantly changing.

Similar to tax laws in the US, labor laws are likely to change at any moment, and it’s your responsibility to a company in that market to pay attention and comply. One example of a dramatic change is in Russia. After ratifying 11 conventions from the International Labor Organization since 2010, Russia finally agreed to regulate labor issues including protection, youth unemployment, employment of disabled people and social partnerships, per a report from TASS. As a result of this treaty, employers need to adjust their contracts to meet these new standards. This is a prime example of the volatile market and its ever-changing standards that are essential for compliance. Another example is in Brazil, where employees receive an annual salary adjustment to counter the effects of inflation. Businesses can expect their Brazilian employees’ costs to rise each year. It’s not just an increase in salary either; this includes benefits, holidays and vacation pay that is determined by the workers’ salary. Things just got expensive - fast.

Termination of Employment comes with strict requirements.

In many countries, at will employment isn’t an option. You may have to give your employees ample time before terminating their employment contract. According to Practical Law, a legal resource from Thomson Reuters, employees and employers should give 30 days notice before ending an employment contract. Plus, employees are given an additional three days' notice for every year they were employed. The employer has the option of paying for this time in lieu of notice. Employees in Brazil are also eligible for severance pay, which is spelled out in detail here.

Do you have a headache? Ditch the drama with expert assistance.

Tackling the complexities of labor law compliance is tricky, but there are options to easily manage international employees. Velocity Global’s Foreign Subsidiary as a Service (FSaaS) takes care of the compliance issues for companies in 185 countries.  As a result, you do not have to manage details that we listed above and you can avoid getting caught up in any traps. The FSaaS allows you to focus on strategic development and help your team reach their goals.

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