Hiring and expanding overseas is becoming less of an option and more of a requirement. Especially for any company looking to make the leap from small/medium to medium/large size business. We speak with dozens of companies each week and ultimately work with many of those, and we found that there are strong common hurdles/traps around international hiring compliance that many of our clients have run into in the past before working with Velocity Global.
Here are the top 5 most common international hiring compliance traps that you should be aware of:
If you use contractors vs. employees, your Intellectual Property (IP) may not actually be yours.
- Depending on the country, IP law can vary heavily from USA. For instance, the contractual idea of “Work Made for Hire” (HERE is a great article about the differences in USA, Australia, the UK, France, Germany, China, and Japan) does not necessarily apply to your international contractors like it does in the United States. Plus, chances are your “contractor” agreement doesn’t address these issues substantially – if at all.
As a follow up to number 1, any IP issues you have internationally will not be solved by the US Government.
- As obvious as this might seem, it can also be a little tricky. Any protection you have of your IP in the US usually does not cross over to the country your contractor is in. So, unless you have the proper local contracts in place prior to bringing the person onboard, you can be in a lot of risk during termination. Long story short, the US Government does not give a _______ about your IP or employment overseas.
International confidentiality agreements can be as tricky as IP protection.
- We find that confidentiality clauses in “contractor” agreements are woefully inadequate and not customized for that country. The same language you use here in the US may simply not apply in a foreign jurisdiction. Additionally, enforcement or seeking injunctive relief can be extremely time consuming and cost prohibitive when dealing with an international contractor.
Just like the USA, Non-Compete agreements for contractors are not assumed.
- If you are not employing your contractor full time or do not have a locally compliant Non-Compete agreement, assume they are also working with your competitor and sharing information. And frankly, if they are working under a contractor agreement you must specifically state that they are free to work with other companies. This makes non-competes awfully hard to enforce.
Last but not least, tax code and employment contracts in many countries can change 180 degrees on an annual basis.
- We all have issues with the IRS, at least the majority of the rules stay within degrees of variation. In many of the developing countries we work with the withholding standards, benefits rules, termination terms, just cause, etc. can change orders of magnitude on an annual basis. There are countries where the termination term has varied from 30 days to 90 days with severance or without, all within a two year period. The onus is on you follow all these changes and ensure that every one of your hires overseas is compliant.
Thanks for reading, we hope this helped bring to light some points to be aware of around international hiring compliance. With Velocity Global’s Foreign Subsidiary as a Service (FSaaS™) solution, we manage all compliance issues.
Do you have more questions about international hiring compliance or Foreign Subsidiary as a Service (FSaaS™)? We are always happy to start a conversation.