5 compliance mistakes to avoid when building your global team

Global expansion is a tangible milestone in the growth trajectory of every company. In the last couple of years, we have seen a massive increase in the opportunities for location-independent work opportunities. As a result, businesses have been leveraging the multiple benefits of having a global team.

However, hiring across borders comes with its own set of caveats. When it comes to employment, every country has its own set of laws which must be followed strictly. Considering different technical hubs in order to build your location strategy? Don’t forget to factor in the time, cost, effort and expertise required to fulfil legal requirements in a foreign country.

Here are five areas of compliance that must be fully vetted before you start rolling out offer letters: 

Taxation laws

When hiring in a new country, ensuring compliance with its tax regime is non negotiable. We know that Income tax is a common deduction across all nations. However, the percentage can differ anywhere between 5% to 40%, depending on the country’s laws. In addition to this, there are multiple other allied taxes that employers must take into account when calculating compensation. 

For example, employers in Brazil are responsible for paying a portion of employees’ social security and unemployment tax. In Germany, employers pay taxes toward employees’ social security (unemployment, accidental and health care insurance). 

Misclassifying your employees

Many companies prefer hiring independent contractors as compared to full-time employees, as it restricts their employer responsibilities substantially. Full time employees are generally entitled to a host of benefits like pension fund, health insurance, paid time off etc. On the other hand, these benefits are not usually provided to contractors. Due to this reason, many companies choose to intentionally misclassify their full time or part time employees as contractors on their payrolls. 

However, this is one mistake that you must avoid at all costs, as this can result in hefty fines and significant legal consequences. For example, in the USA, the punishment for misclassification is $1000 and imprisonment for a year.  In Japan and the U.K., employees with a fixed-term contract automatically become permanent employees after a certain amount of time. 

Not offering statutory entitlements and benefits

While every company can decide what perks and benefits it wants to offer, there are certain basic benefits that all employees are entitled to. These range from employer’s contributions to pension funds, to health insurance, maternity leaves and many other similar aspects. In India, all female employees are entitled to a minimum of 12 weeks of maternity leave. In France, it is illegal to ask your employees to work over weekends under the Right to Disconnect law. 

There is no one-size fits all solution when it comes to identifying employee entitlements and benefits. Our advice? Draft your policies in a way that is aligned with statutory requirements of individual countries. 

Violating minimum wage/ compensation laws

We understand that one of the biggest benefits of hiring globally is getting access to highly qualified talent with affordable compensation. However, as you set about calculating compensation for employees living in a different country, you must factor in minimum wage laws. 

All over the world, over 193 countries have a list of their own minimum wages that must be complied with. India has over 1200 different classifications of minimum wage. The USA has a minimum wage for each state, as well as the federal minimum wage. What remains uniform is the strict penalty dealt out to businesses that fail to comply with these regulations. In Japan, the fine for non-compliance can go up to 500,000 Yen. 

Not meeting immigration, visa or work permit requirements

When working globally, you will often have to bring foreing nationals into your home country, or send employees to a different third country. In all such cases, you must ensure compliance with all immigration and work visa requirements. 

Some countries on the top of this list are the USA, Canada and most European countries. Individuals on a tourist or dependent visa will not be allowed to work in these countries. Moreover, non-compliance with immigration, visa and work permit laws can lead directly to deportation of the employee. For the employer, it could mean heavy penalisation and black-listing of the company. 

A global team is the solution to numerous problems, from the lack of specialised talent, to the ease of entering into any country’s local market. As you build your global team, it is important to prioritise these five factors for a seamless hiring process. 

At Talent500, we are helping global companies hire, build and manage global teams in 30+ countries by acting as their Employers of Record. We aim to transform high-impact companies by giving them access to a worldwide community of highly skilled professionals transcending geographical boundaries. Sign up here to take your first step towards global expansion!