Some of the most common mistakes companies make when hiring abroad and how to avoid them.
2022-04-22
Ignorance is bliss, but not in all situations. When running a business, especially internationally, you should do due diligence by familiarising yourself with the laws that govern your business in foreign countries, as not knowing this could cost you a great deal. With the ever-increasing access to new and conventional ones, more regulations are being put in place, proportional to compliance risks.
Understanding Compliance Risks
Compliance risks, similarly referred to as integrity risks, are the financial, legal, and reputational dangers a company exposes itself to by failing to abide by laws, regulations, and standard practices. To fully understand and address the issues that are compliance risks, companies need to put more effort into thoroughly assessing risks because missing any could deal a significant blow to the company.
It is not a rare occurrence for companies expanding to other countries or recruiting remote workers in different regions to make some errors in the process or after the process has been completed. Some of the most common mistakes companies make when hiring abroad include:
Erroneous classification of a worker’s status
When hiring, it is essential to clarify the agreement terms to qualify the employee under the country’s local and tax laws. The status of an employee affects things significantly. As an employer, you may think you are hiring an independent contractor, for instance, but you are employing the person as a part-time employee.
It is good to carry out your research diligently and get these things straight because by making a mistake or doing this intentionally, you could avoid paying taxes and the like, which could attract severe sanctions.
Failing to grasp the local laws required to set up in a new country
When expanding globally, ensure all key stakeholders across your business understand the in-country employment and labour laws. In many countries, the regulations and governments often favour local employees over foreign employers.
Hiring local employees may require a local legal entity, a registration of your company, and a clear understanding of the local labour laws and employee rights. The lack of adequate knowledge makes the hiring process daunting for many firms expanding into new markets. One of the surest and easiest ways to get this done is to seek expert help.
A problem with employee benefits
Employee benefits differ in various jurisdictions. So, to make an irresistible offer and recruit some of the best talents, it is pertinent to understand the benefit entitlements of employees in certain jurisdictions. Some of these benefits may include health insurance, pension funds, a 13th-month salary, and fully paid maternity leave (in some European countries).
Also, it would be best if you didn’t attempt to kill all birds with one stone by dishing out the same benefits to your global workforce; it’ll only bring about catastrophic results.
Issues meeting the requirements for international employees’ relocation
Meeting and taking care of the immigration and visa requirements is tasking. The problem associated with this is failure to meet the preconditions, and the penalty is the rejection of the application. As an employer, if you desire to bring foreign employees to your home country, you automatically become their sponsor, and it is not a walk in the park.
Not adhering to compensation laws and minimum wages for international workers
It is expected to seek to hire international employees because this gives you access to an infinite pool of talent and, to an extent, reasonable compensation. However, one thing you must consider when hiring from a foreign country is that various jurisdictions have their minimum wage laws.
These laws differ on the state and even regional levels, but one thing is constant: there are strict penalties if you, by any chance, fail to comply with the laws.
Managing Compliance Risks
Making sure your business complies with the rules and regulations of the various countries you are hiring from is essential to the growth of your business. It is also crucial to know what to do when compliance risks surface.
Some of the best practices by which you can manage compliance risks include conducting a risk assessment and having a structure that carefully spells out your organisation’s duty to all the parties involved.
You must consider the parties, from the government down to the customers, and also endeavour to update the structure often to accommodate new laws and regulations that may come up. Also, you have nothing to lose by making sure your business is an ethical one where people can speak up if there are any issues.
Managing compliance risks is not an easy task, but it is something you must be done. If you don’t have the personnel or time to do the job carefully, as is usually the case, it is advisable to automate the process with our AI-Powered global expansion platform.
Final Words
Do not assume a country’s laws when hiring from there; make sure you do proper research because you may unknowingly be violating laws and creating errors for which you could be significantly penalised.
Also, in any case, where you are indulging compliance risks to escape some financial duty, desist from it because it comes back to bite. Contact us for advice and support when hiring internationally.
