Businesses that are entering new markets need the right talent to reach their goals, but there are many laws and regulations HR leaders must follow as they hire and onboard employees in other countries.
Having the correct systems in place to maintain compliance is key to recruiting the right talent, maintaining effective employee relations, and succeeding in new markets. It’s vital that you fully understand HR compliance to assess whether your company has enough safeguards in place, or if there’s room for improvement.
What is HR compliance?
HR compliance is the process of creating policies and procedures that ensure your employment practices are carried out in accordance with applicable laws and regulations.
The consequences for noncompliance with these laws include fines and penalties, reputational harm, wasted resources, legal action and, ultimately, failure to enter global markets that are essential to your company’s growth.
What is the role of HR compliance?
Because HR compliance is so essential to your business’s global success, it has to be more than just an afterthought. It needs a seat at the table even when larger business decisions are being discussed. Business leaders across your company must be aligned on the role of HR compliance.
HR can actually help drive your expansion strategy. There are many HR-related factors that contribute to your company’s viability in new markets, including your legal obligations related to areas like wages or taxes. For example, if you are choosing between two markets, HR may be able to influence the decision by showing how human capital costs compare between the two.
Ultimately, you need to know everything that goes into HR compliance to gain a full picture of what your expansion into a new country will look like.
HR compliance checklist
To get you started, here are a few items that fall under your HR compliance responsibilities:
Every country has different minimum wage and overtime laws you must abide by. Bonuses may also be mandatory in some countries in the form of 13th month pay, but you should understand the common practices regardless.
Employers must often follow certain recordkeeping requirements related to pay, and even pay frequency may be regulated. For example, some laws stipulate that paydays must not be more than 16 days apart.
Companies also must ensure they are withholding and paying the correct employer and employee taxes. These taxes may cover income, retirement, Medicare and unemployment.
Employers must provide various forms of paid leave to employees. These can include sick leave, maternity and paternity leave, medical leave and vacation leave. The amount and conditions of the leave will vary by country.
Employers that collect personal employee data of EU citizens must follow GDPR (General Data Protection Regulation) rules. GDPR HR compliance requires employers to take certain measures when it comes to the collection and storage of employee data. Employers must receive permission to use this data and be transparent about how it’s used. They must also have procedures in place to handle data breaches or data access requests from employees.
When employers make a job offer, they draw up an employment contract that covers terms like salary, bonuses, leaves, working hours and benefits. These contracts are verbal, written or implied and may be for definite or indefinite terms. They can also include clauses like non-compete, non-solicitation and non-disclosure agreements. Employers must research their country’s requirements before drafting a contract.
Termination and severance
Most US employees are employed “at will,” meaning they can be terminated at any time with or without cause. However, other countries require employers to meet certain requirements or obligations before they carry out terminations. For example, they may need to terminate employees by mutual agreement or provide a notice period. Severance requirements also vary by country, but this is another area where it’s beneficial for employers to understand the best practice.
In the US, the Affordable Care Act (ACA) requires employers with 50 or more full-time employees to offer health insurance as part of their benefits package. In other countries with universal healthcare systems, it can be common for employers to offer private supplemental insurance to attract quality employees.
Benefits of compliance outsourcing solutions
Employers have a few options when it comes to managing their HR compliance. They can perform the work in-house, which is difficult for HR leaders who are unfamiliar with local labor laws. This is even more challenging when you consider that three-quarters of HR executives believe that the regulatory challenges of hiring, paying and managing employees are increasing in complexity, according to an ADP survey.
Companies can also seek legal consulting, but this is time-consuming and expensive and may not encompass everything you need to know about local markets.
Many businesses choose instead to outsource some or all of their HR functions to avoid the pitfalls of HR compliance and gain the expertise of professionals who are equipped to handle compliance in multiple countries. Here are some of the benefits:
- Local expertise and market insights. An outsourcing partner will have in-country experts who have local market insights on cultures, customs and languages that you might otherwise lack. These insights can be instrumental to your success.
- Cost savings. Businesses often save on administrative and headcount costs with HR outsourcing. You’ll also free your in-house staff to focus on core business functions and strategic activities.
- Faster speed to market. By outsourcing HR functions to a trusted partner with local expertise and processes already in place, you’ll ultimately be able to enter new markets faster and get your employees from hired to onboarded in a fraction of the usual time.
- HR technology. Outsourcing partners often have their own payroll or HRIS technology platforms that increase efficiency, streamline processes, and save you further in time and money.
How we can help
Elements Global Services offers a variety of HR consulting, outsourcing and technology solutions for companies that want support with their HR compliance. These options include an Employer of Record (EOR) solution, where we become the legal employer for your employees and assume all HR compliance responsibilities, while you retain control over day-to-day operations. Contact us here to learn more.
About Elements Global Services
Elements Global Services is an award-winning HR technology and services company. We provide employment solutions in over 160 countries – covering everything from payroll, benefits, legal & compliance to visa & mobility. Headquartered in Chicago, IL, we have a global network of offices and employees delivering innovative solutions to our growing customer base. With our Direct Employer of Record model, we help companies expand, onboard, manage & pay employees worldwide.