How do I conform with international labor laws?

Assembling a team of remote workers with a global hiring strategy often hinges on the most basic questions.  How can it be done while conforming to laws in many different nations? Is it difficult? What are the best practices?

There are strategies,which make this process much simpler and even seamless despite many different laws regarding wages, taxes, and working conditions. It is important to have at least some understanding of international labor law and how it varies across different nations in order to prevent headaches in the future.

In general, however, if you are an employer building a global team you need only concern yourself with broad generalities.  Compliance with local laws can and should be handled for a small fee by a Professional Employment Organization (PEO).  Your main concern is knowing enough to be able to ask the right questions so that you have a PEO with high quality and represents a good fit with your needs from hiring the right team to keeping them happy.

Let’s get to work on what you need to know to make global hiring a success!

Overview of labor laws

If you do not have any physical presence in a nation and no local registration, most of your workers from that country will be hired on individual contracts.  While this increases your flexibility, it adds another layer of potential complexity. For this reason, the list of applicable laws in the nation which your team member is a resident includes:

  • Contract law, specifically as it applies to labor,
  • Work permits, if they are not citizens,
  • Other regulations regarding working conditions,
  • Taxes on employment, and
  • Required benefits.

There are no single international standards for any of these considerations.  Every nation has their own systems and regulations which need to be understood individually.

The United States

While every US state has its own laws regarding employment, they are generally similar in approach and scope.  Contracts with workers are largely unregulated in all states, and working conditions are up to the worker’s discretion.  It is important that each worker be verified as eligible to work in the US and has a valid Social Security number, however, as any violations of this can result in large fines.  

Taxes on wages are generally the responsibility of the worker.  Contract workers are also not subject to any requirements for benefits.  On exception to this is workman’s compensation, which in many states also applies to contract workers.

The European Union

There are some labor laws that are harmonized throughout Europe.  These include:

  • Protection of employee’s personal data,
  • Contracts negotiated for a fixed term, and
  • Protection from discrimination.

Aside from these, each nation has its own laws and standards that must be applied.  Taxes on contract workers can also include Value Added Taxes (VAT) depending on the nature of the contract.  Required benefits, such as buy-in to health care plans, can vary widely.

China

Laws regarding employment in China are very flexible for contract workers generally.  There are very few requirements, and all taxes are the responsibility of the worker.  The contract is required to be filed appropriately with the government, however, in order to be considered valid.

India

India has very complex labor laws, but most of these do not apply to contract workers.  In general, protections against discrimination and unfair termination still apply to a contractor, but little else.  Taxes are both the responsibility of the hiring company and the worker, so it is important to be aware of all potential liabilities in advance.

Navigating with a PEO

The differences between the labor laws, taxes, and requirements are the main reason why hiring a Professional Employment Organization (PEO) in each nation you have contract workers is highly recommended as part of any global employment strategy.  It is simply not possible to keep track of all of the different laws without a significant human resources staff of your own in place.

Finding an appropriate PEO can be a daunting challenge in itself, however.  Some offer full services including recruitment, contract negotiation, and compliance.  For a small entrepreneur, this is definitely going to be the best choice, even if it comes with some overhead.  

In many cases, the PEO becomes responsible for any mistakes as they are the employer or record in that nation.  This can provide an extra level of insurance should something go wrong.

What to watch for

While a PEO can take care of most of the issues regarding compliance, there are potential problems that every employer with a global hiring strategy has to watch for.

The most significant issues are how the PEO delivers pay and benefits to your team members.  If they are often late with the payments or offer a package of benefits that is not adequate, it will reflect badly on you business.  It is absolutely vital to check in with your international employees from time to time to make sure that they are satisfied with their arrangements.

Another key consideration is information regarding the wages you offer as compared to local standards.  A good PEO will inform you where your total compensation fits in the local market for workers of similar skills.  It is important to always keep in mind that while you may think of your employment as a global system, your team members are aware of opportunities locally.

Additional considerations

The services that you can buy from a PEO are often critical to any global employment strategy, especially in terms of conforming to international labor laws.  But there are other issues that have to be considered as well.

The most significant for any technology company is a non-disclosure agreement which conforms to the prevailing laws of both your nation and your employee’s.  Similarly, a non-compete clause might be desirable, although these are generally impossible to enforce.  It is rare that a PEO can provide such a document, so you will have to have an attorney who is versed in international law provide this separately.

It is also important to note that currency fluctuations can be a significant problem for wages across borders.  The most important consideration for this is to simply check in with your employees on this, along with the administration of the PEO, to be sure that nothing has changed significantly.

Global remote workforce

With all of these considerations, assembling a global team can seem like a great challenge.  International labor law can be complex, but the process is greatly simplified with an appropriate PEO in each nation you have workers.  

With the right team, the right contracts, and the right PEO to administer them your job comes down to making sure that everything is continuing to run smoothly.  It is not difficult, given a general understanding of the issues, and the potential rewards are many.

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