Over the last decade, organizations have seen a rise in remote working and distributed teams, often spanning countries and continents. With these changes comes the need for ensuring that your organization complies with legal, regulatory, and company policies and laws for working off-site in a remote capacity, as well as working for a company based in a different country .
Ensuring compliance is part of the foundation for growing and scaling globally. This means building a workforce where employees are treated equally and fairly, with laws around tax and payroll adhered to, and where data privacy is a priority. But while remote work has numerous benefits for businesses and employees, and is becoming more common, it comes with human resource challenges to consider.
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Why compliance matters in a remote workforce
With any business or organization, compliance with laws, policies, and procedures is a must. With a remote global workforce, compliance becomes more complex as you must be aware of legal considerations across borders.
You need to make time for reviewing labor laws, tax regulations, and cross-border regulations, considering where you’re based as an organization, as well as where your workers are based. This brings many challenges, and non-compliance can result in fines and restrictions, tax complications, and legal issues. Mistakes in non-compliance can have a knock-on effect on your reputation in the eyes of employees, customers, and stakeholders.
Remote working policies vary according to country, state, and even locality in some cases. You’ll find differences in minimum wage requirements, rules around working hours and breaks, and health and safety requirements. Your policies and procedures must hold up despite these differences and must be consistent across worker contracts to maintain fair working conditions and to avoid discrimination. This creates a sustainable model, fosters trust, and worker satisfaction.
It’s important to support your employees and know their rights and responsibilities when it comes to regulatory compliance too. Clear policies on data protection, security, working conditions, and legal rights will help align your organization and employees across borders.
Ensuring that your business or organization is compliant is key to growth and scale. These are the building blocks that you need to have in place to develop and expand recruitment initiatives.
Key compliance challenges
Being aware of the compliance challenges of running a remote business that spans borders is just the first step to keeping on top of them. It's integral that you can classify staff and stay informed about employment law, payroll and tax compliance, including the nuances in data security. With all of this in mind, it's important to choose an appropriate hiring model and technology that can support your workforce management.
Worker classification and contracts
Classifying your workforce to determine whether they work full-time or part-time and whether they’re permanent employees, temporary employees, contractors, or freelancers is vital to making sure that you’re compliant with contractual responsibilities. When you manage a remote workforce, this becomes more complex because different rules apply, depending on the location of your workers. This requires extra vigilance to ensure that you meet your obligations to avoid penalties and fines.
It’s important to bear in mind the ease with which you can carry out obligations for each classification. For example, employees generally require direct supervision, whereas contractors and freelancers are generally more independent. Weigh up the possibilities, and what classification works best for your remote work model. Each will have different rules around payment and benefits. You may also need to offer permanent employees benefits and insurance, whereas contractors don’t necessarily have this requirement. Again, it depends largely on where your workforce is based.
Employment laws and benefits
If you choose to employ your staff and add them to your payroll, you’re subject to laws around minimum wage and benefits, which typically require insurance, flexible working, and adherence to leave policies, including annual leave and maternity leave. With a global remote team, you have to consider that what’s expected of you may be different depending on where your workers live and where you, as an organization, are based.
For example, remote workers in the UK are governed by the Employment Rights Act 1996 and the Flexible Working Regulations 2014, which has different compliance requirements than the USA. It’s important that you can outline which laws apply to avoid legal disputes, as it can be particularly tricky when you have employees in multiple locations.
Payroll and tax compliance
How you pay your staff working remotely across different countries is complex and something you need to pay attention to. Mistakes here open you up to fines and penalties. You must register with local authorities to withhold taxes, so an employee doesn’t become a tax resident. You must also consider the risk of becoming a permanent establishment (PE). If an employee spends a triggering level of time working for a company based abroad, the company can be liable for corporate tax in the worker’s country.
Data privacy and security
Each country has its own rules and laws around data security and privacy, and you need to make sure that you’re compliant across borders. Understand data sovereignty laws in your employees’ countries because these dictate how much data a person can store and handle. This is important so that you don’t request that employees work outside of what is legally allowed.
As an organization, you’ll also have various data protection laws and rules around data security that must be recognized. To address this, make sure you have solid data privacy and data security policies in place. These might include encryption for sensitive information and not storing information for longer than necessary. Employee training is important, as is investing in reliable software and technology to support the process.
How technology supports compliance
Choosing the right software and technology can help you maintain compliance when working with a remote workforce. You can create standardized workflows, strengthen security, facilitate training, and manage your communications.
Opting for a single platform can reduce compliance risk and administrative strain. Global workforce management platforms, such as Deel, offer a one-stop-shop for managing payroll and taxes globally when hiring employees and contractors from across the world. Deel can automate payroll actions, handling appropriate tax reductions, helping you to save time, and avoid costly fines.
Building a compliant workforce
To make your remote workforce compliant, you need to be well versed on laws and regulations pertaining to hiring, managing, and paying staff. Staff involved in these processes need to be fully trained, and you need to create policies and procedures to ensure that everyone fulfills their responsibilities and that this is continually monitored.
As a starting point, consider these practical steps for HR and finance teams within your organization:
- Map hiring locations and local laws: Laws vary in different countries, so note all of the locations you recruit from and specific employment laws that apply.
- Define employment models per country: Laws in some countries may lend themselves to recruiting freelancers or contractors, and in other countries, where it might make sense to hire permanent employees.
- Centralize HR processes and documentation: Create and store your policies and procedures, and ensure they’re accessible to those who need them for continuity and compliance. Create data security policies and systems so that all data is secured safely.
- Automate payroll and compliance workflows: Use software to automate regular payments and deduct the appropriate tax automatically.
- Establish ongoing compliance monitoring: Laws and regulations can change. Compliance must be monitored continually, and staff must be fully trained and up to date.
Key takeaways
Managing and recruiting remote teams across multiple countries can be an effective way to find talent to grow your workforce. However, it’s important to understand the challenges that come with ensuring a remote workforce is compliant with employment laws, as they can vary so dramatically across countries.
Understanding your talent pool, researching laws and regulations in different locations, and investing in HR technology to support your processes can help you overcome these barriers.