Organizations expanding globally need to be aware of compliance issues to avoid potentially costly problems that won’t just slow down their growth but outright halt it. Compliance refers to following the regulations and laws that apply to a company’s business activities. When expanding into new markets and hiring employees in other countries, organizations need to ensure they are familiar with the compliance requirements in those jurisdictions.
Ignoring compliance risks can lead to financial penalties, reputational damage, or criminal charges. Therefore, it is important for companies expanding internationally to consult with legal counsel beforehand and establish procedures for ensuring ongoing compliance.
What Is Global HR Compliance
Global HR compliance encompasses a wide range of topics and laws that impact how employers manage their workforce. Compliance risks are associated with practically every aspect of the employment relationship, from recruiting and hiring to firing and layoffs.
Employers must constantly mind these risks when operating abroad. With workers even in a single country, they may find they are subject to the legislation of more than one nation. For example, a business with employees in the United States and Europe must comply with both U.S. law (such as Title VII of the Civil Rights Act) as well as European Union law (such as the Directives on Equal Treatment).
To minimize compliance risk, employers should develop policies and procedures that address global HR issues such as equal opportunity, data privacy, wage & hour regulations, leaves of absence/disability accommodations, etc. Additionally, employers should provide training on these policies and procedures to all employees whom they may impact.
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Types of Global HR Compliance
Organizations need to be aware of three different types of HR compliance that apply regardless of where their teams are located: statutory, regulatory, and contractual.
Statutory compliance refers to meeting the requirements of the general laws set by the governing body of a country. This can include issues like minimum wage, discrimination, and minimum working age. International labor law and different regional laws that apply to provinces or states within territories also need to be incorporated into statutory compliance, mainly because, in some countries, provincial or regional laws contain specifications that differ from national ones. The HR team should know which law supersedes the other and always be up-to-date with changes to such regulations. Statutory compliance is inherently high risk. Failure to adhere can ultimately lead to criminal prosecution, and in some cases, to severe reputational risk.
Regulatory compliance rules are set by specific regulatory bodies that are often public within a region or country. These regulatory bodies set numerous regulatory compliance rules. For example, the European Union establishes various non-negotiable workplace data security mandates for its member states. Other official overseeing organizations may establish guidelines pertaining to mandatory training for particular job functions or other rules that are very industry-specific. A different set of regulations can also come from independent bodies (labor unions, for example) or privacy governance laws such as the Health Insurance Portability and Accountability Act (HIPAA), which dictates patient data rights and usage.
Contractual agreements usually contain clauses that reinforce company-specific rules and statutes or regulations pertaining to employees contracted under said agreement. For example, if a country’s statutory labor law prohibits workdays exceeding a certain number of hours, that company's employment contract would include the corresponding language specifying this limitation per individual agreement. Essentially, companies can consist of whatever they want into contractual agreements as long as it adheres to over-arching statutory and regulatory Laws where they operate.
Common Global HR Compliance Challenges
As companies scramble to keep up with an ever-changing landscape of compliance issues, HR departments face the added challenge of managing these changes while still being available to handle day-to-day workplace relationships and issues.
Cybersecurity and data protection are critical considerations with remote employees, who pose unique security and privacy risks. Businesses need to make sure they can offer a secure working environment that safeguards employee privacy and company data security. Additionally, new internet of things (IoT) and cloud networks require employees to undergo specific training on using them safely and securely.
Workplace safety is another crucial concern, especially during the COVID-19 pandemic, when many workers began working from home almost overnight. This sudden shift forced HR leaders to quickly implement policy changes around home office workspace standards or workers’ compensation claims for home-based staff, often without having all the answers.
Another area where HR teams feel increased pressure is worker classification. Businesses look more closely at how their contractors are classified to avoid misclassification disputes (which can have serious consequences). In the past, it was typically left up to department heads who were most familiar with their own needs when it came time to engage contractors or gig workers.
Physically distributed workers are another trend resulting from remote and hybrid workforces that presents several challenges for HR teams. When workers are located in different regions, it becomes more difficult for teams to enforce mandatory training or other onboarding activities since these events can no longer be completed in person. Additionally, this arrangement creates disparities between healthcare, pay equity, retirement, and other jurisdictional employment standards among different regions.
Pay equity, diversity, and worker rights have become much bigger priorities for today's employees than in the past. These various movements have even culminated in the phenomenon referred to as The Great Resignation. As a result of this sea of change in attitudes towards employment social issues, many of the world's biggest employers have had to rethink their policies — both voluntarily and due to much-needed political, statutory, and regulatory changes.
How To Ensure HR Compliance for Organizations
The biggest motivator behind ensuring global HR compliance is understanding its potential cost.
2021 was unlike any other regarding workplace litigation, with more class action lawsuits and bigger payouts than ever before. 2020 saw some groundbreaking settlements, with three of the most expensive workplace lawsuits on record stemming from executive misconduct or harassment cases. According to the annual Seyfarth Workplace Class Action Litigation Report, which has been tracking these types of lawsuits globally for 20 years, these trends show no signs of slowing down.
As we continue to see wage inequality and employee classification being the most frequent topics of litigation and settlement, businesses must also deal with a rapid increase in discrimination claims. Cases of discrimination usually result in significant financial and reputational damage, which can be difficult for a company to recover.
HR teams may feel caught up with the ever-changing compliance landscape, but no business is alone in this transition. More tools, technologies, and partners are available to help businesses stay on top of HR compliance. These advancements protect companies from risk and ensure employees feel secure and cared for. In-house HR teams can focus on innovation and growth.
Ensuring global HR compliance may seem daunting, but its most essential components can be scaled down to some foundational elements:
- Data privacy is essential for companies. The most effective HR management systems will protect employee data with comprehensive privacy controls, transparency, and compliance with the latest standards. In addition, these systems will include audit controls to foster trust and confidence.
- By globalizing payroll, companies can reduce risk and operational costs. A standardized and automated payroll process across a company's operating regions ensures that all laws, rules, and compliance criteria are updated automatically. This also allows for end-to-end processing & auditing of payroll, which is then connected to finance through a unified system. Manual sharing/entry of data (which can often be slow & error-prone) is ultimately reduced.
- Ensuring consistency in the employee experience is another crucial way that connected HR solutions can help support staff globally while reducing risks like dissatisfaction or litigation.
It’s important to emphasize that the ideal globalization and remote HR management partner can help you with all of these fundamentals nearly anywhere in the world. A partner like Skuad makes your HR processes and payroll more efficient and streamlined and fully complies with local labor laws in your preferred markets for expansion. You save thousands of dollars in overhead costs and potentially millions in damages from non-compliance.
Your Global HR Compliance Solution: Skuad
At Skuad, we make it easy for your business to stay compliant with local employment laws no matter where in the world you want to build your next team. Our in-depth knowledge of these laws takes the stress out of running remote HR and payroll.
In addition, partnering with the right HR management company can help you become more effective at virtual leadership and managing remote employees. Skuad gives you access to a pool of pre-screened and qualified candidates for open positions, which saves you time and money in the hiring process. We can also help you create policies and procedures related to virtual work arrangements that meet your and your employees' needs.
Request a demo from Skuad today.