How do I conform with international labor laws for remote employees?
Get a quick overview of the legal challenges and aspects when hiring remote teams. It’s not hard, yet we advise consultations with a lawyer.
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 seamless despite 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, if you are an employer building a global team, you should be concerned over 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 ask the right questions. You need a high quality PEO that understands 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 a 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. The list of applicable laws in the nation where your team member resides includes:
- Contract law, specifically as it applies to labor
- Work permits, if they are not citizens
- Other regulations regarding working conditions
- Taxes on employment
- Required benefits
There are no 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 is verified as eligible to work in the US and has a valid Social Security number, however, as any violations can result in large fines.
Taxes on wages are generally the responsibility of the worker. Contract workers are not subject to any requirements for benefits. One exception to this is the 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 an employee’s personal data
- Contracts negotiated for a fixed term
- Protection against 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.
Laws regarding employment in China are very flexible for contract workers. There are very few requirements, and taxes are the worker's responsibility. The contract is required to be filed appropriately with the government in order to be considered valid.
India has very complex labor laws, but most of these do not apply to contract workers. In general, protection against discrimination and unfair termination still apply to a contractor, but little else. Taxes are both the hiring company and worker's responsibility, so it is important to be aware of all potential liabilities in advance.
Navigating with a PEO
The differences between labor laws, taxes, and requirements is 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 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. 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 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 your business. It is absolutely vital to check in with your international employees from time to time to make sure they are satisfied with their arrangements.
Another key consideration is information regarding the wages you offer 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.
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 document, so you will have to get an attorney who is versed in international law to 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, along with the administration of the PEO, to make sure that nothing has changed significantly.
Global remote workforce
With all 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 continues to run smoothly.