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Many companies are expanding their talent searches for remote employees and freelancers internationally to combat recruiting challenges and gain access to a wider pool of candidates. While hiring team members from other countries offers many benefits, the process requires additional diligence compared to hiring nationally. With a thorough understanding of in-country regulations, such as payroll policies and employee classification, you can effectively grow your company internationally while avoiding fines and other penalties.
Given that employee regulations can vary between countries, here are the top four mistakes to avoid when hiring globally.
1. Misclassifying employees as independent contractors
Employee misclassification is the act of categorizing a team member as an independent contractor when they complete the same functions as a full-time employee. Since incorrectly classifying an employee can result in considerable losses in tax revenue, many countries have strict fines or penalties to ensure all members of the labor force receive the correct classification.
To combat employee misclassification, the UK government introduced IR35 tax legislation in 2000. Since this legislation went into effect, other European governments have begun implementing stricter laws and more significant penalties for companies that misclassify their employees. Be sure to review country-specific regulations before building your team.
If you need any information on how to hire an international contractor, don’t hesitate to reach out to us, and start working with G-P Contractor.
2. Disregarding statutory benefits and time off
Many foreign countries grant employees a certain number of sick, personal, and vacation days each year. Rules regarding time off can vary from country to country. Some countries allocate vacation time based on age, while others use the amount of time an employee has worked within a company.
To ensure your company complies with local rules and regulations, you should be aware of the following information when hiring remotely:
- Annual leave requirements and how this time can accumulate
- Whether service, age or other factors affect annual leave requirements
- If your company should provide more leave than the national requirements to remain competitive with local businesses
- The annual leave rollover policy
- How many sick days you must give employees and whether they should receive compensation while ill
- Whether an employee must provide a doctor’s note to accrue sick days
- Vacation bonus requirements
- Other required forms of leave and their rates of pay
3. Neglecting remote work policies
One of the best ways to turn virtual tools and international team members into assets is to set and follow remote work policies. By setting clear expectations and providing the proper documentation, you can give your international hires the support they need.
A well-designed remote work policy should be specific while addressing cultural nuances. The goal should be to keep your entire team in synch using collaborative technology that can safeguard sensitive information and consistently meet performance standards.
4. Processing payroll incorrectly
Many countries in the Organisation for Economic Co-operation and Development (OECD) use payroll taxes to fund social insurance programs; however, the imposition of payroll taxes can vary between nations. Countries with high payroll taxes may have lower caps on taxable earnings and vice versa.
Companies with international employees may also be subject to different tax rates and government assistance programs. By making yourself aware of how a local government processes payments and their taxation rules, you can help your company avoid future audits and penalties.
Request a proposal from Globalization Partners today
If you have plans to grow your business internationally, Globalization Partners can help. Our AI-driven Global Employment Platform™ streamlines and automates all payroll and HR complexities to ensure compliance with international regulations.
Request a proposal to learn how we can help your business today.
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THIS INFORMATION IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. You should always consult with and rely on your own legal and/or tax advisor(s). Globalization Partners does not provide legal or tax advice and the information is not tailored to the specific situations of your company or your workforce. Globalization Partners makes no representations or warranties concerning the accuracy, completeness or timeliness of this information. Globalization Partners shall have no liability arising out of, or in connection with, the information, including any loss caused by use of, or reliance on, the information.
