What is global HR compliance?
Global human resources (HR) compliance is the process of ensuring that your business or organization follows labor laws, policies, and regulations in every state, province, and country where you have employees.
Companies that expand overseas often partner with an EOR service like Via to ensure that they maintain compliance while hiring abroad.
Why is global HR compliance important?
When businesses expand globally and begin onboarding workers in new countries, maintaining compliance becomes more complex. Your global human resources team will need to ensure that employees are onboarded, managed, and offboarded by each country’s unique employment laws and policies.
To avoid penalties and costly lawsuits, employers need to have local experts who know the ins and outs of their country’s HR processes for payroll, payments, and benefits. Local experts can help you understand each country’s federal regulations, as well as state or provincial laws and policies.
What role does HR play in maintaining global compliance?
HR is responsible for establishing processes for recruiting, onboarding, paying employees, and administering benefits that follow all legal obligations, including employment regulations in every state, province, and country where the company operates.
For companies that are looking to establish a business presence across borders, your HR team is responsible for helping to build out a local HR function in the new country, or partnering with a third-party provider to manage all local processes compliance.
Types of compliance
Human resources departments are responsible for different types of compliance.
International labor law.
The International Labour Organization (ILO) has set standards for various countries across the globe. Participating countries must follow certain rules (Conventions), while other guidelines are recommended as good business practices (Recommendations).
Above all, the ILO guarantees protection from discrimination based on gender, race, and parental status. The ILO also states that citizens of participating countries have the right to work.
In-country compliance.
Working hours, retirement age, minimum wage, health care access, taxes, and other regulations vary from country to country.
As companies expand across the globe, they are responsible for ensuring that their human resources team is closely following country-specific policies, no matter how trivial they might seem.
Data compliance.
Remote work has made data compliance more challenging. Data regulations such as the GDPR in Europe and CCPA in California ensure that employees have a certain set of rights when companies share their data with third-party providers. Because of this, HR departments need to ensure that every platform and software they use is compliant with the latest data rights legislation.
Statutory compliance.
Local, state, provincial, and federal governments set regulations that each employee must follow at work. Otherwise, they could face criminal charges. For companies, this means following laws related to minimum wage per hour, anti-discrimination policies, and minimum working age.
Statutory compliance varies from country to country, and even from state to state. For this reason, it’s crucial that your human resources department has a firm knowledge of local employment rules in every country where your company operates.
Regulatory compliance.
Government organizations acting as regulatory bodies set specific labor rules in each country. In the United States, OSHA, or the Occupational Safety and Health Administration, is responsible for setting rules for a safe and discrimination-free workplace. Regulatory bodies help keep each employee safe from hazards (such as poison) or accidents (such as car crashes).
Companies that expand across borders need to ensure their business practices are compliant with regulatory rules, or they could end up facing lawsuits or criminal charges.
Contractual compliance.
Whether you’re employing freelance workers, consultants, or full-time employees, your human resources team will be responsible for ensuring that your company is compliant with the entire agreement, including bonus pay, severance, and employee stock options.
Internal compliance.
Each country has its own internal policies, which build on regulatory and statutory rules. HR usually creates the policies and puts them in a manual. It’s HR’s responsibility for ensuring that the manual is regularly updated to reflect new rules. They should also alert the team of any changes as soon as possible.
Benefits compliance.
Each country has its own rules surrounding key benefits, such as health care, parental leave, paid time off, and sick leave. For companies working across borders, it’s essential to have on-the-ground experts to understand what is 1) mandatory and 2) what is recommended to recruit the best talent.
For example, in Canada and Mexico payroll taxes cover health care. However, businesses can cover private insurance on top of the government healthcare, which is a good way to recruit top talent.
Recruiting compliance.
As companies build their teams, they need to make sure that they adhere to regulations surrounding recruiting. Colorado state law, for instance, requires employers to post the salary range for a role. So companies that recruit in Colorado should plan post salary ranges in all of their job descriptions.
Training compliance.
Management needs to ensure that all employees are compensated fairly for training, and that they receive all of the information they need to succeed at work.
Common HR compliance challenges in the workplace
Missed or incorrect payments. Delayed payments, payments in the wrong amount, or payments in the incorrect currency are, technically speaking, not compliant.
As you build out your payroll function, you want to ensure that both every full-time employee and contractor are receiving their payments consistently.
Adherence to working hours.
Some countries have strict rules that regulate how many hours a day, or how many days a week employees can work. French law requires a 35-hour maximum workweek, while Colombian labor law calls for a day of rest after 6 days of working.
Incorrect deductions.
Taxes, including social security and pension contributions, vary from country to country, with local state and provincial governments also levying their own taxes. It’s important that companies have the right deductions set up so that they can avoid paying penalties or back taxes during tax-return season.
Paid training.
If you’re onboarding a full-time employee, it’s crucial that you pay them for their time during training. This includes teaching them how to use your tech stack, onboarding them on your platforms, and running through human resources basics.
Breaks for meals.
Most countries require companies to give their employees a break to eat. These breaks can range anywhere from 10 minutes to 1 hour, depending on local labor laws.
Discrimination in the hiring and recruiting processes
When building your team, it’s important to avoid engaging in discriminatory hiring practices, such as favoring candidates based on race, class, or gender. Many companies work with third-party diversity consultants to ensure that their hiring practices are compliant with non-discrimination policies.
Misclassification.
As companies expand, many of them cut corners and hire workers that should be classified as a full-time employee, as a contractors. Why? Because the paperwork for onboarding contractors abroad is much simpler than the process for onboarding full-time employees in a new country. Misclassifying an employee can come with heavy penalties. To avoid this, many businesses partner with an EOR service like Via to ensure that full-time employees in countries around the world receive the benefits they deserve.
Harassment.
Management is responsible for ensuring that employees do not become victims of harassment of any kind, including sexual harassment.
How companies can keep up on workplace compliance
With so many compliance challenges popping up every day, human resources teams need a plan.
Creating an HR compliance checklist
For many companies, creating an HR compliance checklist is a crucial step. Some items on the checklist might include:
Recruiting practices
Diversity and inclusion
HIPPA and health records
Accommodation for disabilities
Sexual harassment prevention
Employee benefits and compensation
Onboarding process
Background checks and drug testing
Training materials
Why companies partner with an EOR to maintain compliance abroad
For companies that build their own entity, global HR needs to align with local HR on local employment laws, as well as local data privacy laws.
Navigating a new country’s federal and local labor laws can be a daunting task for employers looking to expand globally. The paperwork required to launch an entity or subsidiary in a new country can take months to complete.
You will probably need to register with a number of government institutions, hire a team of on-the-ground experts, open a bank account in the new country, secure a local address, and wait up to a year for final approval.
Because setting up an entity can take months, if not years, you run the risk of missing out on top talent. And once you have your entity up and running, it's your responsibility to ensure that HR processes remain compliant. Labor laws can change without much notice, and employers are expected to respond immediately or face potential legal repercussions. This is especially true after Covid-19.
Partnering with a PEO or Employer-of-Record Service to manage HR compliance
For companies looking to build strategic hubs in foreign countries, establishing and maintaining foreign entities can interfere with the process of running the company, launching new products, and offering services to customers.
To make global expansion more cost-effective and efficient, many companies choose to partner with a professional employer organization (PEO) or employer-of-record (EOR) service. With a PEO, companies usually enter into a joint-employment relationship. This usually means that your company is responsible for certain HR processes and maintaining some presence in the country.
As an alternative to choosing a PEO, many companies partner with an employer-of-record (EOR) service, like Via. Companies that partner with Via recruit and build their own teams, as well as maintain complete control over their employees’ intellectual property.
With Via as your EOR, you can hire full-time employees without maintaining a physical presence in the foreign country, opening a foreign bank account, or registering with relevant government bodies.
FAQ
What is an HR compliance checklist?
An HR compliance checklist helps the human resources department make sure that they are meeting all of the requirements for an upcoming audit. In general, businesses perform an audit once or twice a year to ensure that companies have best practices in place for processes such as compensation, benefits, and onboarding.
How do you ensure HR compliance?
To ensure HR compliance you need to hire a team of experts that understand the labor laws and policies in the state, province, and/or country where you are hiring. Once you have experts on your team, you should:
Create documents that outline HR procedures
Keep up on any sudden changes in the law
Make sure each employee understand what is required of them
Are HR and compliance the same?
HR is responsible for ensuring that processes such as payroll, recruiting, onboarding, and terminations remain compliant, so technically speaking, HR and compliance are not the same.
What are HR compliance questions?
When hiring members for your HR department, it’s important to ask them about their previous experiences with compliance, such as:
How do you manage a termination compliantly?
Can you name one example of how compliance changes for an employee in California vs. an employee in New York?
What is considered discrimination in the hiring practices?
How do you maintain compliance with remote work?