There has been a dramatic rise in companies hiring remote international employees: employers’ needs are a driving force, as are the availability of new online remote work platforms.
Many employers are now able to hire the best talent from anywhere in the world, which helps make companies more competitive. And employees are able to expand their formerly narrow employment options by looking to a diverse global network of potential employers – allowing them to start working remotely internationally.
Despite the fact that there are many benefits to companies in hiring remote staff, there are also many challenges and risks. However, many of which are not fully considered. To be compliant in their hiring and labour law practices, employers that hire international remote staff often face a plethora of complex legal liability and other risks which they need to address before hiring.
There can be severe consequences for non-compliance when it comes to hiring staff. This can include criminal liability, fines, penalties and other reputational risks.
Below are some of the most common risks when it comes to hiring international staff. It’s important that companies are aware of these risks and have taken reasonable steps to protect themselves and ensure legal compliance when hiring in foreign jurisdictions.
Some of the most common risks are connected to the misclassification of staff as independent contractors, payroll non-compliance and global compliance issues regarding local HR and labour laws.
Legal Risks to consider when hiring remote international employees
While the future of remote work is abuzz with new trends and many countries are offering digital nomad visas to make it easier to work from anywhere, there are also many legal risks to hiring remote staff. These risks need to be considered when hiring remote international employees, to protect against liability, fines and penalties – and to ensure fairness and equity when hiring.
Below are some of the mistakes that employers can avoid by proper planning and risk assessments into the legal implications of their hiring practices.
1. Immigration implications of hiring remotely
When you hire employees, they must have the legal right to live and work in the country they’re in. It’s typically the onus of the employer to check that their staff do have the correct documentation to work there. There can be criminal liability for employers who breach immigration rules, as well as fines.
For employers hiring staff who are working remotely internationally, some of whom may be digital nomads, it’s also important to note that business visas don’t automatically grant people the legal right to work in a country.
That’s why it’s important to ensure that your staff, if they are moving to another country, have the correct visas that allow them to legally work there.
2. Remote employee rights and labour laws
It’s important that employers are aware that when they hire staff in different countries around the world, that those staff members have employment rights under those countries’ laws that may differ from the employers’. And these rights can’t be cancelled through a contract – and some of them may be internationally applicable laws.
The types of rights that employees have, which may differ from country to country, include things like notice periods, severance pay, how long staff can take for paternity or maternity leave, how many mandatory days vacation are due each year, how many hours a day can be worked at maximum, laws around sick pay, protection against discrimination in the workplace, and even laws prohibiting termination of contracts during the pandemic.
For example, in certain countries it’s prohibited to have any kind of probationary period when hiring staff. And in other countries, there are certain time limits to probation periods that differ based on your job level. And when it comes to terminating a contract, some countries entitle staff to severance pay packages, while others do not.
And when it comes to practically wanting to enforce any contractual obligations against an employee in a different jurisdiction or country, that can be very challenging. Not only is the distance an issue, but the differing legal systems (and sometimes different languages) will require the employer to hire a local lawyer to navigate the applicable laws.
And then there are some contractual agreements that may not be able to be upheld as intended. For example, if your employee leaves the company and had signed a non-disclosure or non-compete agreement, these may not be enforceable in other countries.
For employers who have many staff members in one country, it can be an option to then open a branch in that country to help ensure compliance with local laws. That can be very costly, so it’s mostly only large multinationals that can afford to do this.
Tips: It’s critical that employers ensure legal compliance when hiring staff in foreign jurisdictions. Having a written and signed employment contract is the first step. When you draft these contracts, be sure to do your homework and find out about local laws in the country you’re hiring staff from and adjust each contract accordingly. Or hire a lawyer who can properly advise you when drafting your HR contracts.
It’s also important to get rid of all the legal jargon when drafting these contracts so that they are easy to understand, and to ensure they are written in a language that you and your employee both understand – otherwise they may not stand up if challenged in court.
3. Compliance with employee benefits, health care and compensation requirements
Employers of foreign remote workers also need to check that the benefit plans in terms of health insurance, pensions schemes and contributions, and other benefits will be applicable to the foreign employee.
For example, if you contribute towards an employee’s pension scheme in the country where your company is based, will your staff in foreign countries be able to access that one day? And what are the tax implications for employees?
Employers will also need to figure out what the correct tax procedures are when paying salaries, and whether international double taxation agreements are in place and how those affect company liability.
And yet another important consideration is that of medical and life cover for employees. If employers offer medical cover as a benefit, and later find out that they are not covered by their scheme for employees living outside of their country – then they could be liable for significant costs.
That’s where taking out a global health insurance for remote staff, can help to ensure that all staff members receive medical cover no matter where they live.
SafetyWing’s specialised remote health care insurance makes it easy for companies to add their remote employees to their plan at any time, whether they are full-time or working on contract – and they offer comprehensive plans with customizable add-ons.
4. Not complying with international wage and benefits laws
Every country in the world has its own unique HR-related laws that cover topics like minimum hourly salaries and benefits for employees.
That’s why when it comes to hiring remote international employees: employers need to be aware of the laws and regulations of the countries in which their staff are living and working, or domiciled. That is so that they can ensure they’re paying competitive and legal salaries and benefits to all staff members and complying with local and international labour laws.
Some companies choose to hire foreign staff working in locations where the cost of living is less and so companies can pay less.
However, it’s important to be equitable when hiring staff – but it can be challenging to figure out an equitable compensation policy when your staff live around the world. Some companies opt to pay staff based on the cost of living where they are based, which means that people doing the same job in different cities can get paid highly varying salaries. Another option is to pay value-based salaries where everyone gets the same no matter where they live.
Tips: Ensure that you comply with minimum wage laws in countries that you hire staff from. For example, check whether there’s a legal requirement to pay an annual bonus or not – in some countries it’s actually mandatory and in others it’s expected as the norm.
You’ll also need to figure out what your legal requirements are in terms of providing benefits to staff in other countries. Check where there are laws around paid sick leave, pension scheme contributions, and health care.
5. Corporate Insurance
Corporates will need to check whether their legal insurance covers them and their staff members who are living overseas. For example, will your company’s public liability insurance protect you against a claim in a foreign jurisdiction? Or do you need to take out additional cover there?
And will your employer’s insurance plan cover staff overseas in the case of an accident or repatriation?
It’s critical to assess your regulatory risks associated with hiring foreign staff so that you can take measures to be fully covered for all eventualities.
6. Compliance with international public health laws
The pandemic has brought the employer’s legal responsibilities in the workplace with regard to health and safety into the fore.
Even if a foreign employee is working from home, there may be a legal duty on the employer to ensure a safe workplace and this means that employers need to do thorough risk assessments. This can help employers to see what they are required to do under local and international law, and what the implications could be of breaching this duty.
7. Misclassification of employees’ work status under local laws
Employers commonly fall into the trap of thinking and assuming that by hiring foreign-based staff as independent contractors, that they can avoid any foreign employment laws.
However, that’s not always the case. If a company hires someone as a formal employee and pays them a fixed salary at regular intervals and expects that they work a set number of hours a day – then there may be a legal expectation under local laws that the company should pay benefits and other contributions. In other words, they may have erroneously classified as a contractor when in fact they are an employee.
And companies that make this mistake could be audited and fined. They may need to repay the workers’ unpaid overtime and to make up for not paying according to minimum wages.
That’s why it’s important that companies are clear from the outset as to whether they’re hiring employees or contractors – checking with laws applicable in the employers and employees jurisdictions before deciding.
8. Using a work contract that’s not legally compliant
When a company hires international staff, they will need to ensure there’s a well-researched and legally compliant employment contract in place.
But creating a compliant HR contract can be challenging. That’s because the company will need to know the local laws applicable in the jurisdiction where the employee is based. And that also requires figuring out whether the new hire will be classed as a contractor or formal employee.
There are also a range of other HR, payroll and tax laws to take cognisance of when drafting a work contract. For example, if the company pays their staff who are working remotely internationally, using an international money transfer site, then they may be in breach of employment laws. And in some countries, the law requires that payroll managers get staff to sign their payslips when they receive them. Again, if that isn’t being done, your company could be in breach of local hiring laws.
It’s clear that each country has their own specific legal requirements when it comes to hiring, staff, paying wages, how often and when staff should be paid, how and how much taxes to pay, and how to classify staff as contractors or full-time staff.
9. Risk of payroll non-compliance
To ensure that your company is compliant when doing the payroll, you’ll need to check the applicable regulations in both your country and your employees.
If the payroll is not done correctly, this can seriously affect how much an employee can take home in wages each month, their retirement savings, and also their health and medical benefits.
Payroll also affects how much tax is due in your country and your employees – and ensures that the correct amount of tax is withheld.
Therefore you’ll need to check the legal requirements around paying bonuses and benefits (including healthcare), how payments can be made, and how to handle currency conversions when paying salaries.
Final thoughts on hiring remote international employees
When it comes to hiring remote international employees: employers’ needs are often the motivating factor. Employers are keen to access the top international talent to ensure optimal performance, skills and competitiveness.
But there are also many challenges to hiring staff members that are working remotely internationally. And while employers often focus on the benefits of remote staff and common remote work security risks, not enough attention is always paid to employment risks.
It’s critical that employers are aware of their legal obligations when it comes to remote staff and that they conduct a thorough risk assessment to ensure compliance with all applicable laws.