22 Jul Do Companies Have Data to Manage the Risk, Compliance Concerns of a Global Workforce?
As digital tools enable companies to operate regardless of location and time, the workforces continue to go global. Widening their search for the best talent, organizations recognize the need to tap the global talent pool to maintain competitive advantage. But at the height of this growing global workforce, the complexities of handling compliances, risks, and wages increase present a challenge as well.
Sagar Khatri, Co-Founder and CEO of Multiplier, explains that hiring talent in an international labor market does warrant a ton of effort.
In today’s time where employees have a fair amount of influence due to social media, it is critical that organizations meet evolving wage, tax, and transparency regulations in different jurisdictions.
Failure to equip global mobility teams with sharper lenses as to where their mobile workers are situated at any given time, how they are fairly compensated, and how local labor laws and regulations are complied with would have heavy financial repercussions on the company. Not only that, this failure can potentially cause legal sanctions against the company that damages the corporate reputation.
To better understand the context in today’s business landscape, Relocate Global discusses the important data highlights in managing the risks and compliance concerns of having a workforce spread across the globe.
One of the more pressing issues is meeting the minimum-wage requirements of employees who are constantly relocating for foreign assignments. Minimum-wage requirements vary from country to country and are constantly updated in relation to a country’s economic circumstances and crucial events such as inflation rate increases.
Australians enjoy a USD14.14 per hour minimum wage rate while Canada only possesses a minimum hourly rate of USD9.06. Additionally, Luxembourg has the highest minimum wage rate in the EU with USD13.14 per hour while Bulgaria dips down to a minimum wage of just USD1.79 per hour. The US federal minimum wage stands at USD7.25 per hour. Specifically, in California, employees recently benefited from the minimum wage increase in the State
Numerous businesses are struggling to keep up with the fast-evolving minimum-wage requirements as their workforce cross borders frequently. According to a KPMG member firm research, only 21 out of 31 countries that they surveyed have a set minimum wage set at the national level.
In the EU, the European Union’s (EU) Posted Workers Directive stands as the legal framework to guide companies operating in the foreign jurisdiction within the EU. The EU Commission (EC) in 2018 revised this Directive and the updated framework must be translated to national laws by the 30th of July 2022. This updated Directive is designed to enhance posted workers’ rights protection and communicate core employment conditions that must be met for employees working in a host country including:
- Minimum pay rates
- Maximum work periods and minimum rest periods
- Minimum paid annual leave
- Conditions for hiring workers through temporary work agencies
- Workplace health, safety, and hygiene requirements
- Equal workplace treatment between men and women.
Issues from assignments
To provide better visualization of the gravity of when things go wrong with an international assignment, let’s discuss these cases. First, a Romanian company deployed mobile workers who provided services to EU clients who are operating outside Romania. The company opted to pay these mobile employees with “assignment allowances” to comply with the minimum wage requirements of the host country.
In Romania, this assignment allowance is deemed tax-free most of the time. Unfortunately for this Romanian company, a tax audit challenged its interpretation of the assignment allowance. Because the assignment allowance was utilized as payment to reach the minimum wage requirements of the host country, it resulted in the allowance as taxable employee income. This audit caused the company significant tax liability charges and penalties.
Another company having a global workforce in the UK assigned its staff in India to work on an IT project situated in the UK for about 6 months. The company decided to maintain the salary grade of its Indian workers but added allowance to level it out with the higher cost of living in the UK. Similar to the Romanian company’s case, this allowance isn’t considered part of the Indian workers’ salary. This resulted in the company’s failure to meet the UK’s minimum wage rates standards.
With all that has been discussed, global businesses should learn to gather and tap deeply into workforce data and utilize it as a basis for formulating better strategies. Timely and relevant data will allow companies to know where their employees are currently situated, what employees are doing, and what requirements need to be met.
Apart from these, employers can use workforce data to promote transparency and enable true progress in today’s gender pay gap.
Indeed, data will drive many organizations to make sound organization-wide business decisions. That’s why it would be best for them to start seeking methods on how to gather this data as timely as possible.