HR departments across multiple industries adjusted quickly to the pandemic. They managed shifting consumer demand, which impacted hiring and business models, and they adapted to remote workforces. As the pandemic continues, remote working is now “table stakes” for workers, not a rare luxury. As entire organizations adopt remote working, they lose a corporate headquarters. There’s no centralized place where workers gather. While this at times can impact collaboration, it does provide firms with access to a global labor pool and more flexibility to move workers from one locale to another. With this global workforce and free movement, there are also various compliance and tax challenges for employers.
European Union Rules for “Posted Workers”
Within the EU, employers sending and hiring workers to other member countries means complying with the Posted Worker Directive. First created in 1996, the latest version of these regulations went into effect in mid-2020. They add requirements for employers to keep better track of their traveling workers, which includes providing more documentation to local agencies that manage labor.
Failure to comply with the directive means fines and other penalties, so employers spend time and resources trying to manage their workforces to remain in compliance. With millions of workers moving between EU countries every year, companies and HR departments often struggle to keep track of these workers. They need to manage their location, meet various document deadlines, and handle other related processes that require manual tasks and detailed organization.
It should be no surprise that the Posted Workers Directive can become convoluted when an employer plans to send their employees to an eligible country (EU/EEA & Switzerland) to conduct services. The legislation and eligibility of a worker varies with each country involved. The employer must ensure that the worker posted is entitled to the benefits and wages that are equivalent to the local workers employed in the host country. Without the directive, employers could exploit and benefit from inexpensive labor by sending workers to a higher-cost country like Austria or Switzerland but still pay them low rates typical of their home country
Beyond compensation, the rules have other safeguards, such as pregnant women protections and leave. There are also rulings that require employers to provide equal or better accommodations for workers in a new country as compared to their prior country arrangements. Employers take notice because the fines can reach 10,000 or more Euros per worker, an amount that can disrupt business operations and put HR on the “hot seat” with management.
Various tax considerations also govern global workforce, and there’s unsurprisingly complexity in determining the exact tax and compliance rules. Consider an employer who runs a manufacturing center in Barcelona, and a marketing professional from Milan comes to work for that company near the manufacturing location. However, if the worker has nothing to do with the activities going on at the facility (they work on a different area of business), then it’s a tricky situation for the main employer and local HR. The local group might not want the marketing professional to mark them against headcount, or they don’t want the legal or administrative responsibilities for this worker. Another potential problem is salary disparities, if for example the marketing person from Italy makes substantially more than a marketing peer at the Barcelona center.
Automating Global Workforce Tracking with Technology
HR teams must manage the intricacies of remote and traveling workers, such as monitoring border closures, COVID-19 requirements, immigration, permanent establishment and tax issues. With remote work options available, workers can move to other locations and still enjoy the security of their job. For HR, managing a remote global workforce and posted worker compliance requires a technology tool that can automate employee tracking, and improve the organization and movement of documentation.
Global workforce platforms integrate with other HR solutions such as payroll and other workflows, so HR can present a unified view of employees and their data, and further reduce the risks of non-compliance. These platforms can manage the entire assignment lifecycle, from the pre-authorization phase to compensation and eventual repatriation as well as tax obligations for remote workers and immigration compliance for business travelers.
The complexity of a distributed workforce requires an agile and tech-based response from firms. They need technology platforms that automate the right processes and provide organizations with instant risk assessments and data access. It’s the best way for companies to avoid fines and conflict with local labor agencies, protect their brand, and most importantly give workers equitable compensation and extensive benefits.
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