{Rivermate | HR Compliance Challenges and How to Overcome Them

Taxation and Compliance

HR Compliance Challenges and How to Overcome Them

Published on:

May 22, 2024

Written by:

Lucas Botzen

Explore the intricate world of HR compliance challenges that companies face when expanding globally. From navigating shifts in market compliance and managing complex payroll systems across different countries to ensuring the correct implementation of benefits policies and understanding the nuances of retirement and pension plans. Additionally, learn about the critical importance of safeguarding data amidst rising cyber threats. This post offers essential insights and solutions for businesses aiming to thrive in the international market while maintaining compliance and protecting their workforce. Dive into the full article to arm yourself with knowledge and strategies that can help steer your company clear of costly pitfalls and foster a robust, compliant international presence.

The following are the most common HR compliance issues faced by companies worldwide:

1. Shifts in Market Compliance

When Wells Fargo & Company conducted a survey in 2016 to find out whether the decrease in the global economy would affect U.S. companies in turning into international markets, it revealed that 87% of U.S. companies and enterprises still think that expanding their businesses internationally is necessary to attain long-term growth.

Additionally, the survey found that six among ten respondents believed that their companies are expecting to have an increase in their international business endeavors, and 54% remained confident that their company’s global appearance will be more important in the succeeding months. Likewise, 63% mentioned that they are expecting to achieve long-term global business expansion planning in 2016. It can be deduced that planning for internationalization or globalization remains the utmost priority for most US companies.

However, global business expansion is not an easy process. Every country has its own laws and regulations. As an employer, you need to be knowledgeable on how payroll works (i.e. accomplishing requirements in employment, business registration, among many others). Companies are warranted to submit a plethora of documents and other compliance requirements within a span of 3 months especially if we consider the demand of the organization vis-a-vis its global expansion plans. In other words, compliance does not only necessitate rigor, it also needs to be invested a lot of time into.

This even becomes more complicated if the shifts and new trends in international market compliance take place. Not to mention the longer time it would take to accomplish said requirements. Luckily, there are Employers of Record (EOR) that will help you expand your business in the global market without any complexities.

Rivermate offers best-in-class tools that enable you to hire employees anywhere in the world. Rivermate will take care of payroll, compliances, and benefits so that you can focus entirely on growing your business. It provides the solutions you need to get your company into the global market without draining out your pocket.

**2. Mismanagement of Payroll Compliance **

Payroll compliance is one of the most crucial games in global business expansion. The rules, regulations, and laws vary from one country to another and these change regularly. Mismanaging your payroll is often a root cause of paying heavy fines and penalties. That said, your Human Resource Department must keep a keen eye on updates regarding this matter especially since there are also countries that implement different regulations from one region or municipality to another. In other words, multiple regions and municipalities within a country can have different laws. It would not be a shock if HR commits mistakes in this particular facet considering its complexities.

In some countries such as Chile, Argentina, and Uruguay, the laws require employees to sign their payslips upon receipt. Once this is overlooked, a lawsuit may be filed against your company for lost wages, further damaging your company’s finances.

Valerie Bolden-Barrett mentioned in her article on June 7, 2017, that at least two payroll errors could result in employee resignation. According to The Workforce Institute at Ultimate Kronos Group (UKG), 49% of American workers are willing to resign from their positions once they experience just two problems with their payslips. This speaks volumes about just how important it is for HR to accomplish payroll compliance properly not just in the eyes of labor laws, but also to the employees.

It is highly recommended for HR to take measures in monitoring their payroll processes efficiently and accurately to ensure that there will be no errors in employees’ paychecks. Employers should also communicate effectively to their employees once there are unforeseen errors. This does not only help employers solve problems concerning payroll, it also shows transparency and accountability to both the current and potential employees, making the company the “place to be” for these employees.

**3. Benefits Policy **

There are various ways of approaching and enforcing employee benefits. You can access the official government website of the country you wish to expand your business into to know more about their statutory benefits, employee satisfaction requirements, and every other detail necessary. Your HR can also call the contact person directly to obtain more comprehensive information on benefits.

Planning for benefits policy is a great opportunity for you to evaluate and assess whether or not you are overspending your budget on employee benefits. For instance, you no longer need to provide private healthcare insurance to your employees if the state is already offering public healthcare packages. However, for senior employees in the United Kingdom, the case is not the same. Their labor laws warrant that senior directors ought to receive private healthcare coverage for their families and even a company car. It is slight differences like this that HR must unleash their meticulous side so no penalties may be imposed on the company.

Additionally, working parents in Denmark are entitled to 52 weeks of parental leave. Mothers can get four weeks leave before giving birth, then another 14 weeks after while fathers receive two weeks’ leave during the first 14 weeks after the birth of a child. It is not good for a company to be understaffed, and this is exactly why the HR department is among the most important departments that help maintain the standing of the company. They, therefore, should know how to replace the loss in the workforce.

When most employees are on parental leave the flow of the workforce is greatly affected. Human Resources should learn to manage the company calendar efficiently, outsource tasks, and handle overlap and crossover teams.

**4. Retirement and Pension Plans **

A study by the Pew Research Center found that 58% of the workforce is composed of either baby boomers or Gen Xers which was a significant cause in the increase of the demand for retirement and pension planning in 2019. This is in contrast to a few decades back when retirement and pension plans did not receive enough attention. As the primary department in the company responsible for these facets, Human Resources must therefore be wary of both the employee demand and the labor laws regarding the statutory requirements on retirement and pension plans to ensure that the most favorable plans are enforced.

Furthermore, in global business expansion, employers also need to take into account the mandatory retirement ages that vary from one country to another. In some countries, for example, the mandatory retirement age is 60 while others implement a 62-age mandatory retirement requirement.

One mistake employers often make is the misuse and interchanging of the terms retirement and pension. These two terms are different, and while they are interconnected, as an employer, it is vital to have a clear definition of each word. According to Differencebetween, pension is the controlled and constructed sum of money based on the employee’s salary and services. It amounts to the time an employee has rendered service for the company. In contrast, retirement pertains to an age when the employee decides to stop being part of the workforce.

As you hire more employees abroad, you will also be familiarized with the compliance, payroll processes, and labor laws these countries implement, including and especially retirement and pension plans.

Having an international workforce can be challenging and will cost you a lot of money. Hence, relying on an Employer of Record (EOR) can be the most effective way to ease the complexity of global business expansion.

**5. Data Privacy and Cyber Breaches **

Being targeted by hackers is not unfamiliar business for the world’s biggest business companies. In October of 2013, a data breach in Adobe impacted 153 million user records. According to the report, hackers have stolen over 3 million encrypted credit card records from their customers and clients. Later that year, Adobe was charged $1.1 million legal fees and an undisclosed sum of money to some affected users to settle their claims for violating the Customer Records Act.

If cyber breaches could happen to giants like Adobe, it would be crazy to think that the small and medium enterprises are invulnerable to these issues. With advancements in technology here and there, the threats of hacking and other forms of cyber-attacks have more than ever become apparent. All companies are at risk, including and especially the small businesses. You, as company executive, must ensure that all the important and sensitive information is stored, encrypted, and protected from any form of cyber attack.

One solution that you can implement to overcome this challenge is providing data protection benefits to all of your employees, which may be enclosed inside your benefits policy. There are many software and services that you can avail of to monitor identity theft and threats. With this, you are not only protecting your clients but also your entire workforce as well.

Overcoming HR compliance challenges is not enclosed and limited to payroll, state laws, and regulations. Although, providing benefit plans and perks to your employees can help them better their services and meet the demand of today’s market.

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