International employment laws: how to stay compliant with a global team

Building a global team comes with many benefits — and is a great way to expand your business. But when you hire overseas, you need to ensure you’re complying with all the relevant labor laws in your team members’ countries.

If you’re new to this process, it can be difficult to know where to even start. For instance, what areas of legislation do you need to be aware of? How do they differ between countries? And how do you ensure that you always comply?

In this article, we’ll answer these questions and cover the key areas you need to consider when hiring across borders.

So let’s dive right in.

What are employment laws — and why are they important?

Labor laws are the regulations that protect your and your team members’ rights and responsibilities in the workplace. When you hire someone in a different country, you have to adhere to the labor laws of that country.

If you have team members in multiple countries, this can become confusing. For instance, your employees in Germany may be subject to totally different overtime, minimum wage, and paid time off rules than your employees in the US.

If you don’t observe these differences and comply with the relevant laws, your business can run into trouble. For example, in many US states, paid vacation is discretionary and not required by law. But in Germany, employees must take at least 20 paid vacation days per year. If you offer your team members 15 days of annual paid vacation, you’d be breaking the law in Germany.

The penalty for falling foul of employment and labor laws can vary widely depending on the country, the seriousness, and the scope of the infringement. But you could encounter hefty fines, reputational damage, and — in some cases — restrictions on doing business in that region, making it important to comply.

What employment laws do you need to know about if you hire globally?

Every country has their own set of employment and labor laws, and a relevant government department that enforces them. For each of the countries you hire in, your business will need to become acquainted with them, as they can differ wildly.

That said, each of these pieces of legislation typically focus on the same areas of labor and employment. Here are some of these key areas:

Minimum wage

Minimum wage is an important worker protection, and you must meet the minimum wage requirements in your employees’ locations. In some instances, minimum wage allowance is dictated by industry, job type, and/or the age (or seniority) of the employee.

Minimum wage can also vary within country borders. For example, the minimum wage in a certain city might be higher than in rural areas, or might vary along provincial lines. In the US, states set their own minimum wage, which supersedes the federal minimum.

To avoid confusion, it’s advisable to use a global HR solution like Remote that automatically ensures you’re paying the right amount.

Overtime

Most countries have formal overtime laws that are designed to protect workers and ensure they get enough rest each week. Sometimes, though, these laws can be tricky to navigate in practice.

In the US, for instance, employees are entitled to overtime of 1.5x their regular hourly pay if they work more than 40 hours per week. However, this entitlement depends on several other factors, such as the job role, the salary, and the responsibilities of the employee. And that’s before taking into account individual state mandates, which can vary.

To stay compliant with overtime laws, you need to track your employees' hours and compensate them accordingly. Our free HRIS platform enables you and your team to easily track their time, as well as manage their other day-to-day HR needs.

Benefits

Benefits are a great way to attract and retain top talent for your organization. However, there are two types of benefits: statutory (required by law), and supplementary (at the employer’s discretion).

When you have employees in different countries, you need to know what is statutory in those countries, and what isn’t. For instance, what may be considered a “perk” in one location may actually be required by law in another. 

To make matters more confusing, this can also vary within borders. In the US, for example, a 401(k) (or equivalent) is required by law in some states, but is supplementary in others.

If you’re hiring in multiple countries, it’s highly advisable to work with a global HR partner, like Remote. We ensure your team members receive all required statutory benefits in their location, and also allow you to handpick a tailored selection of supplementary benefits to attract and retain the best talent.

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Privacy and data security

If you monitor your remote employees to ensure they are using their working hours effectively, you need to ensure you’re doing so compliantly. In the US, for instance, several states — such as California and Delaware — require employers to notify their staff about electronic monitoring.

In some locations, you may also need to disclose to your people the types of personal information you collect, as well as why and when you are collecting it. This regulation can apply to any personally identifiable information your company keeps.

When managing employee data, you must also comply with any local data protection and security laws. Many companies have fallen foul of data privacy legislation in recent years, resulting in hefty fines and significant reputational damage.

Rest and breaks

Nearly all countries have legislation in place that provides workers with protected break times and rest periods. In most cases, this involves at least one rest day per week, and paid break times during the working day.

In the US, for example, employers must treat short breaks of between five and 20 minutes as compensable working hours (although you aren’t required to compensate your employees for meal breaks of 30 minutes or more).

For your remote workers, it’s important that you are aware of the relevant laws in their country, and that you ensure they are taking breaks and rest periods accordingly.

Discrimination

Many countries have anti-discrimination laws that are designed to protect employees. They stop organizations from discriminating against their people based on age, race, disability, religion, sex, and other factors.

These laws can be collected into one piece of legislation, separate pieces of legislation, or both. In the US, for example, differently-abled employees are protected from discrimination under the federal Americans with Disabilities Act (ADA), but are also covered under state anti-discrimination policies too.

It’s crucial to understand the relevant laws in your team member’s location, not just to remain compliant but to ensure that your employee feels safe and valued.

Paid time off (PTO)

As mentioned, each country has their own laws regarding PTO, and these can vary massively. If you have employees in different locations, you need to be aware of these laws and monitor them accordingly.

This can also be a source of contention within your organization. For instance, your employees in one country may be angry if their counterparts in another country are entitled to more paid leave days. To counter this, you can offer unlimited PTO as a benefit, although you still need to ensure that your people are taking the minimum mandated amount of days in their country.

To see how many days each of your team members should be taking, and to stay on top of their PTO, use our free HRIS platform.

Sick leave

Most countries mandate some form of protected sick leave, although it’s not always necessarily paid. Again, it’s crucial to understand what exactly your obligations are in each of your employees’ locations.

In some places, your people might be entitled to several weeks’ paid sick leave, while in others, they may not be entitled to anything.

In the US, only a handful of states mandate paid sick leave (and this is usually conditional). In most cases, sick leave is unpaid under the federal Family and Medical Leave Act (FMLA).

You also need to be aware of who pays for what. In Australia, for example, you (the employer) are fully responsible for covering sick pay, while in France, it’s down to the government. In Germany, it’s a combination of both.

Other types of leave

The above also applies to other types of leave, such as parental leave, bereavement leave, and military leave. Maternity and paternity leave laws are particularly important to understand as they can vary widely, not just in terms of time off but in regard to whether they are paid, unpaid, or partially-paid.

Be aware of military leave policies, too. Some countries mandate national service obligations, while other countries — such as the US and the UK — have strict labor laws in place to protect military reservists called up for active duty.

Permanent establishment risk

When hiring abroad, it’s also important to be aware of laws relating to permanent establishment.

If you have an ongoing presence in a particular country, that country’s authorities may deem you to be ‘permanently established’ there — and, therefore, be liable for taxes and other obligations. 

Avoiding this risk can prove challenging, especially if you have employees in multiple markets. As each country has its own regulations, some of the steps you take to avoid permanent establishment in one country might not be sufficient in another.

To mitigate this risk, you can create and register a legal entity in each of your employees’ countries. However, it can be far more time- and cost-effective to partner with an employer of record (EOR) provider like Remote. To learn more about how we can help you avoid permanent establishment risk, check out our in-depth guide:

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Staying compliant with Remote

As you can see, keeping up with multiple labor laws in different jurisdictions is a common challenge when hiring remotely. You can work with multiple partners in multiple locations to try and stay on top of this, but this can be costly and inefficient.

When you partner with Remote, we ensure that you’re fully compliant with all labor and employment laws, wherever in the world you’re hiring. We take on all the heavy legal and compliance lifting, allowing you to focus instead on making the right hiring decisions and growing your business.

“Having a specialist to settle compliance processes makes it easier for my team to focus solely on expanding the business. Remote has also helped us to reduce our operational costs and uncertainties when it comes to hiring overseas employees.”

- Jeroen Rutten, CEO of Tablevibe

To learn more about how we can make your global hiring simple, compliant, and stress-free, speak to one of our friendly experts — or book a demo today.