6 February 2020
We see people working internationally in increasingly diverse ways, and this is reflected in how companies are resourcing their international employment needs.
This is in part a reaction to the expense of traditional international assignments that, on average, cost up to three times more than an equivalent domestic role, but also our changing patterns of work driven by people preferring to work flexibly, independently, and often remotely.
Managing a cross-border workforce
Part of this diversification of employment structures is the rise of international portfolio workers who hold several cross-border jobs. However, in most parts of the world, the laws regulating employment have evolved based on a type of work pattern that is predictable, full time and part of a subordinate and direct relationship between an employer and an employee, often referred to as the Standard Employment Relationship (SER). How does global mobility management respond to this increasing complexity?
The SER provides important protections for workers, but it also helps employers, who can rely on a stable workforce and recognised policies and procedures for fiscal and regulatory purposes. However, this certainty changes with a shift away from SER to Non-Standard Employment (NSE).
NSE arrangements deviate from standard employment, and include temporary employment, part-time work, temporary agency work and other multi-party employment relationships, disguised employment relationships and dependent self-employment. These non-standard workers pose a serious challenge to the global mobility compliance processes.
How will this affect your business?
Understanding, how these new working relationships will affect a particular business will become one of the key emerging issues. In particular, the impact on international employment classification will become a key skill. Typically, international employment can involve various types:
- Long-term assignments
- Short-term assignments
- Localised arrangements
- International commuters
However, as international resourcing increasingly look for something new, this may also include:
- Foreign independent contractors
- The new cross-border freelancers i.e. gig workers
- Agency workers and other fixed-term agreements
A central requirement of employment status evaluation is the need to be clear on who is a legitimate international independent contractor, particularly when testing out new markets, or running a number of cross-border fixed term projects. These may involve using contractors who either routinely or infrequently travel outside of this country to carry out their services for end clients.
Make sure you have considered all the compliance issues
A starting point may be to consider from a UK perspective the effect of IR35 rules on international employment. This focuses on contractors or workers providing services through an intermediary – usually a personal service company (PSC).
You will need to know how to check whether the individual should be classified as employed or self-employed. Changes to contractual or working arrangements alter the employment status, e.g. changing from a local hire employee contract to working remotely overseas (but continuing to be paid from the UK off-payroll).
This due diligence should include a review of material changes to contractual or working arrangements. Be on the lookout for what may be construed to be contrived arrangements that have been deliberately created or designed to get a particular outcome as these would be seen as deliberate non-compliance and you risk intrusive enquires and financial penalties.
Foreign independent contractors
For all foreign independent contractors, including existing assignment workers and any planning for future assignment workers, you should assess on a case-by-case basis, in a structured, coherent and correct manner, exposure to risks such as:
- Bogus self-employment
- Abuse of posting of workers
- Sham subcontracting
The challenges of this task are underlined by the variety of views regarding the nature and extent of the fraudulent contracting work, different views on which contractual relationship is appropriate in specific circumstances, and legislative regulations can be open to interpretations.
You will need to design a procedure that compares the actual employment (or commercial) relationship with the conditions of the declared contract; addressing weaknesses and vulnerabilities, and arriving at a risk profile for each relationship as:
- Lawful
- Undeclared
- Fraudulent
- Illicit
A key exercise will be inspecting where the apparent contract disguises a different employment relationship or a different employer from the contractual one.
So what does the future hold for cross-border compliance?
European-level institutions have recently taken several important steps towards clarifying the rules on cross-border employees. For example, the 2014 Enforcement Directive on the posting of workers, and there is ongoing discussion on undeclared work.
Although the on-demand economy is relatively new, particularly in the international arena, it is possible to anticipate it expanding significantly and the issue of classification is likely to have important implications for managing these internationally mobile resources.
Where would you begin to evaluate the impact of NSE for the purposes of immigration, employment law, tax & social security compliance, including shadow payroll administration, as you are faced with increasingly complex cross-jurisdictional employment arrangements?
If you are an employer either already operating cross-border or thinking about expanding overseas, and wish to know more about global mobility compliance, please fill out our contact form here.
