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hiring subcontractors is said to be more difficult than hiring permanent staff, although that extra effort does come with some benefits since there are less regulations tied in. In Indonesia, for example, multinationals often give workers short-term contracts of six months to a year because it is so costly to fire permanent staff. Companies looking to follow this model should do so with a degree of caution. With heated pressure from governments, the media and regulatory bodies on the lack of regulation of the gig-economy, it is likely that disruption of the model is not far-off. In September this year, the Assembly Bill 5 (AB5), limiting the status of employees as contractors, was passed in a landmark ruling that could set a precedent leading to restructured labour laws in not just the US, but filtering to other jurisdictions around the globe. As the world becomes increasingly globalised, we are likely to see more landmark legislation affecting the laws of more than one jurisdiction, especially those in relatively new industries.
It is clear that finding the right talent is crucial to success. What HR teams have at their disposal to help retain talent varies considerably between different jurisdictions and industries. Although there is a universal trend towards benefits beyond financial remuneration, it’s not just firms that are stepping up, governments are also adopting policies that help incentivise workers beyond wages. Besides the three ‘core’ benefits which include minimum wage, paid maternity leave and paid annual leave; employee entitlements vary significantly between different jurisdictions and industries. In the Americas, for example, a ’13-month-salary’ or bonus is mandatory in 17 jurisdictions. Health insurance is now a legal requirement in over half of the countries in the Americas (54 percent) and APAC (57 percent), but only 37 percent across EMEA - and a there is a similar picture around pensions, with APAC (79 percent) leading the way in making those a legal obligation for companies too. Shared parental leave as a legal requirement varies across the world and some jurisdictions demand relatively unusual benefits, such as transportation allowance and life insurance. There are also government reforms to consider in the wider context of Employee Benefits. Reforms to protect workers can sometimes add complexity for employers. In Spain, for example, the government passed a labour law in May (2019) limiting overtime hours to 80 per annum with intensified control and reporting by the Spanish social security department.
A business looking to expand into new territories will need to ensure a payroll system is not only ready to run, but is also fully compliant with the complexities that surround different practices and reporting requirements around the world. To add to the burden, there are frequent changes in payroll legislation across the board, on top of the already complex backdrop of having different practices from one country to the next. Almost half (45 percent) of all jurisdictions we analysed have ‘frequent changes’
WE ARE
ENTERING AN ERA OF ‘SOCIAL COMPLIANCE’ AS REGULATORS BECOME MORE POWERFUL ON THE LOCAL AND GLOBAL SCALE. WE SEE A CLEAR TREND TOWARDS BUSINESSES BEING
COMPELLED TO REPORT MORE GRANULAR EMPLOYEE
DATA, MORE FREQUENTLY
to payroll legislation. There is a clear shift by governments worldwide for more frequent reporting of employer and employee data. It is a legal requirement to submit payroll data at least once a month in an overwhelming majority of countries (76 percent), which can often be extremely time- consuming. In France, for example, where reporting requirements are particularly stringent, businesses must submit monthly reports detailing the pay and hours of individual employees, along with demographic data, including the gender pay gap. Non-compliance or data irregularities are, not surprisingly, taken seriously in many places. For example, the Australian Taxation Office highly scrutinises salary and wage declarations, with real-time data collection measure and Single Touch Payroll - a regulation that requires employers to report detailed payroll information every time they pay employees. Failure to comply results in severe fines for companies that are caught out. Introducing electronic systems to automate and standardise reporting procedures play a huge role in reducing reporting burdens for payroll departments. The Brazilian government, as part of that goal, has introduced eSocial, a system that unifies the electronic submission of employer and employee data.
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Do you think that your firm is appropriately prepared, resourced and financed to cope with an increase in global business planning?
75% No 25% Yes
Regulations and statutory reporting that concern the ethical treatment of workers and their data are increasing globally. However, even within regulatory frameworks, interpretation varies across locations, and processes change. The result of all this is complexity and to counter that complexity, HR and payroll teams at multinationals need to ensure they have the flexibility and agility to accommodate rapidly changing employment legislation for every territory they operate in - whether they employ thousands of workers, or just one. HR leaders also need to recognise that we are entering an era of ‘social compliance’ as regulators become more powerful on the local and global scale. We see a clear trend towards businesses being compelled to report more granular employee data, more frequently. While such technological changes may boost reporting efficiency in the long term, there is likely to be a short-term upswing in complexity while these processes are implemented. Furthermore, it is questionable as to whether technology will be able to keep pace with frequently changing legislation. There is a clear message here for businesses that are looking to expand and build workforces in new jurisdictions - do so with a full understanding of the challenges and complexities they will encounter, particularly around HR and payroll.
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DECEMBER 2019 | thehrdirector | 29
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