6 Common Compliance Mistakes

One of the major pain points in expanding into new territories is dealing with the different regulations and compliance requirements. As much as it is demanding, failure to respect these regulations is much worse. A famous saying by folks in the health sector is that prevention is cheaper than cure for diseases. When it comes to compliance, this statement fits like a glove. According to FMP Global, the cost of non-compliance is more than twice that of compliance costs, and non-compliance costs businesses on average $4,005,116 in revenue losses.

Therefore, underestimating the importance of compliance is a grave mistake any organization should make. Aside from the massive loss in profits, non-compliance negatively affects its reputation and ability to hire. To avoid the unpleasant situation of being caught, here are a few common compliance mistakes.

Workers’ misclassification

In many countries, proper classification of workers is crucial, and the penalty for misclassification is costly. In expanding into new territories, it is always tempting to treat all workers as independent contractors. However, in many countries, every worker is classified as an employee unless proven otherwise.

To avoid misclassifying workers, it is expedient to get third-party organizations’ services to help with the legalese in dealing with and understanding the compliance guidelines for independent contractors.

Safety regulations violation

Organizations understand the importance of having a good safety record and aim to maintain it. However, countries have industry-specific occupational safety and health guidelines, which are usually unique to each country. Failure to adhere to or use an approach that is not in tandem with what is being used in a particular country will incur a penalty.

Labor laws violation

One of the most critical and contentious discourses during an organization’s expansion into new territory is labor laws and workers’ rights. Many countries uphold strict labor laws, and defaulters are made to pay huge fines when penalized.

For every organization, keeping apprised to all state and federal laws regarding labor is integral to its longevity in that country. Undoubtedly, labor laws are the easiest of compliance to break. Thus, staying up to date and adequately complying with the regulations is vital.

Payroll mismanagement

Payroll management is one of the most crucial aspects of an organization’s functions, especially when dealing with a globally distributed team. Payroll involves more activities than making calculations of salaries, and it becomes more complex when dealing with paying workers operating in different countries.

Payroll mismanagement due to wrong calculations can lead to a worker receiving less pay, which may contradict the host country’s labor laws regarding remunerations.

For organizations seeking expansion, it is best practice to outsource this task to third-party partners that are well-versed in dealing with payroll management.

Paper works management

Eligibility to work documents, incomplete forms, and failing to record documentation are issues organizations face when handling employment documents. As a consequence of the uniqueness of different countries’ employment laws, the workers’ documentation must be appropriately handled. Failure to ensure papers are adequately kept will land any organization in a legal battle.

Not paying the right benefits package.

Different countries have varying statutory entitlements and benefits packages. For many countries, every worker is classified as an employee unless proven otherwise. Therefore, the entitlements packages for workers that are not independent contractors must be paid following the country’s regulations.

How to stay compliant as an expanding organization

For growing organizations, compliance is a big deal. Navigating the waters of establishing a solid footprint in a different country is complex, and the legal requirements of compliance can get overwhelming for organizations. Therefore, the best practice is outsourcing tasks such as payroll management, onboarding employees, and compliance to local laws with a platform dedicated to such causes. Platforms such as Skuad, Velocity Global, and Shield GEO are trusted platforms that can assist with full compliance with local laws.