Three keys to maintaining global workforce compliance
November 2016 | EXPERT BRIEFING | LABOUR & EMPLOYMENT
Corporations around the globe continue to seek new growth opportunities for their firms. In today’s economically ‘flat world’, many companies are going outside their own borders to target new customers and build additional product and service capabilities. With global expansion comes opportunity and complexity. The complexity comes in the form of variable country regulations and an ever-changing compliance landscape. How do firms best navigate global workforce compliance? In this article we look at three keys to staying compliant across a multinational business.
Understand people processes, systems and data
If you are operating within a multinational organisation, your firm holds more complexity from a human capital management (HCM) process, system, and data perspective than a single-country company. Each country, and perhaps each location within a country, may contain unique qualities that require compliance monitoring. For example, your workers in southern France may be associated with a specific collective agreement, while your employees in the US are part of an industry labour union. These differences create complexity that is often difficult to manage across a geographically diverse workforce.
The first step to managing the complexity is to understand the types of workers and people processes your organisation utilises at each of your operating locations, including for remote workers. People processes include recruiting, onboarding, hiring, contract management, time and absence management and last but not least, paying employees. Note the process may vary for each location and type of worker (for example, blue or white collar), and the rules to remain compliant likely vary as well based on location and employee type. Firms should also understand who owns each process at each location, including partners, and which systems are used to enable the activity.
Once you have a clear view of the processes and people involved around the globe, the next areas to understand are workforce data and systems. Does your firm have a single HR, time and attendance system globally, or do you utilise various systems to remain compliant? Chances are it uses many systems and often multiple systems in each country. Understanding your data at a location level and where it comes from is the first step you have to take to improve your data management practices. Better human capital data management practices will lower the risk of compliance issues. Be sure to include manual data management processes and spreadsheets in your assessment.
Identify your risk areas
With a clearer view of your people processes, worker types and data management practices across the world, you can start to identify compliance risk areas. The payroll function is a great place to start since so much of workforce compliance is attached to paying employees. Gather insight by asking a number of questions. Which countries or locations have had challenges getting payroll correct or out on time? Has the organisation received any fines from local governments related to payroll or tax payments? Which locations often have the hardest time reporting back to the corporate office for things like general ledgers and labour cost reports?
Answers to these questions can help identify the locations and business processes that are at high risk so you can begin to determine root causes. Common causes of compliance issues include poor HCM system capabilities, manual processes, inadequate local knowledge, and lack of process and data ownership. Be sure to include partners in the risk assessment since compliance is often managed through the use of partner software or services.
Build solutions and know your limitations
After prioritising your biggest risk areas and opportunities, it is time to put in place solutions that equip your firm for success and enable further global expansion. Companies often find upgrading and consolidating HCM systems creates an immediate benefit for managing compliance since it generates process and data visibility across an organisation – a fundamental first step to creating a successful compliance management programme.
In addition, successful firms ensure all functional areas are involved in the creation of a workforce compliance programme. Functional collaboration helps ensure processes and systems have clear business owners at each location. It also fosters the engagement required to implement the necessary changes – often the biggest hurdle any organisation faces when trying to improve its compliance practices.
Since labour rules and regulations change often around the world, be sure your firm is prepared for constant change and builds in the requisite flexibility to react to changes. For example, Brazil’s eSocial programme is consolidating numerous federal reporting agencies into a single reporting body for human resource and payroll functions. The requirements for this new reporting body are onerous and include hundreds of data elements that must be reported monthly to the government. These changes have been in discussion for years and have changed many times, so remaining agile is important to remaining compliant. Another example is occurring in the US, where California’s new labour laws are increasing the complexity for businesses to operate. Companies must constantly monitor local changes and provide flexible systems that can react and adapt quickly to changes across and within individual countries.
Knowing your company’s limitations is extremely important when building your compliance management programme. Certain capabilities, such as managing payroll systems or local contracts, may not be a core competency for you firm and may be better suited for a partner to manage. Finding the right partners and having a clear vision for how partners fit into your compliance programme is an important piece in the solution puzzle.
Aaron Hurst is the vice president of global partnerships and solutions at Ceridian. He can be contacted by email: firstname.lastname@example.org.
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