Navigating the Complexity of Compliance Around the World

New research investigates the treatment of foreign skilled workers around the world across various jurisdictions, shedding light on which locations make it easier or more difficult to navigate rules for an international workforce.

As workforce mobility professionals know, navigating the complex nature of varying tax and payroll systems around the world is no small feat. Knowledge of these systems and their accompanying requirements that affect an assignee’s expenses, obligations, and overall experience is indispensable, and is often an ongoing challenge. New research investigates the treatment of foreign skilled workers around the world across various jurisdictions, shedding light on which locations make it easier or more difficult to navigate rules for an international workforce.

The Global Business Complexity Index was developed by compliance and administrative services provider TMF Group along with market research agency Savanta. Using an in-depth survey by in-market experts in 77 jurisdictions, it sheds light on how jurisdictions around the world tackle HR and payroll complexity, including the treatment of the international workforce.

Where Domestic and International Rules Meet

Individual jurisdictions around the world often have policies that discriminate between the treatment of domestic and international workers. The report found that 61% of jurisdictions globally place limits on hiring foreign workers based on their country of origin. This is most likely to occur in the EMEA region, with 77% of jurisdictions specifying requirements by country of origin even while free movement is encouraged between member states of the EU.

When it comes to placing restrictions on foreign labor, some jurisdictions will place a heavy burden on the companies themselves. For example, the report found that nine out of 10 (93%) jurisdictions in the APAC region require companies to hire foreign talent under a specific set of skills, compared to 68% globally. Additionally, seven out of 10 (71%) APAC jurisdictions require that foreign workers fall under a salary threshold, compared to 38% globally. In Canada, employers must navigate the Labour Market Benefits Plan, outlining to the government the need for your particular foreign employee.

On the other hand, some jurisdictions offer benefits to foreign workers who can stay longer, such as Malaysia, where workers with a contract longer than 182 days and making above a certain salary may be subject to an 11% monthly tax deduction, as opposed to a flat 30% of their gross salary. In Taiwan, the report found that those who earn more than $3 million TWD ($100,000 USD) are entitled to 50% of their income tax above this threshold exempted for three years upon entry.

Understanding Local Rules is Crucial

Even with such enticing reasons to work in a different country, it’s important to be well-versed in local rules and legislation to ensure an employee is in compliance. For example, the report points out Kazakhstan, which recently instituted labor reforms that outline different rules for different foreign workers depending on their skill level categorization as a Director, Manager, Specialist, or Skilled Worker. However, the report found a handful of countries without specifications for foreign workers based on country of origin, skill level, or current salary:

• Argentina
• Costa Rica
• Denmark
• El Salvador
• Hungary
• The Netherlands
• Philippines
• Portugal
• Uruguay
• Venezuela
• United States

Adding to the complexity is navigating rules across multiple jurisdictions, such as cities with varying legislation in place. One route to take is the Shared Service Model (SSM), which centralizes shared service activities across HR regardless of the varying jurisdictions in play. Without the SSM, employers may grapple with varying benefits requirements in certain jurisdictions, most commonly with regard to minimum wage (12%), travel allowance (12%), shares and equity payments (10%), and paid maternity leave (9%). The report found that the seven jurisdictions with the most localized and varying legislation across different cities are:

• Brazil
• Canada
• China
• Guernsey
• India
• Malaysia
• South Africa

Such insight into which jurisdictions around the world are simpler or more complex when it comes to tax, payroll, and other important HR complexities is crucial for workforce mobility professionals who must grapple with compliance. Such knowledge of the varying rules and regulations demonstrates the strategic business importance of mobility professionals, who remain the go-to experts in navigating complex systems that ultimately enhance the employee experience as they relocate.

For more in-depth information on this subject, head to our Learning Portal, where members can access on-demand educational sessions from this year’s Global Workforce Symposium!