Compliance Globalization Partners

7 Compliance Challenges Companies Face When Growing Globally

Sponsored by Globalization Partners

Understand and explore the top compliance challenges faced by companies looking to expand internationally and offer insight into best practices for adherence.

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As companies look to international expansion, they delve into the complex and dynamic labyrinth of global compliance. Entity setup, hiring, onboarding, financial reporting, transactions, product and service commercialization are just a few aspects to consider. Does the company just beginning their cross-border growth have the breadth and capacity to navigate global compliance seamlessly? When it comes to talent, compliance starts with hiring and continues all the way to termination – and in some cases, all the way to the employee’s retirement. This article will explore the top compliance challenges faced by companies looking to expand internationally and offer insight into best practices for adherence.

Employment and Compliance 

In the U.S., wage and hour legal cases have seen significant financial implications, with the top 10 private-plaintiff class actions of 2021 totaling over USD 641 million. In the European Union, regulations like the Posted Workers Enforcement Directive guarantee the same working conditions for locals and temporarily sent workers. Failure to comply with these regulations leads to steep penalties that are stringently monitored.

Privacy and Data Protection 

The emphasis on data compliance has surged, with laws like the EU's General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA) granting more control over personal data. The Schrems II case, China's Personal Information Protection Law, and Brexit have further complicated the landscape. Companies must prioritize data protection, especially in remote workforces, implementing measures like Virtual Private Networks (VPNs) and two-factor authentication.

Taxation Standards 

Although tax structures may vary from one country to another, as well as from one industry to another, the most common taxes that governments collect from their local corporations include: 

  • Product and service sales tax 
  • Property taxes on real estate assets 
  • Employment and payroll taxes 

It’s important to understand all the tax law details in your country of expansion, as failure to comply can lead to substantial fines. Technologies relating to taxation compliance are vital for accurate and timely filing. Several organizations are turning to technologies relating to taxation compliance to quickly understand and adjust to new regulations.

Financial Reporting 

From an accounting perspective, it’s important that companies are aligned with the International Accounting Standards Board (IASB) and in observance of the International Financial Reporting Standards (IFRS). The IFRS serve as a common accounting language — 

a standardized tool for companies to address record keeping, account reporting, and transactions, among other financial reporting aspects. The goal of this tool is to foster seamless reporting, eased compliance, and well-informed financial analyses and decisions. Be on the lookout for Environmental, Social, and Corporate Governance (ESG) regulations to add a layer of complexity to financial reporting in the coming years as well.

Employment Contracts, Payroll, and Benefits 

From national legislation to Collective Bargaining Agreements (CBAs), labor laws vary widely. Understanding laws related to working hours, paid vacation, minimum wage, insurance, safe work environments, and termination procedures is essential. In addition, factors like cost of living, customary benefits, social contributions, and anti-discrimination protection must also be considered. For these reasons, organizations are increasingly requiring country-specific legal counsel when entering the global marketplace.

Discrimination Protections 

Anti-discrimination protection is fundamental in local laws, so organizations should be aware of their obligations. The UN has outlined a human rights legal framework covering areas like race, gender, disability, and more. In the workplace, anti-discrimination law adoption has been prompted by legislation against sexual harassment and the use of non-disclosure agreements globally, with measures such as China's recent Civil Code.

Failure to Comply 

Failure to comply with global laws and regulations can lead to severe financial penalties. GDPR alone can lead to fines of up to EUR 20 million or 4 percent of global revenue. In 2020, companies like Google and Amazon faced massive fines for noncompliance.

Criminal sanctions are also a possibility, with legal provisions linked to bribery, money laundering, or fraud. The challenge of tackling fraud has escalated with the reliance on digital services, with PwC's 2022 global survey highlighting significant losses to platform fraud.

Keep Up with Compliance Changes 

Global compliance management is a complex and demanding task, straining internal resources even with strong governance processes and expertise. As market dynamics shift rapidly, continuous regulatory monitoring and integration become essential.

International Law Firm Simmons & Simmons reported that in 2020, there were at least 51 regulatory changes across 12 countries in areas like paternity leave, gender equality, and minimum wages. On-the-ground compliance experts prove vital when it comes to ensuring locally compliant employment 

contracts, benefits, and worker classification. Plus, sharing the considerable workload is the only route to sustainable scaling for companies as they grow.

How We Can Help 

G-P helps growing companies unlock their full potential by making it possible to build highly skilled teams in days instead of months. Our SaaS-based platform is backed by our team of HR and legal experts to ensure compliance with labor laws and regulations in 180+ countries and counting.

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