Managing International Recruitment Compliance in a Post-Covid World

19th April 2022

There is now no doubt that covid-19 and associated lockdowns not only disrupted labour markets globally in the short term but also changed the way we work forever. A study from the Pew Research Centre indicates that over half of us now want to work from home, while Gartner has found that 32% of organisations are replacing full-time employees with contingent workers to save cash. As Joseph B. Fuller, professor of management practice, recently pointed out in The Harvard Gazette, “It’s the Next to Normal we’re headed to, not ‘back to normal”.

Across the staffing sector, recruitment agencies continue to navigate a wholesale move to remote recruitment while also juggling the shifting demands of clients and candidates alike. However, while much of the rhetoric surrounding the new world of work revolves around the physical location of talent and the consultants who place them, the market has developed in other ways too. For those placing professionals overseas, international recruitment compliance demands are also expanding – and we must adapt to reflect this.

Before the pandemic struck cross-border contractor recruitment was wrought with legislative complexities. While these haven’t been removed, the potential risks for recruitment firms have grown. 6CATS was recently featured in Global Recruiter’s latest compliance supplement, where we discussed how the global pandemic has impacted international recruitment agencies from a legislative perspective. Below is a summary of the insight we shared.


A boom in borderless recruitment

The digitisation of work has created a climate where physical location is no longer the barrier it once was. Those who, pre-pandemic, may have felt their firm didn’t have the ‘on-the-ground’ resources to expand overseas soon realised that recruitment solutions and contractor placements can be borderless.

Here at 6Cats, we have seen a notable increase in the number of agencies making enquiries about expanding their current operations internationally. While this is promising for firms, the questions we are being asked highlighted that too many businesses believe they can ‘drag and drop’ their current set-up to another country. However, differences in international compliance requirements are simply too nuanced to allow for this.

For example, a common misconception is a belief that a contractor can be deployed internationally through a ‘global umbrella’ solution. These simply do not exist. There may be in-country umbrella solutions that you can tap into on an international scale – but these will require a lengthy PSL that needs careful management and monitoring.

When you consider that the risk of engaging a contractor in a non-compliant manner can be passed down the supply chain to the recruitment agency, ensuring that your firm has the right in-country solutions in every location you’re operating in, or planning to expand into, is vital.


Be aware of permanent establishments

Lockdowns changed end clients’ views on how contractors can deliver their work. At the height of the pandemic, where it was entirely possible to complete the agreed project remotely, contractors were able to complete placements without ever leaving their home country – or, indeed, their home.

As everyone in the managed recruitment supply chain soon realised the benefits that this remote working option can have on quickly engaging contractors, businesses began considering filling vacancies in this way on a more permanent basis. However, this adds a layer of compliance risk for both recruiters and the contractors they place.

If a contractor is working from home for a project that has been commissioned in another jurisdiction, they face the potential for dual taxes, depending on if a permanent establishment (PE) has been created.

A PE, under UK law, is a fixed place of business where commercial activity is carried out either in part or wholly in the UK, or where an agent has the authority to act on behalf of the company in the UK. Although there are many bilateral double tax treaties (DTTs) between countries to prevent double taxation, problems might arise if local law and DTT definitions are different, which could trigger liability for local tax. For recruiters, some risks could filter down to them should a contractor be operating from a different country without paying the relevant taxes in the jurisdictions they are connected with.


Keeping abreast of local covid compliance

While there is no doubt that many countries are now beginning to relax entry requirements for incoming contractors, a plethora of often complex rules remains around testing, quarantine, and vaccination for incoming arrivals in the majority of territories.

Authorities across the globe are taking a stringent stance when it comes to limiting the spread of the virus, so anyone staffing firms are putting forward for international opportunities needs to follow guidelines or risk being refused entry at the border. Get it wrong, and aside from the potential financial implications, firms risk damaging relationships with customers and contractors.


International recruitment compliance: a complex landscape

International compliance is highly complex and wrought with potential risks for recruitment firms. However, the pandemic has broadened the scope for potential global growth for recruitment businesses. For senior management, the pandemic has created opportunities that shouldn’t be missed. Rather than take an approach of avoiding the potential risks your agency could be exposed to, recruiters must ensure compliance while subsequently capitalising on the potential that the international market can bring to their firm.

If you are seeking to take advantage of the opportunities that this post-pandemic world has created – but need to know more about international recruitment compliance to do so – speak to our 6CATS International specialists for advice today.

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