Avoid Disguised Employment to Stay Compliant
Don’t fall for this trap when hiring abroad, or your company is going to get in trouble regarding corporate compliance.
Employees’ work preferences have changed since the pandemic began, with many leaning towards remote working. According to Buffer’s 2022 State of Remote Work report, a whopping 97% of employees recommend remote work and would like to work remotely for at least some of the time for the rest of their career. 1
Taking this as a great opportunity to expand overseas, businesses all over the world are trying to hire abroad and expand their international team. However, hiring abroad comes with its own dangers. If you are not careful, you might not fulfill corporate compliance and legal regulations. And one major pitfall to look out for would be disguised employment.
So, what exactly is disguised employment?
Disguised employment is when the contractor or freelancer being hired to fill a role becomes treated like a regular full-time employee. Also known as forced entrepreneurship, these contractors are taken onboard in such a manner to either help the company save costs or speed up the onboarding process. This is a practice that occurs especially when a company is trying to set itself up in a new location.
Unfortunately, this practice done on purpose or by accident can be detrimental. If the contractor or freelancer is fulfilling obligations that are more like that of an employee, both your company and worker can get into trouble. After all, it means that your company hasn’t achieved corporate compliance.
Find out if you’re guilty of disguised employment
To spot disguised employment, you will need to review the working relationship between your company and the worker. Look at the job scope and expectations of the contractor, then assess the contracts on a case-by-case basis. Here are some questions that can help you better assess the situation:
- How much do the contractors/freelancers get paid?
- Do they decide when and where they complete the job?
- Are they allowed to work for other clients?
- Is it possible for the contractors/freelancers to leave without notice?
- Does your company classify the work arrangement to be ad-hoc and not fixed?
- (Dependent on local laws and regulations) Are they not entitled to employee benefits, such as paid sick leave and vacation days?
Your answer to any of those questions should be a firm and confident “yes.” Otherwise, it is possible that your company is engaging in disguised employment. That’s not good news. The risks and penalties of engaging in disguised employment vary from country to country, but they usually incur a heavy financial cost for the companies involved.
How AYP can help you avoid disguised employment
To achieve corporate compliance and avoid disguised employment, it might seem like your company needs to know everything about global employment law, compliance mandates, and the regulations in different countries. But there is a much easier way to get past this hurdle and to expand your business to wherever you want.
By leveraging AYP’s HR knowledge and expertise, your company can achieve corporate compliance without knowing all the laws and regulations under the sun. In fact, by trusting AYP’s PEO services today, you can hit the ground running in a new location without much trouble and worry.
AYP uses analytics, data, and algorithms to help you improve your hiring practices and put good employment practices in place. And as an award-winning end-to-end HR solution in Asia Pacific, you can be sure that your company’s payroll and productivity would be properly managed too. Learn more about our AYP Global Pay platform scheduling a demonstration today.