The Compliant World
Michelle Reilly, CEO of 6CATS International and founder of 6CATSPRO on international contractor compliance trends.
International contractor recruitment has always been complex. However, with global authorities placing greater scrutiny on non-compliant contract placements, a change in visa requirements in a post-transition environment and the pandemic continuing to pose a challenge for placements and contracts, compliance is now more intricate than it has ever been.
While ensuring your recruitment business and the contractors placed, abide by local and international laws isn’t simple and will require constant updates to policies as the legal landscape evolves, there are a number of immediate trends that staffing companies need to adapt to in the coming months.
The end of the Brexit transition period and the UK/EU deal is certainly one of the biggest barriers to address in the short term. Brexit is currently causing significant issues in that agencies can no longer simply place UK contractors into EU roles.
A recruiter seeking to place a UK national in Europe will now need to ensure that the individual has obtained the appropriate work permit. The challenge is that these aren’t easily gained. It’s not possible to simply have a ‘European’ visa that covers contractors for every EU location. And visa requirements will vary from country to country.
While the European Union is a collective authority, each location has varied requirements for these visas and the timescales to securing them will differ. At the moment, they are particularly hard to obtain quickly and can in some cases take up to three months – though in places such as the Nordics, this timescale is reduced.
For agencies that already place contractors globally, this change will arguably have little impact when compared with businesses that are new to the international market. Many firms that have experience of tapping into non-EU contract placements prior to Brexit have the set up in place and relevant knowledge internally or through an external partner to transition into the new requirements relatively easily. However, those without this experience will be starting from scratch and it’s vital that robust compliance processes are part of the strategy from day one.
Unfortunately, it is likely that there will be an initial decline in EU-based recruitment agencies contracting UK workers due to what many are already perceiving as ‘burdensome’ permit requirements. However, we do expect that those non-EU workers based in Europe who already hold the required ‘right to remain’ or ‘right to work’ documents will still be utilised by many firms.
Non-Brexit related EU / UK compliance
While Brexit has created a compliance challenge in itself, there are other legal requirements when placing contractors from the UK into Europe that have existed for some time. Agencies with prior experience of working between the two jurisdictions should already be aware of this, but for those tapping into the European market for the first time, it’s important to know what other requirements their contractors will be subject to, beyond the right visa.
As a case in point, a UK national operating under a UK-registered PSC in an EU country is likely to be working unlawfully. The use of A1 certificates – which allow the holder to work in the host country but stay within their home country’s social security system – is not recommended anywhere in the EU, with many member states withdrawing the use of these. Failure to adhere to this could not only result in penalties for the individual, but also the agency and end-hirer.
Covid compliance concerns
The global pandemic has without doubt created challenges for staffing companies, with international travel restrictions being implemented and amended constantly as authorities continue to tackle the spread of the virus. However, from a compliance standpoint, Covid has created two interlinked issues for contractor recruitment across borders.
Obviously, the ability to travel from location to location is highly restricted at the moment. Where entry into a country is permitted, there are a range of requirements that will depend on where your contractors are travelling from and to. This includes quarantine periods and presenting a negative Covid test, which sounds reasonable on paper, but does lead to an issue when it comes to contractor payments. While in quarantine, for example, these temporary professionals understandably don’t want to lose any remuneration, so we do expect to continue to see quarantine pay stipulated in many contracts.
Health insurance is also more vital for contractors than it has ever been and agencies working with these individuals on a global scale should advise individuals to ensure their insurance covers Covid-related treatment. While rare, there are instances of end-clients stipulating health insurance requirements in contracts, so addressing this issue from the get-go is advisable.
In line with the challenges presented by travel restrictions, a move to remote working is apparent in most specialist disciplines where it is practical. While we certainly welcome the continued efforts to allow contractors to work remotely in both their home country and the client destination, it does create a number of compliance concerns. Where an individual works, and in what location they reside impacts the taxes they need to pay. How long a person operates from and for a particular country also affects tax determinations. As such, your contractors could unknowingly be operating outside of local or national regulations due to their remote working set up. We advise all contractors and the recruiters that place them to seek guidance on a case-by-case basis to prevent the risk of possible fines or criminal prosecutions.
UK agencies shifting to international markets
There is also a trend in new UK agencies moving into international markets as they look to tackle a saturated recruitment market back home and the impact the pandemic has had on profits so far. And with demand for contract professionals to fill skills gaps increasing globally, international markets are, understandably, a key focus. However, this can cause two serious problems.
First of these is the attempted use of UK Agency Worker Regulation (AWR) contracts for international contractors. This does not work and offers zero protection for the individual and recruiter and should be avoided at all costs. Secondly, a contractor on an employed solution has to be paid in the currency of the country in which they are operating. Most UK agencies do not have currency accounts and agree contract rates in GBP which then have to be paid in local currency. This can quickly present a challenge, particularly when exchange rates vary, and it is often in the best interests of the recruiter to use a global payroll provider for international contracts.
A focus on compliance
One rather worrying development is the rise of a small number of unscrupulous management companies offering impossibly high retentions to contractors and a practice, borrowed from certain UK umbrellas, to offer to pay for contractors’ referrals in the form of incentives, or what might be more accurately called bribes. This dangerous for the contractor, the agency and the end-client and a clear breach of the Criminal Finances Act.
Rather more encouragingly, we’ve noticed over the last few months a substantial increase in agencies focusing on best-practice compliance. The 6CATS International team has been extremely busy as more recruitment firms commit to operating compliantly on an international scale as they expand their remit. There’s also been notable growth in multi-channel business, with an uptick in end-users looking to their existing agencies to source across borders now that remote working has opened up significant ‘new’ talent pools for organisations.
While international contractor compliance isn’t easy, the global market presents lucrative opportunities that recruiters simply can’t miss out on. Get compliance right now, and you’ll be setting your firm up for success in the longer-term.