It is about ten minutes into my conversation with Laurel Farrer, CEO of Distribute Consulting and founder of the Remote Work Association, that I realise working from the wrong setup at home may be seen as a form of non-compliance. I am sitting on the couch, instead of an ergonomic chair and desk, I have no arm support, I am tilting my neck too much, there is no window close to me and the lights, while cozy and dim, are far below the health standard. A simple decision to work from home is not so simple after all.
I am not the only one.
“Going back 60 years, there were no laws that governed workplace safety, and people were having all sorts of chiropractic, muscular, degenerative, visual, and auditory problems because their setup was bad. HR professionals started to lobby for regulations that fixed the setup to prevent those from happening and we saw a great improvement. With the explosion of remote work from homes and cafes, we are turning the clocks back, losing all the regulations we had,” Laurel, who has spent over ten years navigating the space of remote, says.
Proper occupational health and safety are only one of many HR compliance topics fully or partially distributed companies may not be thinking about. For all the popularity and buzz of remote, there is an acute lack of talk about the operational side of things that is vital for a distributed company’s success. That starts with figuring out how to pay remote workers legally and compliantly.
“We are still in a state of figuring things out on the go and are prone to many trials and errors.”
To cross the chasm into more mainstream and scaled usage, remote needs to mature, and that can only happen if companies start taking things like compliance seriously.
“Most mistakes are made because founders are just not aware of what it takes to be a compliant remote company; they’ve never really thought about it before. I have this conversation with CEOs of companies that have been working remotely for ten years, and even they would tell me they have never thought about that before, so it’s just not on people’s radar.”
With this article covering the ten most essential aspects on the road to becoming an HR compliant distributed company, we want to begin to change that and put compliance on people’s radars. It will be relevant for you regardless if you are dipping your toes into employing people remotely, are undergoing transition into a hybrid model or already have a fully distributed company.
I wrote it sitting on a proper desk in the office. If you are reading it on your couch, maybe take my example. Your neck, eyes, and arms will thank you. And the Health and Safety inspector will be pleased too.
1. Occupational Health and Safety Regulations
Every country has regulations regarding what constitutes a healthy workplace. Speaking to me from her home office in Connecticut, Laurel falls under OSHA jurisdiction, which dates back to 49 years ago when it was enacted by President Richard Nixon. The self-proclaimed “crappy” chair she sits on, is probably not OSHA compliant. Each country’s regulations will determine what the optimal office temperature, desk ergonomics, tripping hazards, dangerous equipment storage, and many others are.
While Health and Safety inspectors coming around and making sure that an office is compliant is relatively standard practice, that regulation is lost in a home office. According to Irish law, an employer who allows remote work from home is obliged to send a health and safety inspector to the home of the employee, yet that rarely actually happens. This is particularly key in the case of a remote employee getting injured while working. Whose responsibility is it? Is the person entitled to worker compensation?
2. Employment contracts
The purpose of an employment contract is to very specifically outline everything an employee does, including the working environment, expectations, and regulations for the job. What many companies don’t realize is that if that same employee spends time working off-site, meaning from a different environment, many things in that contract will need to reflect that. Performance expectations change, reporting expectations change, hours change, as well as many other structural aspects of the job description.
If an employment contract is not updated accordingly, it could be deemed void, which would mean the employee is working illegally. On top of that, once you cross international borders, each country has very specific rules what must be included on an employment agreement making it especially difficult to be a compliant remote company.
3. Information security
Working remotely often conjures images of working from a cozy cafe, warm drink in hand, smooth jazz playing in the background. Yet, what that image should also conjure is a public WiFi connection and all the related potential security breaches it comes with. Using an open WiFi connection or even a non-secure one at home makes remote employees an easy target to hackers looking to harvest sensitive and valuable client information.
Beyond the obvious problem of leaked data, in places like the EU, which have strict regulations around personal data usage, the company could get fined under GDPR regulation. At a minimum, all remote employees should be using a VPN connection when connecting to unsecured networks.
4. Information security guidelines
Naturally coming from the previous point in an effort to protect the information security, different associations around the world enforce information security guidelines. An example from the US is the Health Insurance Portability and Accountability Act (HIPAA) that regulates patient data security in a very stringent and specific way. Every single person in the entire healthcare industry that accesses patient records that has their name, medications, date of birth, blood type, and other healthcare records has to be working in a HIPAA compliant environment.
The reception desk has to be a certain height so that people can’t see the receptionist’s computer screen, and if there is a door behind them, it has to be locked. If people start working from a remote office, for the company to be legally compliant, that workspace also has to be HIPAA compliant. HealthTech companies will be breaching laws if they are based in a co-working space with hot desks, and people can easily walk behind them.
We live in a global village and, if you want to build a world-class team, you will naturally want to draw from a global talent pool. As easy as this may sound, it’s anything but. The reason is that you have to ensure compliance for the local tax regulations for every state or country where you have an employee. So that means if you have five employees in five countries, or states, you are responsible for paying employment taxes in five countries or states.
If you do not comply with this, you could be charged with tax evasion or tax fraud. Geography isn’t the only factor a compliant remote company should consider, however, as different types of work fall under various regulations – industry, type of product and service, the number of hours worked are all nuances that change the taxation you are responsible for.
6. Local employment laws
Each state and country has precise employment laws that stipulate what the rules are for employing somebody in that area. This covers a myriad of things such as hiring regulations, days off, sick days, minimum wage, advance warning for termination, severance pay. All of those local employment laws mean that managing each of those aspects of employment as a distributed company will get extremely complicated.
According to the Working Hours Act, passed in 1996 in Finland, for example, most staff have the right to adjust the typical daily hours of their workplace by starting or finishing up to three hours earlier or later. Termination is one area, which is particularly problematic since even though there is legislation around it, in practice it could be nearly impossible to end someone’s employment. In France, employers could go to jail for discriminatory dismissal, as is potentially the case for French film director Luc Besson.
7. Statutory benefits
Deriving directly from local employment law are local benefits, which can loosely be grouped in government-provided and government-mandated. Each local government will clearly differentiate between the benefits that it offers, and the ones an employer is obliged to provide. For example, in the UK, providing employer contributions to a pension scheme is mandatory, while in Ireland, all employers with more than 5 employees must offer access to a pension scheme, but they don’t have to make contributions.
Paid time off statutory obligations, such as vacation, holidays, maternity and paternity leave, and medical leave, are treated very differently between the US and European countries. Similarly, disability, life insurance, and health insurance benefits are mandated for employers to provide to employees in some countries and not in others.
For certain occupations that require a license, hiring remotely poses an extra complication. Let’s say you are recruiting nurses to answer phone calls in a customer service department. The medical license of a nurse will vary between states and countries. An employer has to make sure that all of the licences are standardised to the local country. Saying to a customer on the phone, that they will be connected with a nurse, can mean different things in different countries.
A similar predicament can arise with any profession that requires a licence – accountants, lawyers, tax experts, and other positions in the finance and healthcare sectors. Look at the accountant certification standards in your country and see whether they match the other country’s criteria. If they match, then yes, you can hire this person. If they don’t match, it doesn’t work.
9. Worker classification
Anyone who has ever tried to employ in a new country or jurisdiction knows just how difficult and complicated it is to comply with local rules and regulations. That is why many distributed companies opt for hiring people as independent contractors, which solves a lot of the hurdles with international employment. However, in most countries, long term full-time independent contractors are rarely a viable or legal solution.
Governments around the world have a different way to classify what constitutes a full-time employee. Still, a rule of thumb is that if a person works full time for you, within certain hours of the day, reports on their work throughout a project, receives a computer and other technology from you, they should not be treated as independent contractors. Breaching that could have severe financial and fiduciary implications.
Beyond jeopardising the status of a compliant remote company, worker misclassification also poses an ethical problem. Regular employment offers a lot of rewards and benefits, unlike independent contracting, including security and tenure, which the HR world has fought long and hard to have in place. When you are hiring people full time without giving them those extra benefits, you have to ask yourself how fair and ethical that is, especially if you are doing it to evade laws and regulations.
10. Anti-discrimination laws
Similar to previous points, each country has a diverse set of anti-discrimination laws you have to abide by. Sometimes they even may differ within different jurisdictions within the same country, as is the case with the US and Australia. Fairly standard characteristics that fall under anti-discrimination law could include race, color, sex, sexual orientation, age, physical or mental disability, marital or relationship status, family or carer’s responsibilities, pregnancy, religion, political opinion, national extraction, social origin, gender identity, intersex status or trade union membership.
However, when it comes to remote work, understanding instances of discrimination are more difficult to grasp. What does sexual harassment look like in a virtual environment? What bias is happening that you may not be aware of because you are not there? According to Laurel, cases of discrimination on promotion and career development are widespread in hybrid teams (a mixture of office and remote), yet recognising and enforcing regulations is still tricky. Organisations such as the Society of Human Resource Management can offer help, but more work needs to be done.
A lot of small businesses are not upheld to or aware of most of these legal obligations. They can fly under the radar more easily. However, it shouldn’t be this way, and Laurel urges that companies make it a priority to be as compliant as possible to make remote work better. View becoming a compliant remote company as a New Year’s resolution worthy of having.
Becoming an effective, compliant remote company may not be a unicorn kind of narrative, but it’s good for business as it puts people’s happiness and safety first.
“As a remote employer, if you’re saying come work for me, it’s your responsibility in exchange for people’s services, expertise, input, to provide them with a safe place to work, with security, compensation, and growth.”
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