Global Employer of Record & GDPR: How They Can Help

Alex Margolin January 28, 2018
Staff discussing around table

Business owners are forced to wear many hats and spend a great deal of time and resources making sure that every aspect of their runs smoothly and efficiently. Smooth operations become harder to achieve in a global economy. Advancements in technology have made it simple for all companies, of every size, to expand outside their local or domestic area and into international markets. However, these expansions bring their own problems and challenges, some of which may be daunting enough to many small business owners to prevent expansion. This is where a Global Employer of Record (EOR) comes into its own.

What Is a Global Employer of Record?

An Employer of Record (EOR), is a third-party service that helps companies handle the many challenges associated with overseas market entry and global workforce employment. An EOR helps organizations to expand, source, onboard, manage & pay their worldwide workforce through one single provider. Difficult tasks such as international payroll solutions, HR & legal compliance with employment laws, as well as risk management are all services that an EOR can handle.

For many businesses that employ globally, keeping compliant with the many different international employment laws are the largest hurdle to overcome. Having to adhere to each country’s (and even states or regions) can be so complex that your business may be missing out on the many advantages of employing in other nations.

An Employer of Record is primarily used to overcome the huge regulatory and financial hurdles faced when a company employs workers in remote locations.  The challenge of meeting employment, payroll work visa requirement rules can be a significant obstacle to business expansion into foreign fields. The Do-it-Yourself approach of incorporation, registration and the maintenance of a local payroll can be costly, and resource draining.  However, for most many companies entering a new market, or companies without limitless HR resources, an EOR is the ideal alternative. The Employer of Record ensures that the complexity, cost and compliance risk of local employment are all managed and there is no reason to risk violating the varied labor, tax, and employment regulations. This includes complex new compliance laws such as the GDPR.

GDPR and What It Means to Your Business

May 25th, 2018 will see Europe’s data protection laws undergo their biggest change in two decades. The European General Data Protection Regulation (GDPR) will be Europe’s new framework for data protection laws. Replacing the 1995 Data Protection Laws, the GDPR will affect how businesses can handle its data. Any that either controls or processes personal data will come under the jurisdiction of the GDPR. All (a piece of information that can be used to identify a person) and sensitive (includes genetic, religious and political views, sexual orientation etc.) data is covered by the GDPR.

Specific criteria for companies required to comply with GDPR are:

  • A presence within an EU country.
  • No EU presence, but the company processes personal data of EU residents
  • Over 250 employees
  • Less than 250 employees but its data-processing affects the rights and freedoms of data subjects, or comprises specific sensitive personal data types. This means that nearly all companies are subject to GDPR.

The complete text of the GDPR contains 99 articles setting out the rights of the individual and the obligations of companies covered by the regulation. There will be distinct responsibility for companies to get the implicit consent of people they collect information about, whilst enabling individuals to have easier access to the information that companies hold about them. The GDPR contains provisions that require organizations to protect the privacy and personal data of EU citizens for transactions that happen anywhere within the EU member states. Meanwhile, the GDPR also regulates personal data being exported outside the EU, making it a true global concern. In short, companies, regardless of the industry, operating externally to the EU but performing business within it, will have to adhere to GDPR compliance as of May 25th, 2018.

Using an EOR to Handle GDPR

The standards of the GDPR are high and the fines and punishments for breaches of the GDPR are even higher. To ensure complete compliance, most companies that are affected will need to make a sizeable investment to satisfy GDPR regulations and maintain them. The GDPR can issue hefty penalties for non-compliance. An in breach of the GDPR can face a fine of up to €20 million or 4% of global annual turnover (whichever is higher).  It is estimated that failure to comply with the EU General Data Protection Regulation could see FTSE 100 companies face fines of up to £5 billion a year in the first year alone. To combat this, a PWC survey showed that 68% of companies based in the US expect to pay between $1 million to $10 million to ensure GDPR compliance, whilst another 9% expect the outlay to exceed $10 million.

Your business must be prepared for GDPR and other changing regulations worldwide. An Ovum report showed that approximately 66% of companies based in the US think that they will need to reconsider their European strategy because of GDPR. Of those companies surveyed, 85% believe that the GDPR will put their business at a competitive disadvantage with other companies within the EU. The same report shows that more than 50% of businesses believe that they will incur fines because of the General Data Protection Regulation.

A Global Employer of Record ensures that your company has a global HRIS (Human Resource Information System) in place that adheres to the GDPR and other regulations. GDPR is a game-changing compliance issue that can be costly to adhere to, but even costlier to fail to comply to. As data protection regulations will be uniformed in Europe, businesses like yours will no longer require consulting local lawyers to guarantee local compliance, resulting in legal certainty and direct cost savings.

The impact of GDPR and other new regulations are all handled competently and compliantly by a Global Employer of Record as part of the services offered. An EOR ensures you to manage and supervise your employees in a compliant manner, allowing you to wear fewer hats and relieving the hassle and fear of non-compliance.

Papaya Global payroll platform lets you:

  • Automate payroll with zero processing errors
  • Manage global payroll, PEO & contractors via one platform
  • Make cross-border payments in 100+ countries