As global leaders meet at COP 28, the UN’s climate change conference, in December, the recruitment industry is looking for one key issue to be addressed: What can be done to deliver the skills and resources required for building climate-proof infrastructure worldwide?
The International Energy Agency has already warned that a failure to deliver approximately 50 million miles of new and replacement electricity grids in the next two decades could jeopardize the transition to clean energy.
The world’s biggest engineering challenge will require a global redistribution of skilled project workers to achieve the net zero goals set out at the UN conference.
The transition will require a workforce that can work internationally and move around at relatively short notice and for varying lengths of time. This will test the workforce and employment laws of multiple countries. Consistent policies on tax status, in particular, would make the international placement of temporary workers far easier.
International recruitment comes with challenges. The barriers to international recruitment stem from inconsistent employment laws around the globe. Accessing a big enough pool of skilled contractors will be the first challenge, particularly when the employment system in question can be difficult to navigate and noncompliance can be detrimental to the worker.
The UK, for example, determines the workforce status of temporary staff using IR35, relying on end hirers to determine the employment status of their staff through a complex series of conditions that do not always align with similar tests in the US or Europe. Done wrong, international employers can face large fines from His Majesty’s Revenue and Customs.
The UK is considering how to manage the proliferation of unregulated and often uncompliant umbrella companies that promise cheap workarounds to this system. It is often workers that pay the immediate price of any corners cut through opaque and unfair payment practices designed to increase margins. While the government recognizes these problems, there is a risk that the regulatory solutions being considered could cause even more headaches for global employers seeking to engage British skills and expertise.
In the US, systems for worker classification can vary from state to state, with some using an ABC test, while others use a non-exhaustive “all of the circumstances” test to establish employment status.
To add to the confusion, at the federal level, a six-factor test has traditionally been used, and yet a two-factor “economic realities test” and the ABC test have been operational in the last five years. Now, the Department of Labor has proposed a new “non-exhaustive six-factor test.” Worker classification will remain inconsistent, however, as the IRS and individual states use different tests to determine worker status.
With this variety and inconsistency across borders, recruiters are going to face difficult challenges when the time comes to sourcing and placing more contractors overseas.
HR teams and recruitment agencies that want to appoint their contractors internationally will need a good understanding of the different employment laws to ensure full transparency with the end hirer and the worker and facilitate full compliance throughout the appointment.
Can borderless recruitment solve the problem? Unlike the UK, many countries around the world are now operating with an Employer of Record (EOR)/Agent of Record (AOR) structure to determine the employment status of temporary workers.
The EOR/AOR structure has proven to be more transparent and compliant than its equivalents, eliminating costs for the worker and minimizing noncompliance and deceptive practices by ensuring a cleaner, more transparent payroll process.
With this system in place across the board, recruiters would be able to appoint candidates internationally with efficiency and without the worry of non-compliance and offer contractors the confidence that they are receiving the benefits of being a temporary worker with little risk of complications.
The borderless society will need to come fast. The UK and US governments are both deliberating over how to improve their employment laws and temporary worker status. With urgency over the global energy transition increasing, it would be the perfect time to enable an EOR/AOR system that can facilitate the borderless recruitment of the contractors needed to deliver it.
In the meantime, recruiters should follow best practices to ensure that hirers and candidates are working within a compliant supply chain with minimal tax risk.