This Blog follows on from my previous Blogs which set out the need to not only develop high performance recruitment and operational teams, but also ensure there is sufficient focus on managing the significant risks that will be faced in order to gain the rewards from the potential pot of gold in international recruitment markets.
The last C is Claims. As this is the final Part of the 4 Part Series, all four Cs are presented below. As the graphic below shows, SRC's "4C Framework" includes the following categories, you can click on each to jump to that C in this Blog
As UK recruitment businesses look to exploit the outstanding opportunities in the USA and other profitable international markets, I would recommend they seek to mitigate these principal risks, so the huge investment needed to enter and benefit from the market opportunities will not be lost down a black hole, along with monies needed to respond to the consequences of failing to operate a compliant business.
I have developed the “4Cs Framework” based upon my own experiences and observations over the last 16+ years across the recruitment industry in the management of legal and commercial risks associated with international recruitment. I hope that by sharing my insights with you, then you will be able to identify the critical business issues that you need to focus on to benefit from the financial rewards of international expansion.
The first category, Compliance includes the key risks associated with the following issues:
Employment - understanding how to compliantly engage temporary workers and the employment rights that they are then entitled to.
Classification - ensuring the employment status of temporary workers is correct, whether that be ‘employed’, ‘self-employed’ or through an intermediary, so as to avoid legal challenges from misclassification.
Visa - as an employer, it is your legal obligation to check the temporary worker has the right to live and do paid work for your client.
Tax - in some countries your tax obligations may be layered, for example in the USA, there are County, State and Federal regulations to be satisfied.
Data Protection - this is becoming an increasingly confusing legal issue for international businesses particularly data transfer between the EU and US. In February 2023, a European Parliament Committee recommended that the European Commission reject the proposed EU-US Data Privacy Framework - saying it did not comply with the EU's GDPR privacy regulations.
The second category, Care includes the key risks associated with the following issues:
Illness - individuals will fall ill at sometime, have you got adequate medical insurance in place along with a Medical Assistance company that will adequately manage medical emergencies and achieve acceptable service levels?
Injury - as above, are appropriate arrangements in place and do you have Workers Compensation insurance?
Death - hopefully this will never occur, however if unfortunate circumstances arise, are your staff fully prepared to deal with family in a sensitive manner and manage arrangements with the authorities and police?
Insurance - as emphasised above, it is critical to have the necessary insurances in place, some which will be mandatory.
On/Off Board - efficiently managing the onboarding of temporary workers and mobilisation to an overseas location is important to ensure they start their assignment well and does not adversely impact on your reputation. Even more important is their offboarding, particularly if the assignment unexpectedly ends early.
Travel - you need to recognise that when transporting individuals around the world, you have a ‘duty of care’ to them in terms of ensuring they can travel safely and that the accommodation etc that you provide is safe and secure.
The third category, Corporate includes the key risks associated with the following issues:
Entity Set-up - it is critical to have the correct legal, accountancy and tax advice to ensure the entity you use for doing business internationally - whether that be from a UK Company; a Branch or Company registered in the overseas location; or through a Professional Employer Organisation.
Shareholders - in some jurisdictions it is a requirement to have local nationals as shareholders to satisfy ‘Nationalisation’ legislation which can be tricky if they are required to have more than 50% ownership. A key question is how do you maintain control of your business and importantly, the cash in the bank account ?
Licences - again in some jurisdictions, you will be required to have a trade licence to do business and you need to ensure that it is the right one that enables you to legitimately provide recruitment services.
UBO - this stands for Ultimate Beneficial Ownership, and many clients and certainly banks and advisors will ask detailed questions about the ownership and control of each company in your corporate structure to satisfy their obligations under anti-money laundering legislation.
Sanctions - whilst sanctions legislation has always been complex, there has been an exponential increase in light of the international response to the Russia-Ukrainian war.
Trapped Cash - whilst there may be a pot of gold in international markets, if you are unable to repatriate cash from your international expansion back to the UK, then it becomes ‘trapped’ and effectively worthless in increasing shareholder value.
The final category, Claims, are those key risks that arise as a consequence of events going wrong resulting in potential litigation in the courts, including:
Client - in respect of clients, legal action could arise as a result of you taking a client to court for non-payment of your invoices, and then in reverse, a client taking you to court as a respect of errors and omissions in your recruitment services or, if you have accepted vicarious liability in your client contracts, losses arising as a result of errors by a temporary worker.
Contractor - in respect of temporary workers, legal action against you may arise due to the unlawful termination of a temporary worker or not accepting their termination as a result of alleged poor performance.
Staff - similar to above, such claims could arise from your own staff when they are terminated or they consider they have suffered discrimination or harassment.
Insurance - claims could arise from third parties as a result of professional negligence, injury, death or property damage, so you need to ensure you have adequate Professional Indemnity and Public / General / Third Party insurance.
There are obviously other risks that need to be considered, some of which will be specific to where you are doing business and the manner in which you operate. It is essential to develop comprehensive risk mitigation plans to ensure your international growth continues to be successful. By effectively managing these risks, then you are on the right road to ensure success and “can put your head on your pillow at night and sleep easier”.
My mission as a Business Advisor is to champion best practice in risk and compliance for the professional recruitment sector, and extensive experience in international recruitment, enables SRC to help businesses consider and mitigate their risks, so they can enhance shareholder value through the adoption of best practice.
Feel free to make contact with me to discuss any of the above risks and explore how SRC can support you with strategy and plans for international expansion.
Comments