Failing to comply with labour laws in your target hiring country often results in severe penalties, legal disputes, damaged reputation, and more. Here are the consequences of non-compliance, explained in greater detail:
- Financial penalties — One of the biggest risks for non-compliance is the hefty fines, which can exceed $500 million in high-profile cases. Depending on the case, companies may also be required to pay taxes and social security contributions retroactively, along with interest and tax audits.
- Legal disputes — Violations such as incorrect worker classification or failure to adhere to local labor laws can trigger lawsuits. These legal disputes are on the rise since remote work and AI-driven HR tools are testing existing legal frameworks, creating gray areas.
- Reputational damage — Publicised compliance failures erode customer trust and investor confidence. On top of that, it leaves a stain on the company name, deterring potential employees who might be the best fit for your organisation.
- Operational disruptions — Non-compliance causes employee turnover, workflow delays, and resource strain. Legal battles and investigations divert focus from core operations, while workforce instability reduces productivity.
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