A vendor management system (VMS) can not only make compliance easier. It can also automate many of the laborious tasks associated with it. This can help you steer clear of litigation, financial penalties, and generally keep your company out of unwanted hot water.
Not only can a vendor management system (VMS) provide a holistic view of external talent and services providers that businesses source across channels and around the world. It also increases process efficiency. In addition to providing new strategic insights, a VMS automates processes that take time but are critically important. This article reviews just how a VMS can automate the tasks you need to comply with international labour laws.
Worker misclassification conundrum
Worker misclassification is one of the biggest risks and challenges facing organisations with a significant contingent workforce. Lawsuits, as well as federal government initiatives, are becoming more common. This means that your system controls and a centralised process need to be robust to mitigate against the risk of this happening.
For many organisations, these processes can be almost wholly automated, whereby tax codes, payroll processes and worker classifications can be automatically allocated. A vendor management system (VMS) helps protect organisations, all while ensuring compliance with worker classification laws globally.
IR35, United Kingdom
In the United Kingdom, the newly introduced IR35 anti-tax-avoidance legislation represents the Government’s latest efforts to bring tax rates for contingent workers to an equivalent level of full-time employees. This means that they will owe broadly the same Income Tax and National Insurance contributions.
One of the most notable changes is in how the UK makes businesses responsible for workers that are found to be ‘disguised’ employees. In these instances, businesses can be liable for fines and late penalty fees. And, in the event of litigation, the impetus will be on your organisation to prove compliance, demonstrate a full audit trail, and consistent processes.
Using a VMS, you will be able to get on top of the new legislation by:
- Creating automated, easy-to-understand processes that assist in the assessment of your contractor’s tax status
- Keeping a full, tracked, and trusted record of employees, their tax statuses and other critical information required to demonstrate compliance
- Enabling you to easily run reports that show the IR35 status of your contingent workforce
Read more about how Beeline’s VMS is already helping multinationals prove IR35 compliance.
WAB and DBA Acts, The Netherlands
The Netherlands is another Government that has launched new regulations governing the tax status of independent contractors and contingent workers. At the start of 2021, the DBA Act (Deregulering Beoordeling Arbeidsrelaties [NE] or Deregulation of the Review of Labour Relations [EN]) was replaced by new legislation that seeks to offer greater clarity to both workers and organisations. The new module, called Opdrachtgeversverklaring, is now effective.
The WAB has introduced a new definition for on-call contracts where an employee no longer had to be ‘on call’ for work. The amendment to the law proposes that an on-call employee will only be obliged to come to work if an employer requests to do so four days in advance (the calling period can be shortened to 24 hours by collective labour agreement). If the employer cancels the assignment within this period, the employee is entitled to be paid for the hours cancelled. After one year, the employer must make a written or electronic offer for an employment contract to the on-call employee for the average number of hours he worked in the year before.
Our VMS has an online portal through which all supplier contracts are originated and maintained. The portal securely maintains all required documentation, including all financial information when managing supplier payments.
Other regulations
Most countries have a burden from the new compliance, such as Australia’s Fair Work Act, which brings in new definitions around contingent workers - effectively elevating their status and rights in law. Germany’s Arbeitnehmernüberlassungsgesetz is a regulation for temporary workers that’s designed to limit misuse of personnel leasing and strengthen the position of employees working under such contracts. Some of these new rights require organisations to procedurally offer some contingent staff permanent contracts based on their tenure within the organisation. Without the right controls and data, these requirements can be difficult to follow, especially for large international organisations with thousands of employees.
To aid in their compliance, many organisations with operations in Australia and Germany are looking towards solutions like a VMS to formalise their processes.
Wondering what to do about this new compliance burden?
The laws and regulations surrounding the use of contingent workers are becoming increasingly complex and demanding – just as more large, multinational organisations seek to harness the benefits these workers bring.
To fully capitalise on the advantages of a contingent workforce, you need to ensure that your business is set up to be fully compliant across all markets of operation. You also need the tools to capture data, document processes and give you visibility into the status of all your contingent workforce, internationally.
Beeline’s next generation VMS solution has been created to specifically address the challenges these new regulations are bringing to organisations. It helps you automate processes, prove compliance, and incorporate traceability into the management of your contingent workforce. To learn more about the changes in the law, watch our worker misclassification webinar, or get in touch with one of our enterprise experts at Beeline for more information.
