Global Compliance: The Essential Guide for Expanding & Managing International Teams

The Evolving Role of Global Compliance in a Borderless Economy

Modern businesses operate on an unprecedented global scale, with many enterprises also becoming key players in the global economy. Perhaps then, it should come as no surprise that the top 500 multinational enterprises generated over USD $21 trillion in revenue in 2023, making their earnings higher than the European Union’s combined GDP.  

However, while this global reach allows organizations to tap into diverse talent pools and markets like never before, simply being “multinational” doesn’t exempt them from the influence of local legislation. 

Ultimately, whether you’re a large enterprise or a small to medium-sized business, you are still governed by local labor and employment laws. As such, global compliance is an absolute necessity for businesses of all sizes, especially those looking to expand into new markets.  

At Atlas, we provide unrivaled compliance expertise and are uniquely positioned to enable innovative companies to compete in today’s global economy.  

What Is Global Compliance & Why Does it Matter?

Global compliance refers to when a company complies with international labor laws, as well as the rules and regulations of each country it operates in. 

Achieving global compliance is important as it ensures that your company is following local labor laws, and thereby, mitigating risk.  

Table of contents

1. Global Compliance: The Essential Guide for Expanding & Managing International Teams

2. The Biggest Global Compliance Challenges for Small and Medium Enterprises

3. Overcoming the Burden of Global Compliance for Enterprises

4. Misclassification: The Hidden Risk in Global Hiring

5. The Role of an Employer of Record in Global Compliance

6. Global Compliance by Region: What You Need to Know

7. Real-World Global Compliance Success Stories

8. How to Assess Your Compliance Risk

Navigating Employment Law Variations

One of the most common global compliance challenges that SMEs tend to face when entering new markets is adhering to each country’s labor laws. These laws (which often differ greatly between regions) encompass several aspects such as employee classification, minimum wage standards, employee benefits, and even termination procedures. 

In the United States, for example, most employees are “at will” employees, meaning that their employer can terminate their employment at any time without notice or even cause. By contrast, in Japan, employers must provide employees with either 30 days' notice prior to dismissal or payment in lieu of notice and also have a valid reason for the termination.  

For SMEs, ensuring global compliance with local employment law is a fundamental part of business, as misunderstanding or misapplying these regulations can lead to significant issues for both employees and contractors alike. In some instances, this could result in employee misclassification, false employment, legal disputes, and potentially, financial penalties. 

Complex Tax Compliance and Payroll Regulations

For SMEs expanding into new markets, navigating tax laws and payroll compliance is a critical, but often underestimated challenge.  

Corporate tax obligations, payroll taxes, and social contributions vary significantly across jurisdictions, and being unaware of these requirements can lead to substantial penalties or even legal action. 

Beyond payroll concerns, global compliance also includes understanding local VAT/GST regulations, double taxation treaties, and the classification of foreign income. Without a firm grasp of these obligations, SMEs are at risk of compliance breaches. To ensure global compliance, therefore, businesses must stay up to date with local tax laws, implement accurate payroll processing systems, and, where necessary, seek professional tax guidance to avoid costly mistakes. 

Keeping up with Changing Regulations

Politics and international law rarely stand still, which is why one-size-fits-all compliance solutions can fail.  

The challenge then for SMEs is twofold: First, business leaders must stay informed about regulatory changes as they happen, and second, companies must ensure that their internal policies, contracts, and payroll systems are updated accordingly.  

Without a structured compliance strategy, businesses may unintentionally breach regulations, exposing themselves to financial risk and legal complications.  

Technology in Compliance Management

As compliance becomes increasingly complex and data-driven, SMEs are turning to technology solutions to simplify global compliance processes. 

From automated payroll systems to AI-driven regulatory monitoring, the right technology can help businesses track, implement, and enforce compliance policies across multiple jurisdictions. For instance, many companies now use dedicated HR and payroll software to ensure compliance with local tax laws, social contributions, and employee benefits. 

However, for SMEs with limited in-house compliance expertise, using an external service such as an Employer of Record (EOR) is highly recommended. As a leading EOR provider, Atlas combines deep regulatory expertise with a human-first approach, ensuring businesses navigate global expansion safely and compliantly. Powered by people, our trusted experts provide hands-on support across more than 160 countries, offering tailored guidance on local compliance, workforce management, and more. 

Solving the Global Compliance Puzzle

At Atlas, our global reach means that we understand that while global compliance is a multifaceted challenge, it is a hurdle that SMEs can overcome with the right approach.  

As businesses expand into new markets, understanding and addressing employment law variations, tax obligations, regulatory updates, and compliance is crucial to long-term success. 

Below, we explore some of the most significant compliance challenges affecting large enterprises today. 

Regulatory Fragmentation and Operational Complexity

As the term suggests, enterprises frequently operate in multiple jurisdictions at once, often with each territory having its own, unique legal framework, tax obligations, and reporting requirements. The challenge for enterprises therefore lies in harmonizing compliance efforts across different regulatory environments, all without creating inefficiencies or increasing their risk exposure. 

One of the most polarizing examples of this comes from enterprises that operate both in China and the United States. Enterprises that wish to do business in both of these countries must comply with two vastly different data localization laws and cybersecurity frameworks.  

China’s Cybersecurity Law enforces strict data localization mandates which require companies in specific sectors to store and process all personal and critical business data within China’s borders. By contrast, the U.S. does not enforce blanket data localization laws. However, it does apply sector-specific data protection regulations.  

Fundamentally, the biggest difference between the two nations is that there is no federal law requiring businesses to store all U.S. consumer data domestically, However, despite this seemingly more open approach, the U.S. Justice Department has recently reinforced restrictions on what it considers “adversarial nations”, preventing them from accessing bulk U.S. government and personal data. 

For enterprises, these contrasting regulations can create significant operational and global compliance challenges.  

The High Cost of Compliance and Non-Compliance

Maintaining global compliance is of paramount importance to businesses of any size. However, for enterprises, achieving global compliance also comes with significant financial implications.  

For many enterprises however, the damage from non-compliance is not just financial, but can also lead to operational disruptions, reputational damage and potentially a loss of investor confidence.  

Balancing Compliance with Agility & Global Expansion

Due to their immense size, enterprises must also balance strict compliance requirements with operational agility and growth.  

Regulatory changes often force businesses to rethink their global expansion strategies to comply with new laws. A prime example is 7-Eleven’s parent company, Seven & i Holdings, which attempted to use Japan’s Foreign Exchange and Foreign Trade Act (FEFTA) to block a USD $47 billion takeover bid from Canadian firm Alimentation Couche-Tard (ACT). 

FEFTA requires government approval for acquisitions in industries tied to national security, but Japanese regulators rejected Seven & i’s attempt to classify convenience retail under its protections. This case underscores how foreign investment laws and compliance regulations can directly impact multinational workforce planning and corporate structuring, reinforcing the need for businesses to align expansion strategies with evolving regulatory landscapes. 

The Future of Global Compliance for Enterprises

Compliance is not just a legal necessity — it’s a competitive advantage. While regulatory complexity, rising costs, and evolving laws continue to challenge businesses, those that take a proactive approach to compliance will position themselves as leaders in the global marketplace.  

Misclassification is often prevalent across the gig economy, and is frequently used as a means to quickly test and expand into new markets. Misclassification is also a common occurrence for many who work across low-wage and labor-intensive occupations. 

Beyond the substantial damages to workers, employee misclassification can also prove costly for businesses, both in terms of fines and reputational damage. One of the most notable examples of a business facing such issues has been the extensive legal scrutiny Uber and Lyft have faced over its classification of drivers as ‘independent contractors’.  

In November 2023, New York’s Attorney General, Letitia James, announced a landmark settlement against Uber and Lyft as part of a major wage-theft investigation. Following the verdict, both companies agreed to pay USD $328 million, to compensate drivers and provide benefits such as paid sick leave. A similar case in Massachusetts, in June 2024, was also settled between Uber and Lyft for USD $175 million. 

These misclassification disputes have had tangible financial repercussions for Uber, with the enterprise’s stock price proving sensitive to any regulatory news on gig worker status.  

While their cases often get far less media coverage, it’s also important to remember that SMEs are not immune to the pitfalls of false employment and employee misclassification. Regardless of intent, misclassification can have a litany of disastrous consequences for SMEs and can erode trust amongst consumers and prospective employees alike.  

In most instances, enterprises such as Uber, typically have the financial capacity to suffer short-term losses, and potentially repair their reputation over time. SMEs meanwhile tend to operate with more significant financial constraints, and as such, might be unable to withstand the fallout caused by being perceived as unethical or exploitative.  

What is an Employer of Record?

Before we discuss how an Employer of Record can help your business to achieve global compliance, it’s perhaps a good idea to cover what an EOR is. 

Simply put, an EOR is a trusted-third party provider that serves as the legal employer for your global workforce. Often used by businesses looking to expand into new markets where they don’t have a legal entity, an EOR can handle numerous tasks on behalf of your company, including payroll, visa and mobility, tax compliance and more.  

Direct vs Indirect Employer of Record

When choosing an EOR, it’s important to understand that there are two different types of service providers, indirect EORs and direct EORs.  

An indirect EOR commonly doesn’t have their own entity in every country they offer their services in. Instead, indirect EOR’s rely on a web of third-party providers and in-country vendors of HR, tax, accounting, and legal services. Naturally, this added layer of complexity can sometimes cause severe service delays and can potentially even compromise your compliance. 

Meanwhile, a direct EOR service provider, such as Atlas, owns and operates their entities in every country where their services are provided. Direct EORs also act as the legal employer for all international hires. Due to their in-house nature, a direct EOR can help a business to be more agile in their scale-up methods, while still maintaining air-tight compliance levels.    

How Does an Employer of Record Prevent Misclassification?

Expanding your business into a new market can be a challenging task, even for the biggest of companies. Often, expansion comes at the cost of a considerable amount of additional admin and obstacles. However, by using the services of an EOR, many of these hurdles can be easily overcome, making both expansion and compliance a breeze. 
 
Arguably, one of the biggest benefits of using an EOR is to mitigate the risks of misclassification, especially when enlisting the services of independent contractors. A direct EOR such as Atlas can create streamlined processes to handle the transition between employee and contractor. Additionally, a direct EOR can also resolve any underlying employment rights that could cause misclassification.  

Many global markets enforce unique employment laws, tax regulations, and workforce policies, often requiring businesses to adopt a region-specific approach. With Atlas' expertise, businesses can navigate challenges confidently, ensuring global compliance in every jurisdiction they operate in. 

North America

North America, particularly the United States and Canada, presents one of the most dynamic, yet intricate global compliance landscapes. The U.S. follows a state and federal regulatory system, meaning employment laws can vary significantly across different states. Key challenges include at-will employment policies, evolving independent contractor regulations, and pay transparency laws, such as those now enforced in states like California and New York. 

Conversely, in Canada, labor laws are considerably more ‘pro-worker’, requiring businesses to adhere to strict termination policies, paid leave mandates, and even French language compliance in certain provinces. Additionally, both the U.S. and Canada have increasingly stringent data privacy regulations, further complicating compliance.

Asia-Pacific (APAC)

The APAC region presents a highly diverse compliance environment, spanning established markets like South Korea and Australia to fast-growing economies like India, Thailand and Indonesia.  

Employment laws in the APAC region differ greatly, with some countries favoring highly regulated labor markets and others adopting more flexible employment structures. Markets like Singapore in particular have labor laws that are more employer-friendly than some other APAC regions, but despite this, businesses must still adhere to strict foreign worker quotas and visa requirements.

Europe

Europe is known for its employee-friendly labor laws, with the European Union (EU) enforcing extensive worker protections.  

As with other regions, compliance challenges vary by country. For example, France mandates a 35-hour workweek, Germany enforces rigorous employee co-determination laws, and the United Kingdom has diverging policies, especially in areas like right-to-work requirements.  

Latin America (LATAM)

Latin America is a rapidly evolving business hub, with many LATAM countries mandating generous employee benefits, including mandatory 13th-month bonuses, extensive severance protections, and strict union regulations. 

For example, Brazil’s labor laws require formalized work contracts and extensive social security contributions, while Mexico enforces limits on subcontracting and requires businesses to classify workers correctly to avoid hefty misclassification penalties. Meanwhile, in Argentina, high corporate tax rates and economic instability further complicate compliance. Across LATAM, companies must prepare for frequent regulatory shifts and labor-friendly policies, making compliance a key factor in successful market entry.

Middle East

The Middle East presents a unique mix of employment laws, shaped by government-driven economic policies and cultural considerations. Many countries in the region operate under kafala (sponsorship) systems, which means that businesses must sponsor foreign workers. As such, this makes compliance with visa and residency requirements essential. 

Saudi Arabia has recently implemented Saudization (also known as Nitaqat) policies, requiring companies to prioritize local hires, while the UAE has introduced mandatory unemployment insurance and equal pay legislation. Across the Gulf Cooperation Council, businesses must also comply with Sharia-influenced labor laws, which govern contract terminations, working conditions, and end-of-service benefits. Ensuring local compliance expertise is critical for businesses operating in the region. 

Achieving Compliance with an International NGO

A European-based, international NGO and non-profit organization, faced three challenges that were becoming major obstacles to their expansion plans. The NGO needed to secure U.S. work visas for employees, mitigate contractor misclassification risks, and standardize its employee compensation across its global operations. 

After a period of extensive research and recommendations from other NGOs, the organization identified Atlas as its direct Employer of Record partner.   

Once Atlas was onboard, the NGO was able to streamline their visa applications, and begin hiring top talent worldwide. Atlas' global compliance expertise allowed the organization to ensure that their whole team was now being treated under equal terms — significantly enhancing transparency, while eliminating labor compliance risks.  

Learn the full story here. 

Turning Misclassification Risks into Opportunity

Founded in 2012, and launched officially the following year, inDrive has grown into the world’s second-largest ride-hailing platform, having amassed over 200 million downloads globally. However, due to the rapidly expanding popularity of the app, inDrive needed to figure out how to grow swiftly and on an international scale. 

Partnering with Atlas allowed inDrive to navigate the complexities of global compliance, and explore new markets with their unique contractor-to-employee model.  

Atlas played a crucial role in helping inDrive transform their global operations, while maintaining airtight compliance. As a result, inDrive was able to fine-tune their contractor and employee classification while still realizing their global expansion ambitions. 

Discover more about inDrive’s unique journey. 

One of the most common approaches businesses use to assess global compliance risks is through internal audits. Combined with continuous monitoring of internal hiring and employee processes, audits can be an effective method of internally evaluating your organization’s compliance risk. However, it’s important to note that this is a considerably resource-intensive process that could still leave you exposed to unforeseen compliance concerns. 

For a clearer understanding of employment regulations and a streamlined compliance process, specialized compliance software is key. One such tool is  Atlas’ Global Compliance Risk Calculator — a cutting-edge, comprehensive and user-friendly tool that delivers tangible insights, helping you to significantly mitigate the risk of false employment, employee misclassification and other notable compliance concerns.  

With entities in more than 160 countries, Atlas is the perfect global compliance partner for your business. Our vast, global network can provide you with unrivaled, expert knowledge of employment laws, ensuring that your business avoids the pitfalls of false employment, employee misclassification and a raft of other compliance concerns.  

Whether your business is looking to enter a new market or transition your workforce from contractors to employees, Atlas can help you to navigate the complexities of global expansion, while staying agile and compliant.