This year, I’m spending more time working with vendors across the HCM technology and services marketplace to understand the key trends and learn more about the modern solutions and innovations focused on advancing how compliance is managed across the HR spectrum.
The struggle is real.
In HR buyer research, compliance bubbles up consistently as a top challenge for practitioners and a leading driver for HR and payroll-managed services adoption as regulations evolve, introducing new complexities at an accelerated pace.
Over half of employers cite mounting concern for solving skills gaps locally and struggling to attract top talent as key obstacles to business transformation and remaining competitive. These obstacles lead to organizations of all sizes commonly engaging talent beyond their home borders and seeing their footprints expand alongside their total talent strategies.
For multinational companies, complying with global employment laws has become increasingly challenging, if not unmanageable for some, further amplifying risk at scale for emerging and the most mature multinational firms.
Deel’s differentiated fintech and SaaS foundation.
I recently had the opportunity to go behind the scenes at Deel, one of the market’s largest and fastest-growing global workforce solution providers supporting 20K MNC businesses, moving $4.5B in payments annually to over 300K workers around the globe.
Deel’s approach to compliance is rooted in its DNA – literally. Founded as a fintech and SaaS solution to help workers process invoices for payment, the company built its global employment solution on top of a fintech-first framework and infrastructure. The very nature of fintech’s innovation and design is rooted in compliance. It also “leaned in” from the start of its journey, working closely with global regulators to adopt the most advanced and rigorous compliance framework possible, which it continuously advances.
This is a very differentiated design approach amongst its global payroll and EOR peers, most of whom are partnering and, in some cases, acquiring fintech and money movement capability as a bolt-on later; many only recently doing so with the boom in cross-border and digital money movement. Deel leverages banking partners for its global payment “rails”, infrastructure that moves money from one party to another. Deel supports this system with over 450 global bank accounts, enabling a risk-averse, diversified payroll funding approach.
How Deel “orbits” its clients and business.
Beyond its foundational fintech infrastructure, Deel incorporates a relentless customer validation process, deeply understanding who they are and what they do (e.g., business operations), incorporating an “always on” horizon scan process to monitor and proactively track changes and activity across its base. Generative AI is natively embedded in APIs, moving client and payment data to surface summary changes and flag activities for immediate action.
All clients undergo an advanced background screening process that is constantly refreshed over time. Deel also assesses onboarding documents to help ensure pay, benefits, and employment are accurate and consistent with applicable law. They assess right-to-work documentation and proactively engage the client with the next steps. Local teams review and ensure contract terms remain compliant, including flexibility for “redlining” to meet client unique employment needs while protecting employees and workers as a standard, incorporating a balanced approach to employee-employer care, something Deel takes incredibly seriously. All workers are screened against international sanction lists, and background checks are applied where permitted by law to ensure nefarious players are identified immediately.
Risk monitoring is a key theme in Deel’s approach to its mammoth task. Clients are risk-scored and routinely assessed, with risk ratings shifting as and when activity warrants it. Due diligence is refreshed and revalidated when needed. If necessary, Deel can and does freeze accounts and return funds to prevent fraud and harm.
Every country Deel operates in (entities across nearly 100 countries) is underpinned by a center of excellence (COE) at the regional, if not country level (for larger countries), led by a local certified public accountant (CPA) finance manager, responsible for local compliance and reporting, supported by a team that incorporates local HR experts, payroll managers, legal counsel, and finance support. Deel also maintains stringent data security and protection standards, led by a data protection officer, including SOC II and GDPR certifications.
Deel’s compliance innovation.
Deel is constantly seeking new ways to fortify its business and compliance while supporting the same for its clients and workers, and to that end, leans into compliance with global employment laws at the local level. In 2022, Deel launched the Deel Lab, a consortium of universities brought together to study worker classification globally and led by Deel’s Chief of Policy, Cornell Law Professor, and AI in law expert Samuel Dahan. (See the recent HR & Payroll 2.0 episode, where I interviewed Samuel about the work at the Deel Lab).
The industry-first consortium’s work includes leveraging AI to study case law at the country and local levels to understand misclassification litigation cases and derive a confidence index for how judges rule on worker classification. Deel began its research in the U.S. and Canada and will gradually work through over 100 countries where it operates and employs workers. This research is helping pave a compliant path for an entire industry that lacks any 3rd party entity to support its interests.
Workers and businesses can” test drive” the Deel Misclassification research tool here: https://lab.deel.com/misclassification-assessment. Deel also publishes a semi-annual State of Global Hiring Report to share the findings of its work.
Go Slow to Go Fast.
With organizations of every size increasingly seeking to engage talent beyond borders, the Global EOR model can offer a turnkey, compliant model for executing strategic plans and unlocking a world of rich talent and opportunity for fueling strategic outcomes.
My keys to selecting a global employment services partner center are three core focus areas. There are many other elements to consider, EX, CX, tech and solution capability, etc., but these are the essential lenses through which you must select these solutions.
- Compliance: this is where you must understand “how the cake is made”; how does the provider enable and support a compliant global employment vehicle? What tools, technology, and leading practices are in place? Speak to customers and their worker/employee users and understand how your provider enables its services and fulfills its compliance requirements.
- Entities: there are multiple ways global EORs go to market and enable their “employment vehicle.” Aggregator (entities are entirely partner enabled), Direct (owned entities), and Unified (hybrid mix) models all offer varying levels of benefits and drawbacks for the buyer and provider. However, in my research, the direct EOR model is the most impactful among adopters for CX, EX, and compliance outcomes due to enhanced understanding, investment, and control in the country serviced.
- Capability: Can the provider support your target country, or do they need help? When a provider owns local entities, has expert boots on the ground and in the country of choice, underpinned by a modern, compliant, localized infrastructure, they can control the experience and outcomes up and down the value chain, and the service experience is differentiated. Too often, global EOR firms are operating as aggregators, and while a single-throat choke sounds good, they lack complete control and expertise for the locations they serve and, thus, the overall value chain, experience, and outcomes.
The global EoR service model is a true human potential and organizational agility enabler designed to help companies facilitate their strategic ambitions and accelerate improved outcomes. However, the marketplace is crowded, confusing, and mildly differentiated regarding vendor capability. I caution global EoR buyers to over-emphasize the due diligence here… ”go slow, to go fast” and prioritize compliance and capability when choosing a partner.