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Best Practices for Handling an International Contract Extension

By July 17, 2017April 23rd, 2019No Comments
Best Practices for Handling an International Contract Extension

Mastering the art of employment contracts in global business is a large undertaking for organizations that are new to international operations. Each country has its own set of rules and regulations regarding contract establishment, including written versus verbal, acceptable languages, and type of employment. When it comes time for a contract extension, employers must ensure their employees have the proper work permits in place to support employment beyond the previously defined timeline. As companies make a plan to keep their global employees onboard for a longer period, it is important for them to understand what it takes to compliantly handle an international contract extension.

International-payroll

Establish a Reasonable Probationary Period

Due to the lack of flexibility in overseas hiring — given no “at-will” employment and termination variations — employers must establish a reasonable probationary period for all new hires, which must be established in the employment agreement. As expected, each country has its own regulations surrounding acceptable probationary periods.

For example, Germany permits a six-month probationary period, while those in China have various options, including six months for open-term contracts, one month for fixed-term contracts of less than one year, and two months for contracts longer than one year.

Employers must address the probationary period in all employment contracts and discuss the grounds for termination up front. After a successful probationary period, employers can then choose to move forward with a contract extension.

Term of Employment Matters

After the probationary period ends, employers will determine — depending on the country — the term of employment for their team member. These vary from country-to-country but typically include independent contractors, temporary employees, and full-time employees.

Once again, China is unique in that all of its employment terms are based on terms of the contract — each employee must be hired pursuant to a written contract. The country provides flexibility for employers that are not ready to hire full-time, extended team members because after the initial contract term expires, an employer can initiate a contract extension to the employee. Although, in some cases, the employee will automatically be converted into an employee with an open contract term at the end of the fixed term. It’s smart to partner with an expert in China — or a new country of operations — to help navigate the complexities of international labor law.

Reasons for Contract Extension

If an employee performs well and their contract is set to expire, an employer can grant them a contract extension. Contract time frames typically align with the employee’s visa or work permit expiration. For an employee to continue working in a foreign country after their permit expiration, they need to receive both a contract extension from their employer and a renewal from the respective immigration department.

For example, in Qatar, residency visa lasts up to two years and can take up to three weeks for approval. It’s more common for employees to obtain a typical work visa as a short-term option that is valid for up to one year. Both the resident visa and the work visa are eligible for renewal upon expiration and an employment contract extension must be confirmed before the employee can file for that renewal.

Partner Up to Navigate Labor Law Complexities

As mentioned, most countries outside the U.S. do not practice “at-will” employment. This means employers must give ample notice before ending an employment relationship if they decide not to move forward with a contract extension. Outside of termination requirements, there are a number of other complexities regarding labor laws in international business that companies need to be aware when crafting employment agreements.

When an organization expands their business into global territories, they can be more prepared and find greater success by partnering with an expert that has experience working in their target country. An experienced global expansion partner can not only help companies compliantly execute a contract extension but can also simplify the global expansion process so companies can focus on the success of their employees.

 

 

Learn how to draft legal, compliant employment contracts in over 185 countries with the experts at Velocity Global. Reach out today to see how we can help you tackle international contract extensions and support your global growth goals.