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Contract Compliance for International Employers

By April 25, 2016January 22nd, 2018No Comments
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Compliance is defined by the International Compliance Association as the ability to act according to an order, set of rules or request as part of your business practice; in the context of international employment, contract compliance will protect both the employer and the employee.  The old saying is “good contracts make good relationships,” when it comes to international contract compliance the stakes are even higher.  Here’s how you can ensure good contracts by meeting employment and commercial regulations while operating in a foreign country.

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The following are the basics of contract compliance normally found in government regulations across the world:

•Know the local legislation

It is important to understand all regulations applicable to your business.  It is standard to make sure you are fully registered with the government authorities before engaging in any commercial activities in a foreign country. In regards to employment, some countries require the employer to register the employment contract with the Ministry of Labor. Others, such as Spain, allow employers to create the employment contract themselves through their Social Security website. (See our post on employment contract basics for international 

•Always have your contracts in writing

Although verbal contracts are legal in many countries worldwide it is always best to have a written agreement in place to ensure common ground and enforceability.  From an International PEO or normal employment perspective the contract must clearly state the elements of the employment:

  • Define the position
  • Length of the agreement
  • Performance requirements
  • Compensation
  • Benefits
  • IP clauses
  • All other covenants that are applicable to your business and are required by local legislation.

•Keep in mind that the “At-Will” employment is only applicable in the U.S.

Most countries (if not all others besides the US) have very strict termination requirements that include notice periods for termination/quitting, and severance pay for those employees whose contract is being terminated.  Requirements of time and pay vary depending on the country.

•Make sure you understand all your obligations

In most of the countries, employers are not only required to contribute to the local Social Security system but also must ensure the employees are trained in occupational and workplace safety regulations.  Some countries even require a health checkup conducted each year of employment. (See our post Top 5 Most Common International Hiring Compliance TRAPS)

•Always keep track of changes in labor legislation

Even though you already have a contract in place, legislation might change at any moment. It is your job to ensure all business activities are carried out within the regulatory framework and your contracts are updated to match these regulatory shifts.  We recommend making a team-wide calendar that automatically reminds you of upcoming legislation shifts.

Our job at Velocity Global is to make sure that our clients comply with all regulations regardless of the country of your preference. Our duty is to understand the regulations of all the countries where we are present. We possess a diverse team of account managers with expertise in such regulations internationally that will walk you through the employment process and will make sure you are comfortable with the procedures throughout the onboarding process.

Don’t leave compliance to chance. Call us to discuss how we can help in your international expansion.