Labor law is complicated in every country. Employers have to understand collective bargaining agreements, labor protection laws, employment contract requirements, social security benefits, and numerous other legal quagmires. It becomes more difficult when hiring in international markets because you’re working with multiple countries, each with its own labor protections. Before hiring international team members, it’s important to have the right contract in place to ensure compliance and to protect your company. Here are some guidelines for a fixed-term contract template.
Fixed-Term Contract Template Elements
When you begin crafting a fixed-term employment contract, always check with local labor laws. Each country requires different elements in all contracts, but fixed-term contracts require special scrutiny. Most countries’ labor laws prefer permanent contracts and they place heavy regulations on fixed-term contracts to prevent abuse.
Here are some basic elements that most countries require in all employment contracts:
- Job title and job description
- Hours of work
- Place of work
- Sick Leave
- Vacation Terms
- Collective bargaining terms
- Grounds for dismissal
- Termination benefits and notice periods
Fixed-term contracts also should include these elements:
- When the contract ends such as a fixed date, end of a project, or end of a season
- Early termination clause
- Justification for fixed-term status
As a resource, The New Zealand’s Ministry of Business, Innovation, and Employment has a fantastic website with an employment contract builder. It is common for local governments to offer employers guidance on compliance.
Keep in mind that many countries prohibit treating fixed-term employees less favorably than permanent employees. You should offer them the same remuneration and benefits that you offer your permanent employees or be able to objectively justify your reasoning. You can partner with a service such as an Employer of Record solution to understand the requirements in each country you operate in to help keep your company compliant overseas.
Justifying A Fixed-Term Contract
Just because your employee signed a fixed-term contract doesn’t mean that courts will consider him or her a fixed-term employee. If you renew a fixed-term contract multiple times, local labor laws may consider the employee a permanent employee. When the fixed-term contract ends, the courts may consider it a dismissal of a permanent employee. Then local dismissal laws, such as severance, will apply.
Fixed-term contracts need to be objectively justified. Fixed-term contracts are great for covering employees when they go on maternity leave or sabbatical, for short-term projects that need extra staff, or for seasonal work. Without objective justification for a fixed-term contract, the courts may consider the worker a permanent employee.
Early Termination of a Fixed-Term Contract
Employers should always include a carefully drafted early termination clause in a fixed-term contract. Without an early termination clause, an employer will not be able to end a fixed-term contract before its end date.
Just having an early termination clause doesn’t always protect an employer. If the contract’s clause is ambiguously worded, the courts can rule it unenforceable. If a terminated worker sues, your company can be forced to pay the remaining terms of the contract.
Use Local Human Resources Experts
When drafting a fixed-term contract, it is important to use experts in local labor laws, whether a local firm or a global Employer of Record partner. Their expertise can guide you through labor regulations and contract requirements. Note that, no matter what your employment contract says, employees cannot sign away their basic protections set in law. As an example of the different labor laws set by each country, here’s a list of some interesting regulations:
- Madagascar: Women are forbidden to work at night unless for a family establishment
- Japan: The Metabo Law requires that employers measure their employees, ages 40 – 74, waistlines to ensure they fall within certain limits
- Minnesota, U. S.: Employees who fail a drug test cannot be fired on the first offense. The law requires that they be given a chance to complete a treatment program before returning to work
- South Carolina, U. S.: At-will disclaimers on employment contracts are not valid unless they appear in underlined, capital letters on the cover page of employee handbooks
When managing workers in foreign countries, partner with an expert in local labor laws so you don’t get caught violating their rules. Velocity Global’s team of experts are available to ensure you stay compliant with local labor laws, contact us if you have any questions!