The Ins And Outs of Employment Agreements

By April 20, 2017 January 11th, 2018 No Comments
Ins and Outs of Employment Agreements

Employment agreements come in many shapes and sizes. Some may reach the lengths of War and Peace, while others are only a few short pages. The subtle changes in content of employment contracts from country to country are a common concern when drafting for an employee in a country where your company doesn’t have much experience.

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There are a few ways to be sure your documents are locally compliant. These range from reading and understanding labor code in each specific country, to hiring local experts to assist.

Employment Contract Basics

There are a few key points that are present in employment contracts across the globe. These typically address starting date, probation period, location of work, salary, working hours, leave, confidentiality, and termination.  Leave in this instance refers to things such as vacation, holidays, sick leave, maternity leave and more. Confidentiality agreements generally include company property, intellectual property, and non-disclosures. Each country has specific legal requirements for most of these points, which can be both easy and hard to find.

For example, local government and labor websites make it easy to find mandatory holiday and sick leave. Legal limits on confidentiality and restraint of trade (or non-compete post-termination) can be harder to find from country to country. For example, in the UK and Australia, restraint of trade can be up to 18 months. This can extend to competitors and clients of the former employer. Whereas in China, enforcing restraint of trade is only possible if the former employer pays the terminated employee throughout the restraint period.

Termination Matters Most

While confidentiality is important, it is the rules of terminating employment that are the most sensitive, and in turn, the most important piece of information for employers to understand in each country they work. It is important to understand the nuances of a country’s termination regulations for employment agreements for many reasons. The most important reason is that an employer does not want lingering liability with a former employee if they go about termination the wrong way. Therefore, employers need to intimately understand mandatory notice periods, accepted reasons for termination, and severance requirements.

Note Regional Differences and Similarities

While it’s not true to say that each region of the world follows the same rules when it comes to key points in employment agreements, you can definitely see patterns across places like Latin America, the Middle East, and Southeast and East Asia, to name a few.

Looking just at termination requirements in South and Central America, it can be guaranteed that terminating an employee with mutual agreement or without enforceable cause will result in a required severance payout. These payment amounts can range from one month’s highest annual wage, to three months of the same. However, in East and Southeast Asia, the concept of “employment for life” is not uncommon. Another key example is China. An employee is considered a permanent employee in Beijing if they have been with a company for two or more years. In cases like this, termination often comes with high additional payouts.

Putting Agreements in Place

While labor law requires much of what is in employment agreements worldwide, the nuances of understanding how these codes work in practice in a specific country can take an experienced eye. Employers are encouraged to put the structure of an employment contract together. However, it is advised to have experienced in-country parties review it. This ensures that employment contracts include and follow all required points in place in that country.

When writing your employment agreements, trust the experts at Velocity Global to help you with any questions, give us a call today +1 (303) 309-2894