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International Employment Agreements — Understanding the Basics

By March 27, 2017 October 18th, 2017 No Comments
International Employment Agreements — Understanding the Basics

Employment agreements in foreign markets are tricky to manage due to a number of reasons, primarily revolving back to the differing regulations in each country. Unfortunately, due to the nature of market variation, there isn’t a one-size fits all methodology when it comes to crafting a contract for new team members.

During global expansion, employers need to consider the local labor code and how it relates to the nature of employment agreements.

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For example, in some countries, agreements aren’t a requirement. If an issue arises between employee and employer, all decisions fall back on the ways of the law. In other countries, agreements are 100% mandatory and have very strict requirements such as it must be in writing, signed by both parties and available in the home country’s language and English.

What to Consider When Drafting Employment Agreements:

To kick off the conversation, here are a few items to put on your company’s radar.

Probation Periods

Many countries will allow you to have a probation period as long as both parties agree on the arrangement. In addition, there must be a plan to continue the working relationship if everything goes well during the trial.

For example, in South Africa, a probation period is allowed and is imposed to specifically review the employee’s ability to perform the tasks as expected. As a result, employers cannot use the trial expiration as an excuse to fire an employee for other reasons, such as personality fits, etc.

In most countries, probation periods are a fixed time frame and cannot be extended or renewed.

Indefinite & Fixed-Term Employment Agreements

One of the most important things to consider when forming international employment agreements is your language.

You can be proactive by establishing firm guidelines and details in contracts before the working relationship begins. This becomes critical when differentiating between a fixed-term agreement and an indefinite working relationship.

In Germany, for example, fixed-term employment arrangements are legal if:

  • Your company’s demand for workers is temporary, i.e. seasonal work during the
  • Holidays
  • Employee is on a short-term work visa
  • Employee is covering for another employee who is on short-term leave, i.e. maternity or disability

Understand the requirements in your target country before drafting these specific arrangements, especially for fixed-term employment. Also, be prepared to battle your case in courts if an issue arises, even if you have a solid contract in place.

In contrast, an employee hired indefinitely means that there is no end date to the agreement and each party will have to come to a firm understanding when the arrangement ends. We’ll talk about termination next because this is a huge hurdle for international employers.

Termination

A majority of countries outside the US don’t have an “at-will” policy, which requires employers to give ample notice before ending an employment relationship.

For example, in China employees that work for a firm for more than 12 months receive an entitlement for statutory paid annual leave. The amount of annual leave depends on years worked and ranges from five to 15 days per year.

Each country has different limits to termination notification. Ontario’s termination notice depends on the time of employment. If your employee has been on your team for one to three years, they need a two-week notice before termination.

Employment agreements always need to address termination requirements.

Collective Bargaining Agreements

In addition, some countries may have collective bargaining agreements that your company collaborates with instead of forming your own contract.

Collective bargaining is essentially the negotiation process between employers and a group of employees. It regulates salaries, working conditions, benefits and workers’ compensation. The interests of the employees are commonly presented by representatives of a trade union to which the employees belong. These agreements put guidelines in place for employers and help you understand the landscape of international employment.

Completing International Employment Agreements

We recommend working with a legal expert who understands employment regulations in your target country when drafting your contracts. When you partner with an attorney, prepare a list of questions. Cover specific items that you expect out of your working arrangements.

Review our previous post to further understand the legal aspects of doing business overseas and prepare for your meeting.

Also, consider working with an international consultant to help with globalization. A partner prepares you for cultural barriers, human resources, payroll requirements, and hiring in your new market. Give us a call today to discuss international employment agreements or international expansion in general!