International labor regulations surrounding termination of employment are constantly changing. It is vital for business managers and HR directors to monitor termination requirements to avoid legal disputes.
A PwC study shows that the average length of an overseas hire has decreased from three years or longer to just 18 months. This significant drop in time suggests that companies should be aware of regulations and potential exposures in regards to employment termination. Below, we have outlined international termination notice best practices.
1. Understand local termination policies BEFORE creating employment contract
The consequences of not properly following local termination policies can range from hefty fines to lawsuits. Have an understanding of local termination policies before creating/ signing an employment contract to avoid future headaches.
The difficulty with many countries is that digital public resources may be out of date. It’s best to have a human resource or bite the bullet and hire a local lawyer/partner/consultant to ensure you are drafting an employment contract that is compliant.
2. Be sure to understand the full cost of termination before executing (and hiring for that matter)
There are many different ways that countries calculate the employer’s financial responsibility to the employee during a termination event. Do not assume that the termination costs are even remotely similar to your domestic country of business. The major variables that can affect how much an employee is entitled to in a termination event are:
- Length of Employment
- Mandatory payments
- Vacation accruals
- Outstanding Bonuses
- Probationary period- It is safe to terminate employment contracts as long as the probationary periods are valid.
It is vital to understand how severance payments are calculated. To help get a better understanding of the complexities surrounding different countries termination payments, we have outlined four different country’s policies.
France: Employees with one year of service dismissed for reasons other than gross misconduct is entitled to severance compensation.
Philippines: Separation pay is required only in cases of business closure, layoffs, or termination due to a disease.
Qatar: Before the end of the working day following termination or expiration of employment contract, the employer must pay the employee all amounts due and any amount of accrued but untaken annual leave and any end of service benefits due. Read this blog post for more details surrounding Qatar employment law.
Saudi Arabia: The employer is required to pay the employee an end-of-service bonus of a half month’s wage for each of the first five years of employment and one month’s wages for each year following.
**Disclaimer: This information may be altered at any time and should not be the basis for any legal decisions or employment contracts. This information is just being used to display the differences that exist in the world today.
3. Have a plan for IP protection
Make sure you know how to properly and legally reacquire your intellectual property. Although most countries enforce IP agreements, many developing countries don’t have the mechanisms to enforce IP rights.
Best practices for protecting IP include:
- Require employees to sign a code of conduct and confidentiality, and non-disclosure agreement
- Revoke employee’s ability to access proprietary information directly after the termination
- Include non-compete clauses in the employment contract where applicable– Note: non-compete clauses are not always enforceable and are frowned upon in Europe.
Bottom line, know the rules. Velocity Global’s team of experts have knowledge in over 185 countries and would love to help answer any questions you may have regarding termination policies or global expansion in general, give us a call today!