When you work in international business, you could end up working in countries where it is very difficult to terminate an employee. For most American companies, terminating an employee can be a fairly straightforward process due to the concept of “at-will” employment. The problem is, “at-will” employment is a primarily U.S. construct and is very rare to the rest of the world.
Other countries typically have strict regulations about firing workers, and those regulations can make it very difficult to fire someone without major repercussions.
Here’s a rundown of the top three high-risk countries for terminating an employee.
High-Risk Countries for Terminating Employment: France
Terminating an employee in France is generally a long, complicated process. French employment law grants strong protections to workers, forcing employers to prove that terminations are merited according to law. To terminate an employee, the employer needs to prove that there are real and serious grounds for dismissal. These grounds come in two forms: Personal and Economic.
Personal reasons include:
- Poor performance
- Poor skills
- Inability to perform assigned tasks
- Frequent absences with exceptions for illness or work-related injury
This kind of termination is for cause, but an employer has to be able to prove, in court, that the problems are with the employee and not due to management failures or bad economic times. As one can imagine, this is very difficult to do. Additionally, the employer must also show that it gave the employee many opportunities to improve or resolve the issues.
Economic reasons include:
- Market changes affecting the whole sector
- Technological changes
- Safeguarding competitiveness
- Closing a business
The employer usually goes through a lengthy process of meetings and reports before this kind of termination. Again, the employer must prove that there is no recourse but to terminate the employee instead of finding a new position. In the case of layoffs, the employer also needs to develop a social plan to support the terminated employee’s transition into other jobs.
If the employer fails to prove, in court, that the dismissal is justified, the court can overturn the termination or offer a settlement that starts at six months salary. A very common court resolution is to reinstate the employee’s job, which is not an ideal situation for either party.
High-Risk Countries for Terminating Employment: Japan
Japan is another country where it is difficult to terminate an employee. There are important cultural and legal aspects of employment that international employers should be aware of. Although not as prevalent anymore, the Japanese labor market is characterized by the concept of lifetime employment, whereby an employee works for an employer until retirement. Japanese employment laws are very employee-friendly and workers enjoy a high level of job security and a wide range of benefits.
In order to terminate an employment relationship, employers must give at least 30 days’ notice of dismissal or provide payment of 30 days’ base salary in lieu of notice. Foreign employees in Japan are also protected by the same labor laws as Japanese employees.
Additionally, the employer has to prove cause that is “objectively reasonable” and “socially acceptable.” If there is gross misconduct, however, the company can dismiss someone without notice, but they have to obtain consent from the Labor Standards Inspection Office beforehand.
In the case of layoffs, the employer must prove that several economic factors call for a dismissal, including:
- Poor company financial situation requiring drastic action
- The employer attempted to reassign the employee
- A rational set of objective criteria for dismissal
- Due process including an explanation to the employee
If the employer fails to adequately prove that there is cause for dismissal, a judge can order a reinstatement of employment or a financial settlement. Since employment laws are designed to protect workers in Japan, most employers typically do not fire their employees. Instead, they ask them to resign, often attaching financial incentives to the resignation. Should employees refuse, companies may place the worker in a “chasing-out room” to encourage them to resign.
High-Risk Countries for Terminating Employment: Brazil
Employment law in Brazil ensures that there are strong financial penalties for terminating an employment contract without cause.
Brazilian employment law describes the following reasons for which a company may dismiss an employee for cause:
- Improper acts
- Business competition with the employer
- Prosecution of the employee
- Dereliction of Duties
- Drug or alcohol abuse
- Revealing company secrets
- Absence of more than 30 days
- Physically aggressive to colleagues
As in the other countries above, the employer must prove in court that there is just cause for terminating employment.
It’s important to note that terminating an employee without cause is an expensive option. Unjustified dismissals also entitle employees to a bonus payment of 40 percent of their FGTS accounts, which constitutes a penalty borne by employers. An additional 10 percent (total of 50 percent) must be paid by employers to the government in such cases as indemnification.
Upon termination of employment, employees are entitled to the following payouts:
- Unpaid wages
- Unused vacation days plus 33%
- A 13th-month salary” or Christmas bonus
- Access to a severance fund, Fundo de Garantia do Tempo de Serviço (FGTS)
- Payments from collective bargaining
- Other benefits as defined by the employment contract.
While terminating employment in Brazil is not as difficult a process as in some other countries, it is extremely expensive.
Navigating Foreign Employment Law
When expanding overseas, don’t reinvent the wheel. Work with an in-country expert to help you navigate the complicated labor laws and employment process. A service like a global Employer of Record can help your team hire (and fire) employees overseas compliantly.
Contact Velocity Global to learn more!