Best Practices for Employee Contract Compliance

Best Practices for Employee Contract Compliance

Hiring new employees in a foreign market is a difficult job, the most challenging aspect being crafting employment contracts that are compliant with international labor laws. Employee contract compliance is one of the most common issues that arise when hiring abroad, making the stakes for these contracts extremely high.


The goal with any employment contract is to lay out the terms of an employer-employee relationship and - more importantly - protect the interests of both parties. Like with a building, a contract built on a weak foundation will not stand up over time. Putting together these contracts and making sure they are compliant can be a daunting task in dynamic international markets. However, it can be done by following a few basic guidelines.

Focus on Local Employee Contract Compliance

First and foremost, employment contracts must be compliant with local rules and regulations. What might work in one country, often will not be compliant in another. For example, the concept of “at will employment” is something that is almost exclusive to the U.S. marketplace. Most countries have very specific and strict termination policies that must be adhered to and written into any employment contract. Therefore, even a seemingly trivial mistake can open the employer up to sizable termination liability.  

Many countries have other employment requirements that go beyond the straightforward social system contributions. This can include mandatory workforce training and complex safety regulations that must be written into the employment agreement.  Therefore employers need to take the time to research the current employment contract requirements. In addition, they need to be aware of proposed changes in the desired country in order to ensure contract compliance.

Clearly Identify Employment: Contractor vs Employee

An independent contractor is someone who is not an official employee of a company. When expanding globally, foreign independent contractors can be beneficial to companies that want to get into a country quickly and with a low price tag. However, this is also a common compliance trap when hiring overseas.

When deciding between utilizing independent contractors or hiring employees, it is important to evaluate the plans a company has for a specific country. If expansion is not a long-term objective, then independent contractors can simplify expansion. However, companies that plan to stay within a country for an extended period of time should consider hiring true employees over contractors. This will ensure employee contract compliance in the long run.

Provide Attractive Benefits Offerings

In today’s competitive talent acquisition market, companies looking to go global have to be able to hire without boundaries. In addition, they need to be able to offer attractive and increasingly complex compensation plans. Compensation alone isn’t enough to catch the attention of the best candidates. More and more, people are looking for benefits such as insurance, time off and more when making decisions about employment. Companies are encouraged to look into what is provided by the government within a country, what benefits they require, and what is expected of the type of candidates they hope to hire. Consequently, by setting up a well-structured benefits administration, companies set themselves up to bring in the best possible talent.

The rules and regulations are not only unique between countries, but are also highly dynamic within each.  Therefore, simply staying on top of compliance requirements in a single country can become an overwhelming task for HR.

Ensure you successfully achieved employment contract compliance and partner up with experts at compliant, efficient global expansion. Reach out today to let Velocity Global give you peace of mind for your global expansion.

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