When hiring an employee in an overseas market, I often see companies make the common error of using their local HQ country employment contract template. The reason this is incorrect is that local labor law (and customs) typically dictate what you should and should not include in an employment contract. Often times your own country’s employment contract template is insufficient. Further, in the case where language in the employment contract conflicts with local labor law, local labor law supersedes what may be written in the contract.
Employment Contract Template Elements
We’ve all heard about how “at-will” employment doesn’t apply outside of the U.S. But, we also know that, for many countries, you should incorporate the following aspects into the employment contract:
- Specific working hours
- Days of paid vacation
- Job title and job description
- Place of work
- Collective bargaining agreement category
- Probation period
- Notice period upon contract termination
Please feel free to see other posts we’ve penned on this topic; Employment Contract Basics, Top 10 mistakes companies make (as written by our guest blogger, Ute Krudewagen from DLA Piper), China Employment Contracts, and French Employment Law Basics. Here is another great piece that was written for the American Bar Association on international employment contract basics.
My experience is that companies don’t use a local employment contract template for any one of the following reasons:
- They don’t know that their domestic template may not be applicable
- They are moving too fast
- Old habits die hard...
I can be honest and say that we ourselves were recently victims of the last error. We’ve been hiring quite a number of employees in the U.S. and when a UK-based new hire came to fruition, we simply sent over a U.S. contract out of habit. It’s a little embarrassing given what we do, but thankfully we caught it right away and put together a UK-specific contract based on our local UK template.
What to Know about the "Employer of Record" Approach
Of course, if you are hiring that international employee under an employer of record model, then the locally compliant contract template is already a part of the service and your role is simply to review and approve. But if you are going through the process of setting up your own entity and hiring employees directly under your local company then don’t forget to find, vet, and hire a local law firm to provide you with a local employment contract template. It will take time to find the right firm and it will cost you two to three thousand dollars. But, you’ll have peace of mind that it’s done right.
Our International PEO (Professional Employer Organization) solution allows us to become your Employer of Record and, in turn, hire on your behalf. This frees you up to continue focusing on your daily operations while we do the heavy lifting and ensure your employees are classified correctly, no matter where your global expansion leads. Have a target country in mind? We're here to help you break into that international market—quickly, compliantly, and cost effectively.
One last thing: use a side-by-side English and local language contract. Some countries require a local language contract, but in every case, we suggest the side-by-side contract.