International Employment Law Guide

Applicable Laws for International Employment

According to the “Rome 1” European Convention (still applicable in light of the EU Exit Regulations), the parties in an international employment contract can specify which laws apply to their relationship and which local authorities should hear claims and appeals.

The convention also states that when there are no contractual specifications, the laws applicable to a working relationship are those of the country where the worker is stationed.

While these regulations apply exclusively within Europe, the principles expressed there are also found in other countries’ employment regulations and international treaties, though with certain caveats. Specifying which law applies to all specific situations is an arduous task that cannot be conceivably done any other way than by analysing each particular issue separately.

What Difficulties May Arise When Hiring People Abroad?

A major difficulty you’d have to cope with as an employer is with regard to the requirements and conditions for employing people in a new territory, as this entails having to get familiarised with local employment laws and regulations.

Our international employment lawyers are capable of coordinating advice with foreign firms and corporations or with lawyers across numerous jurisdictions within our global network to get insight 0n the legal requirements for employers in each country wherein you decide to hire.

With that said, we will look at some specifics, questions, and issues that could arise when dabbling in international employment.

Should I Establish Distinct Legal Entities When Employing International Workers?

Employers are typically obliged to register in the country where their new hires reside for tax purposes. Some countries may not demand the creation of distinct legal entities, though you’d still generally have to operate through a branch office.

Would I Need to Register a Local Legal Entity for Managing Overseas Remote Workers?

Establishing a subsidiary in another country can help you reduce compliance risks, though it’s quite an expensive solution if your only aim is to hire remote workers. In this scenario, as an employer, you have three other options:

• Register as a non-resident employer (in which case, the employee is still technically on your payroll).
• Hire via a professional employer organisation (PEO).
• Hire independent contractors.

How Should I Handle Overseas Remote Workers’ Taxation?

Managing a global workforce, especially in the wake of the recent pandemic, has entailed a series of complications, especially when this workforce engages in exclusively remote work. Digital work carried out overseas might prompt a series of tax and social security concerns for both you and the employee.

The rule of thumb is that, so long as the employee only performs remote work from outside the UK for six months or less, you should still process their tax and National Insurance contributions (NICs) via the PAYE (Pay As You Earn) system. In many cases, you’d also need to report to the overseas country.

Beyond that period, according to existing double taxation agreements, the country of residence will likely attempt to tax the income that these employees receive to some degree, while you’d still have to process the other portion of the tax and NICs through PAYE for another six months.

If the worker is an independent contractor, they have to make their self-assessment before the different tax authorities.

Do I Need to Have an Employment Contract in Writing?

In most instances, you’ll be compelled to issue a written document, especially for fixed-term contracts.

Some countries will demand that you draft an employment contract containing all the terms and conditions, while others will only ask that you provide the employee with a written statement containing only the terms that are relevant to that particular employment relationship. This written statement would contain provisions that deal with basic topics such as working hours, remuneration, payment schedule, holiday and sick pay, etc.

Language Requirements and International Employment Contracts

50% of countries worldwide don’t have language requirements when drafting an employment contract and give clearance insofar as both parties understand the text of the agreement.

The other 50% will urge employers to draft these employment contracts (and other relevant documents such as a settlement agreement) in the country’s official language or, at least, to issue a translation of the original document. Whenever there are discrepancies between the original and translated agreement, the authorities will likely give prevalence to the translation.

Can I Establish a Probation Period for Employees Abroad?

Most jurisdictions allow you to put your new hires “on trial” for a period during which you may be allowed to dismiss the employee for whatever reason or within shorter notice periods.

The allowed limits for these probation periods differ between countries and also depend heavily on the job level or seniority. Normally, higher-ranking personnel require longer probation periods than ordinary employees.

How Should I Handle Dismissals?

Under UK employment law, employees can claim unfair dismissals if they’ve had 24 months’ continuous service or more for the same employer and the latter did not oust them on the grounds laid out in the Employment Rights Act 1996.

Overseas employees could likewise benefit from unfair dismissal protection and the ability to bring claims before a British employment tribunal if certain conditions are met.

Ousted employees can prove that they’re entitled to this protection if they showed that they were still paid in sterling, filed their tax returns before the HMRC, spent their holidays in the UK and had a particularly stronger connection to Great Britain than to their current country of residence.

Many of the principles we just described have been set out by case law (Supreme Court decisions) and serve more like guidelines rather than fixed rules. Additionally, be mindful that they may also apply during business transfers (TUPE or “Transfer of Undertakings”).

With all that said, employees could alternatively seek protection from their country of residence if they deem it more favourable to their interests, provided that it’s applicable.

What Should I Do Before Sending My Employees to Other Countries?

You must first inform HMRC that the employee will leave the country to work abroad. Also, you’d need to ensure that the worker can legally work in the destination country and determine whether or not they need a visa and/or permission to live and work there.

Moreover, you may have to file additional paperwork before local authorities or perform a “Right to Work” compliance check on the employees you’re planning to send to that location.

Also, you must arrange for dispute resolutions, dismissals, and protections against workplace discrimination. If you’re a foreign employer with a subsidiary or branch in the UK who wishes to send British employees abroad, you should arrange with them all the conditions for termination and carefully record them in writing. In addition, make sure that all workers and employees within the same category and situation are given the same conditions to avoid any discrimination claims in the future.

Can I/Should I Perform Hiring Checks?

Medical examination before hiring someone is mandatory in over 22 countries, irrespective of the position that the candidate is applying for. Other hiring checks, such as personal reference and education checks, are allowed in most locations.

Criminal checks are unconditionally allowed in over 11 countries worldwide, while in other jurisdictions, you’ll need to seek the consent of the applicant or justification for doing due to the nature of the job.

International Employment Lawyers. How We Can Help

The subject of international employment is capable of overwhelming most employers, especially within our current globalised environment.

You can refer to our multi-jurisdictional employment law team, consisting of a plethora of trusted member firms and independent legal and HR professionals across Europe, the Middle East, Asia Pacific, and beyond. We have helped numerous national and international clients in their efforts to comply with local and international regulations.

We can (among many other things):

• Provide employment advice to international employers when establishing businesses in the UK and overseas.
• Represent employers in litigation processes related to international employment law.
• Coordinate advice on updating the terms and conditions across multiple countries.
• Give advice regarding overseas outsourcing.
• Give Counsel to multinationals on how to handle their affairs with European Works Councils and other employees’ platforms.

Call us now at 03334149244 for more information on the services we offer.