A Beginner’s Guide to International Employment Contracts
For companies looking at how to start a business overseas, one thing is certain: you will need an international employment contract for each new employee. The alternative, using standard US employment contracts for overseas hires, is likely fall short of local minimum requirements. Using a standard template employment contract in any form, purely for the convenience, is likely to cause problems in the long run.
These international employment contracts will differ in several ways from the domestic contracts you already have in place with your existing local employees. It’s therefore important to make sure you get the structure and content right before starting the hiring process for your new location.
If you’re looking to expand business operations into a new market, you’ll know that early research and preparation are both crucial factors that play a significant part in your long-term success. This early preparation should include sourcing international payroll providers and finalizing your global supply chain. The preparation for your company’s international employment contracts should be equally important; these contracts can have big implications for your business and its global workforce, and there are several factors to consider that will determine the contents of the contracts.
When drawing up employment contracts as part of your international business expansion, it’s important to carefully balance your existing company policies with the employment laws of both your home and host country – because some existing company policies may prove to be in conflict with the host country’s laws. The regulations regarding employee disclosure of trade secrets, minimum requirements for vacation, probation period, notice period and termination requirements, may all vary from market to market. For example, many countries outside of the US don’t have an “at-will” policy in their contracts, which requires employers to give reasonable notice before ending their employment.
The employment laws and regulations of your new market should be one of the very first factors you consider when drawing up your international employment contracts. This should then be followed by the laws and policies of your home country, and the default should be to choose whichever option is more generous to the employee. This will avoid the risk of any future disputes and maintain a good professional reputation, while also keeping you attractive to a new labor market.
In many countries outside of the US, businesses will find that they have a greater number of obligations to their employees – such as the requirement to provide housing, transportation, and health insurance for employees, as well as statutory minimums for paid-time-off, holiday, sick leave, probationary periods and terms for termination.
When expanding to a new country, it’s often advised to hire locals. They can offer insight into the local working customs and cultures, as well as offer a native-speaker on the ground, and connections to other potential local stakeholders. It’s crucial, therefore, to cement the working relationship with a strong employment contract.