Many US multinational organizations find themselves in labor courts abroad in clear violation of local employment law.
US employers need to be aware of regulations in country that may not be a factor in the US such as:
- Employment contracts
- Bonus payments
- Severance payments
- Holiday and annual leave entitlements
The above are all points that need to be considered when operating abroad. US employers need to ensure they are operating under the local employment law to ensure they will not incurring fines and penalties with regards to local employment.
Prevention is better than cure so with that in mind, understanding the local requirements is the best way to mitigate the compliance risk associated to global employment.
Having the internal HR resources is essential for multinational organizations. But if the internal resources are lacking, organizations need to rely on their external partners to alleviate the risk on their behalf.
Let’s look at the basic points of employment US multinational organizations need to be aware of to have successful global employment.
Employment at Will
Employment at will means that an employee can be terminated at any time without any reason, explanation, or warning.
It also means that an employee can quit at any time for any reason and without providing notice to the employer.
Employers can also deny any claim attempting to seek benefits for losses as a result of termination.
What many US employers don’t know is that the United States is the only country where employment at will applies
In all other countries, employers and employees have specific termination protection and required notice periods.
Let’s compare the United States to Luxembourg.
In the United States, employers are not required to provide employees with a written employment contract. In fact, they are relatively rare and are mostly reserved for highly compensated employees. More commonly, in some cases, employees are presented with a written offer letter that outlines their salary, pay frequency, available benefits and vacation/holiday policy.
In Luxembourg, employers are required, by law, to provide employees with a written employment contract, prior to beginning employment. They must be presented with two original copies, one for each party. Contracts must be drawn up in the language understood by both parties and can be executed in Luxembourgish, French, German or English.
Any contract of employment must contain the following:
- Hire date
- Place of employment
- Job description
- Normal working days
- Normal working hours
- Basic salary
- Holiday leave with pay
- Length of probation period
- Length of notice period
- Pension scheme
Termination and Severance
Let’s compare the United States to Thailand for purposes of termination and severance pay.
In the United States, employers are not required to offer employees severance payment for terminations. US employers are also not required to give employees notice of termination. Employees are not required to notify employers of resignations.
In Thailand, employers must provide 60 days’ notice to the employee prior to the termination. If employers fail to provide 60 days’ notice, employers are required to pay severance equal to the 60 day period. An employee who has worked for at least 6 months, but for less than one year shall be paid severance pay for not less than 30 days. An employee who has worked continuously for at least one year but less than three years shall be paid severance pay for not less than 90 days at the most recent rate of basic pay. An employee who has worked continuously for at least three years but less than six years shall be severance basic pay for not less than 180 days at the most recent rate of basic pay. An employee who has worked continuously for at least six years but less than 10 years shall be paid severance pay for not less than 240 days at the most recent rate of basic pay. An employee who has worked for more than 10 years consecutively shall be paid severance pay for not less than 300 days at the most recent rate of basic pay.
Let’s compare the United States to Spain for purposes of bonus payments.
In the United States, employers are not required to pay bonuses to their employees. Bonus payments are discretionary unless specifically agreed upon, in writing and based on employment compensation schedule.
In Spain, employers are legally required to pay their employees two bonus payments per year. Employees annual pay is divided into 14 installments; the two additional installments are payable in July and December. These payments are referred to as 13th and 14th month salary payments. For example, if an employee typically earns $1,000 per month, in July and December, they will earn $2,000 per month.
Holidays and Vacations
Let’s compare the United States to Australia for purposes of holiday and vacation days.
In the United States, The Fair Labor Standards Act (FLSA) does not require payment for time not worked, such as vacations, sick leave or federal or other holidays. These remunerations are generally a matter of agreement between an employer and an employee. The FLSA does not require overtime pay for work on Saturdays, Sundays, holidays, or regular days of rest, unless overtime hours are worked on such days.
In Australia, full-time and part-time employees get four weeks of annual leave, based on their normal hours of work. For example, if a full time employee works 40 hours per week, they will receive 160 hours of annual leave. If an employee works 20 hours per week, they are entitled to 80 hours of annual leave. If the employee is a shift worker, they will receive five weeks annual leave. Every employee is also entitled to 10 to 13 paid public holidays depending on the state and territory.
Immedis offers assistance to clients who are operating in multiple countries. We put together a clear and attainable path to compliance and assist with providing local compliant employment agreements, proper employer registrations, ensuring compliance through payroll and provide ongoing support.
This blog was featured as an article by the Global Payroll Association – Read it here