International Employment Q&A
Last week’s webinar Beyond At-Will: International Employment Best Practices encouraged a lot of discussion.There were several interesting questions from attendees for HSP's human resources expert Chris Davies; here are some of the highlights, and answers:
We employ sales people around the world. What are the considerations which would trigger the need to establish a formal local presence (representative office, branch or subsidiary) vs. an independent contractor agreement (current practice)?
You need to determine whether or not you have triggered permanent establishment in country. This will depend on what business activities are being conducted. Generally speaking, contracts are being concluded in-country and activities are generating taxable revenue, you will probably trigger permanent establishment and require an entity. For more on PE triggers, see here. Some general information on common entity types is available here.
Should I be concerned about an audit once I do set up an entity and move my "contractors" to employee status?
If authorities are already knocking on your door and beginning the audit process, it may be too later to make the transfer from contractor to employee. The audit could result in your company paying the relevant back taxes, interest and penalties. Additionally, those former contractors may have the right to be reimbursed for their employment rights reverting back to their start dates.
Which countries in EMEA require documentation (except contracts of employment) in local languages?
France is one example. Belgium and the Netherlands have a number of language options based on location. There are many more countries where it is not mandated, but using local language is still considered a best practice. The reason is that if there is fallout with an employee, that worker cannot go to a labor court and claim that the documents were misunderstood due to a language difference.
Do local rules and regulations apply to expats in some countries?
By definition, an expatriate retains home employment status and is merely in another country to perform certain business activities. Hence, they are not typically subject to local rules and regulations. However, it can depend on the assignment itself. If it’s short term, the answer is likely no. But if the expatriate agreement is written to be indefinite and habitually works in another country, it could mean that the local authorities would consider and treat the worker as a local employee, governed by local rules.
We are looking to hire a contractor in Brazil, where is the best place to go find all of the information we need to understand the appropriate compensation, compensation in lieu of benefits, and statutory requirements?
It all depends on your company’s specific circumstances, industry and intended geography. One place to start seeking more information on Brazil would be our recent webinar covering doing business there; slides and recording are available here. However, to get specific details, we would be happy to discuss this further with you and work with our local partners to get the most up to date data for you.
If we included a statement that certain benefits would be provided in the labor contract and have since determined it is not in our best interest to offer all items. How do we rectify the situation? Additionally, if we want to update contracts with the flexibility language what do you recommend?
It depends on the specific situation. If you have specific benefits that the employee is contractually entitled to and which you would like to change, communication is the key here. You may be surprised by how employees are willing to support their employer for the right reasons. The company may reserve the right to modify or withdraw the plan, but again, you want to keep employees in the know.
If we only have 1 or 2 EEs that we are hiring in the U.K. and don't want to have a local bank account can we still get some U.K. insurers to provide "social welfare benefits"?
Social welfare benefits are automatic and are not contingent upon whether you have a U.K. bank account.
What are the best resources to keep up with international benefits/laws?
HSP.com and the HSP newsletter are great places to start. There are a plethora of additional legal resources available, but it is the interpretation and how you apply the knowledge and updates to your business that really counts. To ensure you have the correct tailored advice and guidance for all of your international locations, you will want to work with an experienced international business services firm. We’re happy to setup some time to discuss your specific needs.