Recruiting new staff overseas can be exciting, and perhaps slightly daunting. Whether your business is starting up, or expanding to a new foreign base, there are various considerations. When branching out, you might opt to recruit foreign workers who are already living in the relevant market. In doing so, you will benefit from their local geographical expertise, for example, in relation to language and regional culture. On the other hand, you could opt to send expat workers on assignment abroad, such as via a temporary secondment.
Here, we explore some of the considerations which apply when hiring and dismissing staff overseas, with thoughts from our international team.
Hiring overseas: avoiding possible pitfalls
- Think carefully about how you advertise
Check whether vacancies need to be advertised for any minimum period, or whether they should satisfy any specific requirements from an immigration perspective, or minority rights and inclusion.
Jurisdictions vary in terms of requirements. In Slovakia, changes from 1 May 2018 expressly require employers to state in the job advert the basic salary that will be paid for the specific position, and the salary must not fall below the advertised amount on conclusion of the employment contract. Recent amendments to Slovakian law also bring in significant developments in relation to employee overtime, weekend and night work remuneration, as well as the employment of non-EU citizens.
Avoid discriminatory wording in adverts. Fair treatment is a basic right in the EU. As such, it is unlawful to discriminate (whether for a job, a training position or an internship) directly or indirectly on the basis of a person's sex, disability, ethnic or racial origin, religion, belief or sexual orientation. In the employment context, this applies in relation to remuneration, incentive schemes, training or redeployment programs, posting, qualification, classification, career development, mobility or contract renewal.
While this principle is universal in the EU, what counts as a protected characteristic/prohibited discrimination varies in scope from one country to the next. For example, under the French Labour Code "prohibited discrimination" also includes the applicant's age, marital status, nationality, political opinions, trade union activities, physical appearance, name and medical conditions. Countries continue to find new ways of discriminating. For example, in France, the Supreme Court has ruled that requiring a potential employee to present a voter's card (where the right to vote is only granted to nationals, and to a limited extent, to European Union citizens) constitutes prohibited discrimination.
From the "positive discrimination" perspective, generally job offers should steer clear of indicating any preference in terms of these types of attributes. Adverts should not indicate, for example, that "the position is open to people with a disability", nor that the role is reserved for any specific age group, nor that any particular family situation is preferred.
Be alert though to where exceptions apply that could be helpful to your business. For example, in France, a company may reserve certain jobs for women as part of a gender action plan (subject to the signature of a prior agreement with the unions). The Chinese government offers tax incentives to encourage the employment of those with a disability. In Northern Ireland, extra protections apply in respect of both religion and political opinion (including the idea of sectarian harassment). Taking local advice in the relevant market will help to embrace the opportunities, as well as avoid the potential liabilities, that flow from these types of country-specific nuances.
- Have an acceptable interview set up
Rules about methods for interviewing can vary. In the Netherlands, employers must not require an applicant to apply via video conference. Employees can be given the option to do so, but (unlike elsewhere) this should not be a requirement.
Always be prepared to adapt interview arrangements for disability, which can include adjusting the physical set up and making more time available. Watch out too for hidden or indirect discrimination; having a Polish language only recruiting centre for jobs across the EU may expose you to liability. Being alert to these types of restrictions will limit potential liability from an employment perspective and, ultimately, maximise the chances of a new overseas venture being a success.
- Ask the right questions at interview
To avoid allegations of discrimination, interviewers should restrict questions asked to those with a direct and necessary link to the relevant job. In Germany, the Federal Employment Court imposes limits on the employer's right to ask questions regarding the seven "deadly sins": race; ethnic origin; gender; religion or secular belief; disability; age; and sexual identity. Questions regarding political party or religious affiliation, illness or disability, marital status, pregnancy or desire to have children, reason(s) for leaving a prior employer, previous salary, club, association or organisation membership(s) or union membership and previous criminal convictions or financial situation are best avoided across the board.
In some jurisdictions (such as Austria and Germany), employees have the positive "right to lie", i.e. they are not obliged to give a correct answer to discriminatory questions. But if a candidate lies in response to permissible questions, the employer can contest the subsequent employment agreement on the grounds of fraudulent deception and/or terminate the relationship for an important reason. Certain time periods apply in these circumstances: contesting on the grounds of fraudulent deception must take place within a year of the knowledge of the fraudulent deception; and termination for an important reason must be announced within two weeks of knowledge of the relevant facts.
- Think about any candidate checks
The scope of personal data employers are permitted, and required, to collect about prospective candidates varies between geographical markets. For example, under newly proposed Polish laws it will not be possible to process data pertaining to addictions, health or sexual orientation, even with the specific consent of the employee.
As well as prohibiting the collection of certain data, local laws can require that specific information be collected about potential candidates. In Poland, new rules expressly require employers to collect the full name, date of birth, address, email address or telephone number, education and career history of all prospective applicants. If an applicant is subsequently employed, the new Polish law requires employers to obtain further details (such as details about the employee's children and other family members).
Establishing that a worker has the right to work in the relevant jurisdiction should be of high priority. In the UK, employers face high penalties for employing an illegal worker (imprisonment and/or up to £20,000 fine for each illegal worker). Carrying out right to work checks at the start of any new working relationship is therefore key. With Brexit on the horizon this will become even more relevant.
Being mindful of evolving rules regarding immigration work permit requirements is also important. For example, in Ukraine, recent legal changes have introduced a new three year work permit (previously only one year work permits were available) for some categories of employee (highly paid professionals, shareholders/ultimate beneficiaries, top-100 world university graduates, creative workers and IT specialists). The new law requires that foreign employees have a salary of at least 10 times the Ukrainian minimum wage (approximately EUR 1130 per month). Foreign employees at NGOs must earn at least 5 times the Ukrainian minimum wage (approximately EUR 565). These salary requirements may change in due course (as there is a registered bill proposing a decrease to these salary thresholds), so keeping on top of these evolving requirements will be necessary for any business setting up in Ukraine.
- Limit criminal record and background checks unless strictly necessary for the role
The introduction of the GDPR has thrown a spotlight on technical issues around criminal record and background checks, as these inherently involve the processing of personal data.
In the UK, the Employment Practices Code published by the Information Commissioner's Office states that pre-employment vetting should only be used where there are "particular and significant risks involved to the employer, client, customers or others, and where there is no less intrusive and reasonably practicable alternative". As such, aside from certain regulated or financially-focused roles and those involving the care of vulnerable adults and children, criminal record checks are usually best avoided.
In Poland, any background check which goes beyond the scope of limited requirements (such as criminal background or social media check) is illegal even if the candidate provides prior and clear written consent.
In Germany, background checks are permissible only in exceptional cases. German legislation imposes a duty on employers to grant former employees a comprehensive reference letter. Together, this letter, information provided by the applicant and a job interview are assumed to satisfy any legitimate information requirement of a new employer.
As a result, privacy protection under German law sets narrow limits for conducting background checks. The employer's legitimate interest in gathering personal data must be so great that the protection of the candidate's data rights is in comparison less important. As a general rule, the employer is required to obtain any information relevant to the selection process directly from the candidate. Employers should only ask candidates about their criminal record if the information is relevant to the respective position. For example, if the employer wants to hire a bank cashier or a person with fiduciary duties, an employer could request a criminal record with regard to relevant white-collar crimes. The certificate of good conduct only lists serious offences after final conviction. Only in rare circumstances (such as public employers, kindergartens, banks) can employers request this document for a job application. Credit checks conducted by the employer are not permitted under German data protection law.
Engaging staff overseas could involve input from a works council. For example, in Germany, if a company decides to implement background check policies, prior consent from the works council is required. This right applies to any formalised and standardised collection of information with respect to candidates or employees. By putting in place a works agreement, the business can run individual background checks without further involvement of the works council as long as the rules of the agreement are applied.
Similarly, the timing and scope of any questions about medical history should be carefully managed (to avoid any disability claim). In Germany, drug or alcohol testing is permitted only if the employer has a legitimate interest in a medical examination (such as for potentially hazardous jobs like drivers or machine operators). Drug screening or alcohol testing is highly likely to require the candidate or employee's specific consent and should be considered carefully on a case by case basis.
- Prepare the right documents
If you decide to offer a candidate a job, make sure you do this in the correct format. In Belgium, failing to provide a Flemish or French language version of an employment contract or secondment agreement can render the contract void, as well as preventing any business protection clauses from being enforceable.
As a general rule, the employment law of the country where the work is performed will apply, even if the employment contract states otherwise. If employees travel between countries in their posts, their employment will typically be governed by the employment law of the country with which they are most closely associated. Employers should avoid simply using a generic employment contract when posting staff overseas; rather the governing law and jurisdiction should be carefully considered and tailored to the relevant circumstances.
If seconding a member of staff, think about what support you will provide such as accommodation, transportation of possessions and any enhanced living allowance or benefits you may offer. Take care though about the impact of equal pay/gender pay gap reporting, or accidentally uplifting the value of salary and benefits (for example, using temporary allowances which fall away on repatriation). You should also consider the impact of double taxation and whether any form of tax equalisation is appropriate.
- Comply with the General Data Protection Regulation (GDPR)
Given the introduction of the GDPR in in May this year, protection of candidate and staff personal data is an increasingly hot topic.
Think about the points at which you obtain candidate data, how you process that data and the legal basis on which you do so. The grounds for processing will be different to those for processing staff data, and you should make sure these are clearly identified.
Notably, the GDPR incorporates provisions on automated decision making (i.e. making a decision solely by automated means, without any human involvement), which is relevant in the context of recruitment.
It is important to carefully document the various stages of the recruitment process and how candidate data will be handled, particularly any sensitive data such as criminal record or right to work information. You will need to convey this information to candidates, and you may need to take additional steps to do so. If you are working with recruiters, think about the way in which you interact with them and obtain candidate data, and where there are any GDPR-related risks.
In some jurisdictions, works councils require employers to obtain their prior authority for hiring decisions and candidate data processing. In Austria, advance consent from the works council (if established) will be needed where an employer collects data via personnel questionnaires over and above general personal information from the applicant (meaning a collective bargaining agreement will need to be concluded).
Best practice in relation to data retention varies between jurisdictions. For example, in Germany, it is recommended that employers keep relevant data for at least two months after a job application has been declined (as the limitation period for unsuccessful job applicants to bring a claim is two months). In the UK, six months is relatively common (to align with employment tribunal limitation periods), although some data (such as visa data) may need to be kept longer. In each case data retention periods should be carefully considered in the context of what is reasonable and proportionate for the specific business scenario.
Historically, some employers have found it useful to keep the details of unsuccessful candidates on file for future reference (as a "talent pool", in case future roles come up). However, given new rules about employee consent under the GDPR, specific written consent should generally be sought from individuals in these circumstances. Certainly, the reasons for retaining any such data and the period of retention should be kept under regular review.
Firing staff based overseas
- Think ahead
Anticipating from the start of a working relationship issues that are likely to arise at the end of the employment relationship is important. For example, understanding what is likely to be involved in removing any directorships and powers of attorney you might grant to employees overseas and thinking about what any departure might look like will help to avoid issues further down the line. Considering in advance the impact of visas and timescales is also important. In Dubai, on termination of employment, the work permit and residency visa of the seconded employee must be cancelled and the individual has a 30 day window within which to exit the United Arab Emirates. Daily fines accrue for any period of overstaying and it is a criminal offence to stay beyond the 30 day grace period. So timing will be important when carrying out any dismissal (for example, if the employee has children at school that would benefit from staying until the end of a school term).
- Consider any minimum notice periods and statutory protections against dismissal
When bringing any employment relationship to an end, notice periods will of course be key. Again, whether statutory minimum periods of notice apply, and if so what they are, varies between markets.
In the UK, a worker is entitled to at least one week's notice for every year of employment up to a maximum of twelve weeks (for twelve years' employment). For more senior roles, a minimum of three months' notice is relatively standard. Employees with over two years' service also have the statutory right not to be unfairly dismissed, meaning there should be a statutory fair reason for dismissal and a fair procedure should be applied. Failure to do so will entitle an eligible employee to bring an employment tribunal claim.
Notably, in Austria, the position in relation to notice periods is due to change. Currently, minimum mandatory periods of notice for open ended contracts differ between "white collar" (office based) and "blue collar" (manual) employees. Under new Austrian legislation these distinctions will be removed by 1 January 2021 (from that date all employees will receive the same notice). Since 1 July 2018, the distinction that existed between these two types of employees in relation to receipt of sick pay has also been removed, as the Austrian Parliament is striving to ensure that both types of workers will be treated more equally moving forward.
- Be clear about the reason for termination
In the UK, it is generally recommended that all employers provide a clear reason for termination, even if the employee being dismissed has not yet accrued their statutory unfair dismissal rights (i.e does not yet have two years' service). This is because being clear about the reason for termination helps to avoid an allegation by the employee that their departure is related to any form of prohibited discrimination, minimising the risks of employment claims in the long term.
Dismissing employees in Hungary can often be viewed as unusually long-winded to managers coming from the US or Western Europe. Hungary is known for its strict termination rules, and a recent Supreme Court case has place renewed emphasis on the importance of written justification being given for any termination. Any termination can only be grounded in the employee's capabilities, a breach of duties or changes to the employer's operations (which the employer must carefully detail). The justification must make it clear why the cited ground led to the termination of the employment relationship. The reasons must be clear, truthful and conclusive. During any subsequently employment claim, a Hungarian employer can only refer to the reasons cited in the termination notice and the reasons cannot be amended afterwards. Prudent employers should therefore cite in the notice all the relevant reasons and circumstances that led to the termination in as much detail as possible.
- Are business protections needed for key employees
Ideally you should consider at the start of the employment relationship whether any business protections (such as confidentiality, intellectual property and post-termination restrictions) are likely to be needed at the end. If so, ensure any contractual provisions are up-to-date and well drafted.
If, however, these protections have not been considered from the outset, there is the option of including them as part of an agreed severance arrangement (for example in a settlement agreement). If opting for a settlement agreement, it is important to check local formulation and ensure that proper steps are taken in line with local laws to preclude any future employment claim.
Rules about the types of business protections that can be enforced post-employment differ widely. In Austria, post contractual non-compete clauses are only valid (if concluded after 29 December 2015) in cases where the employee earns more than EUR 3.420 gross (applicable for 2018) in the last month of employment, exclusive of special payments. In Hungary, post contractual non-compete clauses can be agreed for a maximum of two years and the employer must pay compensation for each month amounting to at least one third of the employee's salary in the last month of employment (again, without considering special payments).
Under Dutch law, a non-compete or non-solicitation clause in a fixed term contract is only valid if the employer has a substantial business interest justifying its inclusion. Assuming so, the employer must include an explanation for this in the employment contract. If not, the non-compete and/or non-solicitation clause will be invalid. In permanent contracts, non-compete provisions can last for up to one year and non-soliciation provisions for up to two years.
In the UK, the general rule is that any post-termination restrictions must go no further than is reasonably necessary to protect an employer's legitimate business interests. Typically, anything up to 12 months can be enforced (assuming the individual is of sufficient seniority and significance to the business). In Germany, justified non-competition provisions can be agreed for up to two years' post-termination, but the employer must pay 50% salary for each year.
- Be mindful of any collective redundancy or bargaining unit requirements (including TUPE)
Any business with a workforce based in the European Economic Area which exceeds prescribed thresholds must establish a European Works Council or a procedure for the purpose of informing and consulting employees about transnational issues. Obligations also arise in relation to national works councils/trade unions. Similarly, local rules in relation to collective consultation may apply in specific circumstances: for example, in the UK there is a statutory obligation on employers to consult with affected employees where an employer proposes to make large scale redundancies (of 20 or more employees within a period of 90 days or less). Employers should also be mindful of collective consultation obligations which arise in the context of the transfer of an undertaking or service provision change (in line with the Acquired Rights Directive).
With the increased focus on day-to-day HR compliance under the GDPR comes a renewed need for employers to think carefully about how staff data is processed. This is the case at all stages of the employment relationship: from hiring through to an employee's departure, and beyond. Mapping out how personal data is collected and used, as well as ensuring data is closely managed and discarded once no longer needed, helps to manage the risks, as well as avoiding potentially high penalties for breach.
There is no doubt that, with effective planning and a willingness to engage proactively with local laws and best practice, the opportunities afforded by working with staff overseas can be huge.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.