Fast growth employers looking to scale and expand their international footprint will have a host of questions on how to execute this whilst being legally compliant and commercially pragmatic. In this article we outline the key legal issues and factors an employer should be considering when engaging talent overseas.
Key considerations per country
As a growing business, it can be overwhelming and difficult to distil the legal issues and factors relevant to the engagement of talent in different jurisdictions. It's critical that employers understand the following key considerations, at a local level, before going ahead with their expansion plans.
Engagement structure
It will be necessary to consider whether the individual should be engaged as an employee or whether they could provide services as a consultant. Generally, there are potential financial benefits to adopting a consultancy model and typically a consultant will have fewer rights and entitlements, which will inevitably impact on the costs/benefits analysis. However, employers should think about how the services will be carried out (and indeed what those services are) when determining which type of relationship should apply. Employers should be mindful that there could be penalties if an individual is found to be misclassified.
Recruiting employees through a global employment outsourcing/employer of record provider, in countries where it is not possible to recruit employees directly via a UK subsidiary, is another option for employers. The ‘Employer of Record’ (EOR) typically employs the individual on the company’s behalf through a legal entity in the country, either where required or desirable to avoid any "permanent establishment" risk, such as paying corporation tax. Often, an EOR can assist with payroll too.
Business, corporate & tax implications
It is critical to address whether a legal presence is required in the territory for engagement and any licensing and regulatory regimes that must be complied with. Employers looking to engage staff abroad should also consider the risks/liabilities associated with being deemed to have a permanent establishment. Even in jurisdictions where no legal presence is strictly required there may be other registration requirements that apply.
We would always recommend obtaining detailed tax advice for each country (including in relation to any permanent establishment risks), as tax considerations will go hand-in-hand with other considerations (such as, ongoing employer costs).
Mandatory employment law compliance & documentation
Understanding how to achieve compliance with local mandatory employment law rules that apply, throughout the employment life cycle, is vital.
This should include any mandatory rights in relation to engagement, employment, and employee management (and associated rights such as the right not to be unfairly dismissed or discriminated against). In addition, any requirements relating to notice and termination provisions should also be considered. An employer should also consider any length of service requirements an employee must have before they become entitled to those rights within each jurisdiction.
Related to this is the potential litigation risk in each jurisdiction; this will depend on the level of employment rights, whether there is any qualifying period of service required to bring a claim, the limitation period that applies, and the likely costs and remedies. It is important to be aware that in some jurisdictions breaches of employment law can result in criminal as well as financial sanctions.
Employers should also ascertain what documents are required to regulate the employment relationship (e.g., contracts, offer letters, policy documents), at what point these must be provided, and whether there is a requirement for such documents to be in the local language. Employers need to be mindful of any execution and/or registration requirements, including the validity of electronic signatures.
Pensions, benefits & insurance
Similarly, employers must understand and comply with any mandatory benefit entitlements (which can vary significantly according to the country of engagement).This may include sick pay, holiday pay, family leave/pay, minimum wage, pension requirements and how pension plans are managed practically.
In many countries there are also minimum mandatory insurances that an employer must have in place such as workplace accident cover, and employer’s liability insurance.
Immigration
Employers are likely to need to carry out right to work checks in most jurisdictions. Employers should be aware of what evidence must be collected, when it should be collected, any visa requirements and record keeping obligations. In some jurisdictions breaches of immigration rules can result in criminal as well as financial sanctions.
Data protection
Due consideration must be given to the types of data that can be collected and processed in relation to the workforce and the obligations that apply when doing so, which may vary depending on jurisdiction. It's important to be mindful of any employment data-related documents which may be required as well as how to manage the risks associated with processing employment data.
Weighing up a global remote working policy
Working remotely with flexibility is an attractive offering from a talent retention and engagement perspective. Employers may find that they need to recruit talent from overseas but without a need for those individuals to relocate, or that their existing workforce is increasingly requesting to work remotely from abroad. There are various legal and cultural factors which employers should consider, as well as being mindful of any infrastructure required to achieve a consistent approach to accommodating global remote working. One such way to help achieve the latter is via a global remote working policy covering the jurisdictions an employer may allow its workforce to operate in and expand into, and the factors relevant to this. Such a policy can also help to ensure that existing employees understand the company’s position on remote working.
How we can help
We can provide detailed advice and necessary support on any of the above elements in any country (including in relation to the implementation, the costs, and associated risks).
You can complete our free checklist to start to understand the key considerations before you commit to recruiting in a brand-new territory.
We can also support employers with comparing and determining which country would work best from a legal and commercial view for recruitment purposes (please contact razia.begum@mishcon.com if you would like a country comparison report), as well as supporting employers on executing their recruitment plans at a local level.