Are you planning to expand your team across borders? Navigating international employment contracts is an essential aspect of global expansion. In this comprehensive guide, we discuss everything from essential elements of employment contracts to compliance.
Of course, having a reliable Employer of Record (EOR) service provider by your side can streamline this entire process. Before we go into that, let’s understand what an international employment contract consists of.
What Is an International Employment Contract?
An international employment contract is a legally binding document or agreement between a business and its hired employees in different countries. This kind of contract has to comply with the local employment laws of the country in which the employee (not the employer) resides.
An international employment contract also has the same terms and conditions as a typical employment contract for local hires in the home country.
These usually include:
- Basic job duties
- Statutory benefits
- Notice period
- Termination
- Salary
- Vacation rights
- Sickness
- Confidentiality requirements
- Working hours
- Overtime policy
Let's find out under what circumstances employers need to consider using an international employment contract.
When Do You Need An International Employment Contract?
An international employment contract is required when the employer and their employees are based in two different countries. The employee could either have been hired overseas or could have permanently moved abroad during their employment term.
The pandemic gave rise to remote work across the globe. Since then, global employee mobility has been on the rise, with many employees either having relocated to their home countries or working from a different country. Given this, it becomes critical to have an international employment contract. The next section explains why.
Is It Essential to Have an International Employment Contract?
When hiring takes place beyond one’s geographical boundaries, it also has to take into account the other country’s employment and labor laws. Therefore, it is essential to have an international employment contract that offers benefits to both the employer and the employee.
Here are three main benefits:
1. Protection for employer and employee
An international employment contract is a written document with legal implications and is an absolute must when it comes to having employees working in different countries. It serves as a point of reference for both, an employer and employee, especially in cases of disputes. Having a written contract in place, therefore, protects both parties equally.
2. Employee rights
The country in which the employee works has its own laws, regulations, and employee rights. These statutory rights of the employee need to be reflected in the international employment contract to avoid any legal disputes later on. In cases of a dispute, the court’s decision will be based on local laws governing the employment contract.
3. Legal requirement
Most countries legally require both, the employer and the employee, to sign an employment contract that reflects the laws and regulations of the country of residence of the employee. To ensure that the contract is compliant with the applicable local laws, it is crucial that an employer consults local authorities for the same.
Further, compliance with employment regulations in different countries can pose a huge challenge due to factors such as cultural differences, language barriers, and varying labor laws. Let’s see what are the legal and regulatory compliances required in international employment contracts.
Legal and Regulatory Compliance in International Employment Contracts
Legal compliance in international employment contracts involves adhering to the employee's local employment laws in their country of residence.
- Minimum wages
- Legal reasons for termination of contract
- Duration of probation periods
- Statutory benefits
- Payroll laws
Regulatory compliance in international employment contracts refers to whether or not a business is adhering to international labor laws when hiring a global team or even an employee overseas.
This can include:
- Supplementary pay, bonuses, and equal compensation for equal work
- Exchange rates, involving agreements for inflationary currencies
- Work arrangements that could be flexible or part-time work, and also include performance and disciplinary issues
- Valid reasons for termination of duties, such as unsatisfactory performance, misconduct or mutual consent
Essential Elements of an International Employment Contract
An international employment contract must have some essential elements for it to serve the purpose for which it has been created.
These elements include:
- Rules and responsibilities: The job duties that the employee is expected to carry out should be listed in no uncertain terms so that there is no ambiguity
- Compensation: The compensation needs to be clearly defined, including any additional benefits or perks or bonuses
- Termination: The grounds on which the contract may be terminated by either party should be clearly stated to help prevent both parties from abandoning their obligations. The notice period should also be mentioned.
- Confidentiality: A key clause that legally binds the employees from leaking critical company information to outsiders
- Probationary period: The duration of the probationary period should be mentioned and the subsequent status of employment following this period
- Employment duration: The duration of the employment period, its start and end dates, need to be stated clearly
- Work schedule: The contract should mention working days and hours and, if any overtime or extra working hours would be required on off days, etc.
Don’t Get Overwhelmed: Call in a Reliable Employer of Record Service Provider
International hiring may sound very exciting and glamorous even, but it is not without its pros and cons, especially if the legal and regulatory compliances are not met fully. This is when most companies fall back upon their trusted Employer of Record(EOR) service providers, like BGC, to navigate these international hiring waters successfully. Boasting an impressive track record since 2005, BGC is the go-to EOR for companies wishing to engage employees overseas and need help with a flawless international employment contract.
Get in touch with us today!
