A Guide for US Employers Terminating Overseas Employees

US companies that assign staff overseas already know they will need to adapt to the employment and labour laws of the host country. But one of the areas that can be problematic for HR departments is that of employee termination, which is largely taken for granted in the US.

Go to the profile of Tim Burgess
Aug 20, 2018
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US companies that assign staff overseas already know they will need to adapt to the employment and labour laws of the host country.  But one of the areas that can be problematic for HR departments is that of employee termination, which is largely taken for granted in the US. 

The business culture of ‘at will’ employment at home means that US employees can be terminated at any time and for any reason, and without severance unless it was negotiated in the contract.  There is no right to employment in the US, and termination is left entirely to the discretion of the employer.  However, it is a much different story when terminating employees abroad.

‘At Will’ Employment is Not Recognized in Many Countries

US employers often don’t realise that at-will employment is unique to US labour law, and most countries around the world don’t operate that way.  Instead, many foreign countries have strict labour protections in place, that favour employee rights over the interests or convenience of the employer.  These employment rights will usually supersede any terms included in the employment contract or letter of assignment, so any termination clauses should be drafted to match local standards.

Host country employment rights include just cause for termination, notice periods and severance pay, and the rules apply equally for local citizens and expats on assignment.  Although expats might not know they have these statutory protections, local employees may know the termination rules better than the US employer and will be prepared to pursue legal remedies if their rights were not respected.

Risks of Terminating Overseas Employees

Many of our clients don’t realize that simply ending an assignment or position abruptly can bring unexpected consequences.  Employee termination carries a lot of risk and legal implications and is one of the major benefits of using an employer of record to outsource international employment.

Brand Reputation: If your company has repeated violations of termination rules, then it may be more difficult to attract local talent if they believe you won’t offer them the job security or employment rights that they expect.  The internet and social media make this information easily shared among professional groups, so your brand could suffer in the foreign market.

Legal implications and Costs: Many countries will impose penalties when a company runs afoul of termination laws, even something as simple as ignoring notice periods.  The terminated employee may also have the right to bring a claim that could exceed the statutory severance amount.  This means hiring local legal counsel and either contesting or settling claims, adding to the cost of entering a foreign market.

Case Studies

As you begin to see, there are a few best practices to be applied for terminations abroad in three distinct areas: 1) cause for termination, 2) notice periods and 3) severance payments. 

Cause for termination: always know the allowed causes for termination and put them in writing when you issue the written notice.

Notice periods: these vary from country to country, and unless the employee commits a criminal or grossly negligent act, you must follow the notice period rules.

Severance: some type of severance is often statutory, even if you were not aware of it.  In some cases, severance must be paid even if the termination is voluntary or planned ahead of time such as repatriating an assigned employee home.

Here are some case examples that we’ve helped our clients with that illustrate what you will need to watch out for:...read more

Shield GEO makes international employment simple. Our customers use Shield GEO to employ and payroll hundreds of workers in over fifty countries. Find out more.

Go to the profile of Tim Burgess

Tim Burgess

Director, Shield GEO Services Ltd

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