With businesses operating globally, it is increasingly common for employees to be working in business units spread across jurisdictions or to spend time on secondment to an associated company or a branch of their employer company.
International assignments can address employee developmental gaps, permit a good candidate to obtain exposure to a new market and enhance integration of local operations with international management. However, from a management perspective, operating a globally integrated workforce poses specific issues, including a requirement to take advice on the employment law and practice in each jurisdiction where employees are carrying out their work. Tax advice might also be necessary, from the perspective of both the employer and the employee.
Application of local law
Where an employees is assigned to work in the Gulf Cooperation Council (GCC) region, the key consideration is that the concept of 'secondment,' as commonly understood, is not recognized. Each employee will need a locally based entity in the country of assignment in order to sponsor the employee for work permit and residency visa purposes. Such sponsorship is employer specific. As far as the government authorities are concerned, the sponsor of an employee is also his employer.
In the United Arab Emirates, an integral part of the sponsorship application process is for the sponsoring entity and the employee to enter into an employment contract in a prescribed form which is registered with the Ministry of Labour (or the relevant free zone authority depending on where the UAE entity is established). This contract is treated as the operative contract by the UAE authorities, in so far as no second or subsequent contract can diminish or extinguish any rights or benefits conferred on the employee by this contract.
In all GCC countries, the local labour laws will have mandatory application to individuals working in the GCC country. The key employee entitlements are to a minimum period of notice and an end of service gratuity (Gratuity).
Gratuity
The statutory formula varies across GCC member states broadly as follows (there are particular factors which might apply to reduce or extinguish the right to claim Gratuity and which are not set out below):
United Arab Emirates |
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Kingdom of Saudi Arabia |
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Emirate of Qatar |
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Emirate of Kuwait |
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Kingdom of Bahrain |
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Sultanate of Oman |
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Gratuity is not payable if an employee is terminated for gross misconduct, or in certain circumstances breaks his contract.
Whilst there is no personal income tax in the GCC states, salary payment is increasingly regulated with both Kuwait and the UAE requiring payment to be made by direct electronic transfer by a locally regulated bank into a local bank account. This requirement can be problematic for international assignees who often wish to continue being paid in their home country.
Employer Policies
Operating an international assignment HR structure requires integrated company policies which can manage expectations for managers and assignees. A key consideration for such policies is whether these should be contractual or non-contractual enabling employees to rely on them and seek to have their terms enforced.
The following considerations are relevant:
- Assignment Policy: provides a reference point for employees and managers regarding the terms of an assignment (potential variation of benefits (with relocation and repatriation costs being key) and flexibility) so that employees are treated consistently. Such a policy should also distinguish between different groups, grades or categories of employees as appropriate. It would also be appropriate to have different terms for short term assignments and long term assignments;
- Local HR policies or collective agreements: in any jurisdiction certain policies will be mandatory such as health and safety, disciplinary and grievance policies. The application of collective agreements (covering pay, HR policies and potentially termination) may also be mandatory and this is a particular issue in many European jurisdictions;
- Employee job descriptions and titles: these can affect the legal provisions applicable to an assignment in the local jurisdiction with certain categories of employees often being excluded from the application of key employment protections. Immigration provisions will also be important and the basis for work permits and residency can depend on the employee's role and title;
- Tax equalization: if the employer imposes tax equalization then
clarity of what this means and its effect on the employee on
assignment is of paramount importance.
Termination
The contractual basis for an international assignment will
usually be the original employment contract, the secondment
agreement and depending on the jurisdiction, the local contract
with the host company. All three documents need to be consistent
and if the assignment is terminated prior to completion the
agreements should either provide for the underlying employment to
also terminate or for the assignee to be repatriated back to the
underlying employing entity.
Consideration also needs to be made of whether to repatriate an
assignee and try to reassign the employee rather than terminate
employment. The reason for termination should be clear and an
assessment made on the potential exposure arising out of
termination both in the local jurisdiction of assignment and in the
home country. The employee may have statutory claims which could be
brought in both jurisdictions and contractual claims may
potentially be brought in his home country. The risk of dual claims
cannot therefore be discounted. Where an exit is agreed it would be
wise to document the terms agreed by putting in place settlement or
compromise agreements which comply with statutory provisions for
the waiver or settlement of employee entitlements in the
jurisdictions where the employee has been employed or assigned.
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.