Labour Pains

Before you expand your business into new jurisdictions, be sure to check the fine print – and the large type – of local employment laws.

In some countries, cars drive on the left. In others, cars drive on the right. In some countries most people ride bikes or scooters; and in some parts of some major cities, cars aren’t allowed to drive at all. Employment law is no different. While some employment regulations are universal, others have local variations that create complexities for businesses looking to expand into new jurisdictions.

The International Labour Organization (ILO) sets universal labour law standards, which individual countries ratify (sign up for) and enforce as part of their domestic laws. But there are nuances to many local laws which must be understood and accounted for, to ensure your business doesn’t miss out on recruiting the people it needs, and that it doesn’t waste money on avoidable fines or criminal sanctions.

The recruitment process is often a puzzle for globally growing businesses. Some countries require a local entity to be set up to hire local employees, while in others the parent company can work directly with local hires. Many – but not all – countries require written employee contracts to be in place, setting out the employer’s and employee’s obligations. (In some jurisdictions, like Belgium and Saudi Arabia, those contracts are only enforceable if they’ve been translated into the local language accurately.) Likewise, many – but again not all – countries have a minimum wage and overtime requirements in place; and while this does not apply to white-collar hires, it may well apply to your blue-collar staff or independent contractors.

Implementing country-compliant processes is absolutely essential. Take the Saudi Arabian example: there, all part-time workers must have a contract that states an official termination date, and part time-contracts can only be renewed once. Foreign workers must have a fixed-term contract and are ineligible for part-time work. Probation periods should be explicitly stated in contracts and normally run for three months, although they can be extended to six months by written agreement.

The in-country specifics only get more complex from there. The maximum working time for employees working in Saudi Arabia is eight hours a day or 48 hours a week. This can vary in the event of shift work, but only if those limits are not breached over a three-week rolling average. Those limits are then reduced during Ramadan to six hours a day and 36 hours a week.

Now compare that to Singapore, for example. According to the local Employment Act, every contract of service must include the designation title and job scope, hours of work, probation clause, remuneration package, employee benefits, code of conduct and termination. Companies that fail to comply with any aspect of this Employment Act can face severe fines and possible jail time. In Singapore, the maximum working hours are eight hours a day, 44 hours a week, and no more than six consecutive hours without a break. Employees cannot work more than 12 hours a day, including overtime.

Some countries (like France, Italy and Brazil) require employees to “unionise”, or join in industry-specific collective bargaining agreements.; and almost every country on the planet requires employers to set up payroll and redirect the applicable income tax and employee benefits (healthcare, pensions, unemployment insurance, etc) to the relevant authorities. This can be a significant cost, which may be best outsourced to a specialist payroll provider, at least at the start.

If hiring is a maze, then firing can be a minefield. The grounds for legally terminating employment vary dramatically from country to country, or even in different regions within a single country. Some countries (including, famously, the United States) have “at-will” employment, which allows employers to fire staff as and when they please. Try that in other most countries, and you’ll face a short and expensive trip to the labour courts. There, terminations must follow a fair process and must be based on reasonable grounds, like poor performance (which has to be documented), redundancy (which often requires firmer grounds than simply a desire to restructure that one role) or gross misconduct (which again has to be documented and proven).

The rules get more complicated as your business grows. In Japan, for example, you’re required to document work rules in an employee handbook once you’ve grown to 10 employees; in France, that’s required at 20 employees, while in Belgium it’s mandatory for just one.

As with so many aspects of global expansion, the secret to success lies in knowing the lay of the land and planning ahead. Your first engagement, then, might not be an in-country employee, but rather a local “fixer” who can help you navigate the intricacies of domestic labour law.

Dates Mar 19, 2021

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