HR Challenges Expanding to a New Country – Part 3

In the final of our three part series, we highlight the areas companies need to be primarily aware of when a worker’s terms of employment come to an end. Often a challenging topic in the U.S., terminating employees and retirement ages brings a whole new level of complexity when expanding overseas. We look at the various areas you should be paying particular attention when venturing into unfamiliar countries.

Termination Policies and Practices

Outside of the U.S., there is no such thing as at-will employment, a term used in U.S. labor law for contractual relationships in which an employee can be dismissed by an employer for any reason without warning or having to establish “just cause” for termination. U.S. companies operating in foreign markets must therefore be acutely aware of the differences in termination policies and practices in other countries in order to avoid non-compliance.

Termination rules tend to depend on the specific situation at hand. If an individual breaks a law or steals from the company, for instance, then the termination process is much more straightforward than, say, if an employer is simply dissatisfied with an employee’s performance.

In many countries, in order to terminate an employment contract solely for performance issues, a company has to attempt for a certain number of months to bring the particular employee up to the required standard. This period can range from six months up to a year. If the company can prove that sufficient efforts were made, only then is it legal to terminate. Even if termination is justified, a notice period and severance pay may be required.

If you need to lay off workers for non-performance related reasons, governments may require you to prove you are legitimately downsizing or dissolving a division. Making someone redundant and then hiring again for that position in a month, for example, will certainly raise a red flag.

It is very important to follow the local guidelines for termination and laying off workers as they can differ so drastically from country to country and from situation to situation.

Retirement

Mandatory Retirement Age

Mandatory retirement age varies from country to country, and is often shaped by historical and cultural expectations and is in no way standardized.

Most countries expect employees to begin the retirement process in their early-to-mid sixties. For French workers, both men and women can retire at 62, while in nearby Italy, men can retire at 66 and women at 64. However, in Vietnam, while men retire at 60, the mandatory retirement age for women is 55.

U.S. companies must be careful not to make assumptions about areas such as retirement age based solely on their expectation of what is “normal”—there will always be outliers to expected patterns of behavior and legislation. A safe assumption is that the rules will be different in other countries.

Retirement Pension Plans

Many countries have a pension provision in place as part of their social insurance or statutory requirements. These requirements seldom remain constant, and keeping up with them from year to year can be challenging.

As of August 2014, for instance, the U.K. introduced a new law that required employers to contribute at least 3% into an employee’s private pension scheme. This is a very recent change and highlights the need for local expertise when it comes to understanding local employment legislation.

When it comes to pensions, there are a potentially confusing number of options, including any combination of:

• A government fund paid for with taxes
• Company contributions
• Employee contributions
• Public models
• Private models
• Group pensions

The major issue to remember is that whatever is expected in one country will almost certainly not be appropriate in another. Employees in Russia will not have the same retirement expectations as similar employees in Japan. More than understanding the basics of rules and regulations, companies must understand the expectations of employees in each of the countries in which they operate. Without understanding this, attracting high-quality candidates is more challenging.

SafeGuard World International invests enormous resources in its established network of global experts, making them the ideal resource for businesses looking to expand into new markets. Their international experience and relationships with local experts provide you with the exact support your particular business requires. Simplify your strategy with a single experienced partner to help your business grow with confidence.