Compliance with local labor laws

The employer will want to ensure compliance with the local laws of the country where the employee is normally based, but it has the additional burden of ensuring compliance with the overseas host country’s labor laws. The general rule (regardless of what the employment contract says on choice of law) is that employees are protected by the laws of the country where they are normally working. These local mandatory employment rights (including dismissal protection) cannot be overridden by a choice of law clause in an employment agreement. This can create confusion and legal risk where there are performance and conduct issues during the period of internal mobility. Anticipating this and building safeguards into the relevant employment documents is essential.

Tax protection and equalization

A key issue for internationally mobile employees is taxation, particularly if the employee is moving from a low-tax to a high-tax jurisdiction. The most common forms of support include tax protection from the employer (where, at the end of the tax year, the employer keeps the employee whole so the employee is not worse off, based on what they would have paid in their home country) and tax equalisation, where the employer essentially takes over responsibility for the employee’s taxes in both countries and ensures that the employee who is working overseas is taxed based on what they would have paid in their home country. Tax protection is less burdensome for the employer but can trigger significant cashflow problems for the employee. Tax protection comes at a significant cost for the employer. In either scenario, the employee will likely need professional support to complete tax returns in multiple countries. The employer will also need to protect its position by ensuring it obtains any tax credits paid by the tax authority to the employee in connection with these tax arrangements.

Employee well-being and COLA

HR must consider support systems such as health insurance and assistance with relocation, housing, travel, additional leave, and support with school fees for employees' families. While there is often no legal requirement to offer this support, it is often practically necessary for the internal assignment to be viable. Similarly, employers will need to assess the impact of an employee moving from a low-cost to a high-cost jurisdiction from a cost of living perspective. That may include a cost of living allowance taking into account the price difference between a basket of supermarket goods in the home and overseas country.

Conclusion

Incorporating international workers into supply chains is crucial as it allows companies to leverage diverse skill sets and perspectives, enhancing innovation and efficiency. Additionally, understanding and managing the complexities of international employment ensures compliance with global employment laws, thereby mitigating risks and maintaining the integrity of the supply chain.