Effective Employee Termination: Managing the Complex Process Overseas

Working with remote workers can be a very positive and rewarding experience, but you will inevitably find yourself in a situation where you have to let employees go. Terminating an employee is a complex and difficult process, especially if it is an overseas termination as international labor regulations change. If not done properly, it can lead to reputational damage and costly litigation.

So what’s the best way to handle the termination of an employee in another country? Read on to find out.

The Risks of Terminating International Employees 

When you terminate employees abroad, you need to be aware that they enjoy the protections and rights that are customary in that country. Here are some of the most common ones your company might face.

  • Damaged Reputation: Dismissing an employee improperly can lead to bad press and/or a lawsuit and severely damage your company’s reputation.
  • Wrongful Termination Lawsuits: Wrongful dismissal occurs when an employee is dismissed for reasons that are against the law. However, the definition of a wrongful dismissal claim varies from country to country, so it is important to know the local laws.
  • Discrimination Lawsuits: A discrimination claim occurs when an employee is dismissed on the basis of factors such as race, gender or age. If employees feel that they have been dismissed on the basis of such discriminatory factors, they can file a discrimination claim against your company.

Terminating expatriate employees is not easy, but there are certain steps you can take to ensure that each employee is terminated fairly and in accordance with local law. Here’s what you should keep in mind:

  1. Understand the Employment Laws and Regulations. As a company, you need to know what you are getting into when you start working with external employees. This means that you need to find out about the labor laws and regulations in the employee’s country before drawing up the employment contract. Also, check whether there are any collective bargaining agreements (CBAs) that contain further provisions on employee termination.
  2. Go Through the Employment Contract. Be sure to check the individual employment contract to determine whether there are any other requirements or restrictions in addition to the legal provisions that you need to take into account.
  3. Work with an EoR Agency. Many employers choose to partner with an employer of record (EoR) agency to better manage the termination process. A global EoR agency takes care of all tasks related to the management of international employees, including the recruitment and termination of company employees.

How Can an EoR Agency Help with Employee Termination Abroad?

Working with an employer of record can save you a lot of time and unnecessary headaches. Find out how an EoR agency can simplify the termination process for your company:

1. Local Expertise

A global EoR has local expertise that ensures the termination process is done correctly from the start. Knowing the local regulations before drafting an employment contract is the best way to avoid stressful situations later on.

In addition, knowledge of local regulations guarantees that the employment contract complies with all local regulations and serves as a formal agreement setting out the terms and conditions of employment, including termination. These articles usually set out the grounds for termination of employment, severance obligations and notice periods.

2. Accurate Implementation  

The process of terminating an employment relationship has a financial component that must be implemented properly. The exact amount to which an employee is entitled in the event of termination may depend on a number of important factors, including length of employment, statutory payments, unpaid bonuses and allowances, and accrued vacation entitlements.

An experienced EoR provides global payroll management, performs tax and severance information and is able to accurately calculate an employee’s entitlement, regardless of the country or type of business.

3. Security

One of the main problems with dismissed employees is access to sensitive information. The company’s intellectual property must be legally protected when the employment contract is drawn up in order to prevent digital access after termination. An international EoR has policies in place to legally protect and reclaim your intellectual property

In Conclusion

The improper dismissal of employees is a serious risk for any company operating abroad. It carries reputational and compliance risks as well as costly litigation. For this reason, it is crucial to ensure compliance with the labour laws of the country in which the employee is based. One solution is to work with a global employment agency or EoR such as Swapp Agency. Swapp Agency provides international payroll and HR services with a focus on the Nordic countries and ensures that the hiring and termination of employees is done in accordance with local legislation.