03 May What You Need to Know When Terminating an Expat’s Services
When is the best time to terminate an expat assignment? It’s not always an easy decision but expats know they always have a contract with an expiration date stamped on it. The contract can be extended but organizations need to have a policy in place long before an expat assignment ends, to avoid potential claims under home– or host-country protection.
Some tap the ingenuity of a clever recruiter from their home country or local HR person who understands the risks of hiring foreign assignees. They can be “accidental expats,” with tax liabilities after contract ends, and even the scenario of the expat becoming localized without ending a contract. A global mobility manager needs to understand all these matters even before the hiring stage, especially from the host country manager.
To cite an example, an expat bound for the United States needs to undergo a background check. If the expat underperforms, a training is required to test if he or she can meet expectations. If the expat’s performance doesn’t improve within a certain period of time (eg. within a month), he or she will need to be let go.
Now what if the expat claims unfair dismissal protection? Global mobility managers need to have measures in place, like the following:
Before the assignment
The host country manager and US-based global mobility manager will need to have an agreement that can withstand any unfair dismissal claim from a talent, making sure the latter understands all the repercussions.
A list of responsibilities that is not met can be grounds for dismissal, for instance, which is why some companies need specific duties and responsibilities written down and explained clearly for the expat to understand, especially for the expat who speaks English as a second language.
During the assignment
The home-country recruiter must be aware of all the expat’s duties and responsibilities and how he or she is performing, especially the reason for the assignee’s demotion, changes in duties or bosses and if these are considered disciplinary actions.
The termination day
This should follow the home-country termination procedure. But in many more effective cases, both home-country and host-country organizations have already agreed on one termination procedure. Both sides need to plan ahead and understand the ramifications of a termination.
When an employee is localized, the recruiter or HR person must first end the contract as expat salaries are usually higher than local hires.
Employers should be aware of an employee’s tax liabilities after termination. In some cases, 11 months after being let go, funds may be owed back to the employer who needs to understand its expat’s tax responsibilities even before hiring them.
It’s never easy to let go of employees, but to avoid drama of the unnecessary hiring kind, here are some more pointers from Global Boxx Expat Solutions:
- Where is the employee working, under what contract and which laws apply?
- When the applicable laws are stipulated in the contact, was this determined correctly at the start of the employment or could the employee possibly benefit from other laws when appearing before a court of law?
The next important element to consider is tax. Sometimes, there is a period of garden leave, where the employee has resigned or otherwise had their employment terminated and is instructed to stay away from work during the notice period, while remaining on the payroll. During this time, it is important to know several things:
- Is the income during this period is taxable in the home or host country? Or both?
- Does the employee stay in the host country during this time or come back to the home country?
- Is there an applicable tax treaty between the two countries or do you have to rely on the local tax rules of the two (or more countries)
Beyond all the employment matters, the other thing no one talks about but is just as crucial is the expat’s housing accommodation. It’s important for an expat to know when he needs to vacate his apartment. This is usually handled by the employer but if the employee has made many home purchases, it means he or she will need sufficient time to sort out the items before the big move.
And one last thing: On top of leaving a company one has grown to like, moving out of a home is the next most difficult thing to do. So for expats with assignments of only 6 months or a year, it’s best to rein in one’s tendency to accumulate stuff when California Corporate Housing already provides furnished homes customized to their needs, from coffee machines to toiletry products and ideal furnishings to fully stacked kitchens.