International employment laws vary from country to country. Some are simple and some come with pages and pages of complex technical jargon. Some are unique, for example, in Argentina, employees are entitled to one extra month of salary per year, known as the ‘13th month of salary’ (however, this is more common than you’d think).
What should you look out for? How does a business stay wary of the complexities of international employment? Read on to find out.
International Tax Laws
Tax compliance is one of the most critical areas of national and international law that businesses have to contend with. They’re significant parts of your legal obligations and should be one of the first things you research before entering new territory.
With international businesses, this may mean you have to pay tax in two locations, meaning two sets of tax laws to understand and work within. Some international agreements and trade deals ease the obligations that surround these laws but again, these are areas you must research.
If tax laws differ substantially, it’s worth working with an experienced Global Professional Employer Organization (PEO), who can help you remain compliant with tax laws and even help to deduct tax at source by acting as a local entity for any overseas employees.
International Labor Laws
International labor laws are the rules and regulations that span both public and private international law. They cover the obligations and rights of employees, employers, trade unions and even governments. They are developed, maintained and altered by the:
- International Labour Organization
- World Trade Organizations
- International Monetary Fund
- World Bank
These organizations have been responsible for reforming labor markets, labor policy and creating structural change across global markets. The labor laws and standards work to protect worker rights, job security and improve employment terms.
These laws establish the minimum protection from inhumane work practices for employees and it’s vitally important businesses such as yours work within their boundaries. Specific areas of these laws apply to international or expatriate workers.
For example, if a worker is sent from Ecuador to work in France for a set amount of time, the employer could choose to class the contract of employment as governed by the labor laws of either country. This can be an issue for employees, as it means they could be ascribed a contract with the less favorable laws.
One famous example of this is Ravat v Halliburton Manufacturing and Services Ltd, where Mr. Ravat was terminated from employment and claimed unfair dismissal. However, Halliburton argued they had no jurisdiction because Mr. Ravat was working in Libya, even though he was from the UK.
Fortunately for Mr. Ravat, it was held that he could claim unfair dismissal because he worked in close connection with the UK. This is an example of why it’s important to be aware of international labor laws and how they can affect both you and your employees, even after a contract has been terminated or ended in any way.
Employees vs. Independent Contractors
Similar to the classification of contracts under national labor laws is identifying how you regard the professional status of overseas workers.
Employees will naturally have a full contract, salary and benefits. As an employer, you have an obligation to provide these. In contrast, an independent contractor is either known as a ‘consultant’ or ‘self-employed’. They act as a sole trader or independent company to offer their services.
For anyone expanding internationally and hiring overseas workers, you must specify what these workers are classed as. A worker classed as an employee means you’re obligated to provide a certain amount of the aforementioned guarantees as part of the contract; otherwise, your business could be non-compliant with labor laws.
By specifying your relationship from the beginning, you can avoid any future compliance issues that could occur.
Abiding by international employment laws will result in you avoiding severe financial penalties. Again, these are all issues that can be aided by partnering with an experienced Global PEO. These organizations have experience helping businesses set up in multiple countries. For example, here at Global Expansion, our capabilities stretch to over 200 separate countries across the globe.
Until that point, you can download our helpful expansion guide which covers the most important areas of consideration for any growing business.
Explore Our International Expansion Guide
Our guide, ‘Expansion Considerations for Rapidly Growing Businesses’ can help you begin your expansion process in earnest. From expansion options to the top considerations for any growing company, our guide is the best start to any expansion.
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