Foreign Staffing Publishes Article in Global Trade Magazine
You are considering expanding your company’s presence into Europe. You might think it will be as simple as expanding across the United States. How difficult could it be? You open an office, hire some staff and you are in business. Not so fast. A great deal of homework and research is necessary to understand some vastly different rules and regulations. The requirements for opening offices in Europe and hiring new employees are worlds apart from those in the United States. Just a few of the myriad changes from the USA to other countries involve: hiring new employees, employment contracts, termination issues, severance, benefits, vacation time, etc. Can a foreign company hire new employees if it doesn’t have a legal entity established in that country? Depending on the country, establishing legal presence could take a long time. If a legal presence is required, can you utilize contractors? What are the rules? Are there tax considerations for employees versus contractors? Will you pay your employees in local currencies? Some of these issues favor the employer, some favor the employee. Even after your new operations are setup and your company is generating revenue, do you have a plan for repatriating your funds back to the United States? Remember, every country is different. Not understanding these rules and regulations can cause long term consequences both legally and financially.
Some of the countries in Europe are represented below. Some practices are similar and some are vastly different. We highly recommend securing legal and tax advice before embarking on your European expansion.
Germany
German labor and employment law is strongly biased in favor of employees and is probably the best in Europe. In Germany, there are specific rules regarding hiring employees. Fifty-hour work weeks and a maximum of six working days per week are permitted.
There are also specific rules regarding firing/terminating employees. They include: 1) dismissal (with or without notice for cause); 2) resignation (with or without notice for cause); 3) lapse of an employment contract entered into for a fixed term or to achieve a specific aim; 4) occurrence of a dissolving condition; 5) contractually agreed age limit is reached; or 6) recession of the contract. If an employee is terminated then the employer must provide the employee with a written notice of termination. In addition, depending on the length of employment, the employer must provide a notice period to the employee. The employer may have multiple grounds for termination that are fair and justified relating to the employee’s conduct or operational requirements. Furthermore, dismissal due to redundancy is legally permitted. The employees benefit because they must be provided 10 weeks’ notice prior to dismissal, and the employee is provided an average 12 weeks of severance pay. If an employee is hired on a probationary period, the maximum length of time is 6 months.
Similar to other countries in Europe an employer in Germany may not base termination on leave for family reasons (including pregnancy, maternity/paternity/adoption/parental leave), trade union membership and activities, filing a complaint against the employer, gender, disability, age, religion, sexual orientation, or ethnic origin.
Italy
In Italy there are specific issues regarding the hiring of employees. For example, written employment contracts must be provided. Within these contracts, a trial period can be provided in which the relationship may be terminated without notice or payment for services. In addition, fixed-term contracts are permitted for permanent tasks and the maximum length of a fixed contract is 44 months. Overtime is not an accepted practice and there is a maximum work load of 48 hours per week. There is no severance pay provided to employees following dismissal due to redundancy.
In Italy, employment contracts must be provided in written form and outline the relationship between the employer and employee and must include the following: 1) parties of the relationship; 2) start date; 3) end date (if for a fixed term); 4) remuneration and frequency; 5) benefits; 6) work hours; 7) paid leave; and 8) duties and responsibilities of employee.
Employees in Italy are provided with at least 4 weeks of vacation each year and a minimum 11 days of public holidays.
France
In France, all employees must complete a medical examination prior to the end of the trial period. Employers must publicly post inside the business location required information including: 1) working hours required; 2) break times; and 3) contact information for the works inspectorate, occupational health department, and emergency services. The maximum probationary trial period in France is 8 months. France does not allow 50-hour work weeks and employers are allowed a maximum of 6 working days. Legal working hours are 35 hours per week. Also, it is nationally mandated that all businesses adhere to smoking bans in the workplace.
Termination of employees due to redundancy is allowed, but requires 4.6 weeks of severance pay. Labor law mandates that an employer must request a meeting with an employee prior to termination. The employee may have a colleague or representative in the meeting. Termination also requires a written explanation including precise legal reasons for the termination. A dismissed employee receives a certificate of employment and an ASSEDIC form entitling the employee to unemployment benefits. Different types of notice must be given depending on the length of tenure by the employees and these can range from 1 to 2 months.
In France, fixed-term contracts are prohibited for permanent positions and can be assigned for no more than 18 months. There are many types of employment contracts in France. However an employer may nullify a contract within the first three months of employment.
In France, employees receive 30 paid working days annually, one of the highest paid vacation allowances in Europe. In addition, female employees receive six weeks of paid time prior to giving birth and ten weeks afterwards for maternity leave. Male employees receive 11 consecutive days for paternity leave once the baby is born.
Portugal
In Portugal there are specific issues regarding the hiring of employees. For example, employment contracts may be written or oral. Portugal does allow 50-hour work weeks and employers may only require a maximum of 6 working days.
There are seven ways of terminating an employee relationship in Portugal. They include: 1) expiration of contract; 2) mutual agreement; 3) dismissal with proper cause; 4) collective dismissal; 5) elimination of position; 6) inability to perform tasks relating to technology; and 8) employee resignation. Ordinary rules do not apply to civil servants, members of the armed forces and police, domestic servants, and persons working aboard ships.
Termination of employees due to redundancy is allowed and requires 26 weeks of severance pay. Regular termination of an employee must be made in writing. There is no requirement for notice if the employee’s termination is based on misconduct. However, a notice period for regular termination of an employee can range from as few as 15 days and rise to 75 days depending on length of employment. In Portugal, employees receive 22 paid working days annually.
A great example of why it is so very important to clarify these employee/employer issues is because of the issues currently faced by one of our clients. A medical device manufacturer located in the United States hired Foreign Staffing, Inc. to find 18 sales and business development specialists. The company is looking to hire for just one type of position, but needs these specialists in 18 different countries. In some countries the parent company has a physical presence, in other countries there is no legal office. Some of the hired specialists are to be treated as employees, in other countries they were treated as contractors. Some received benefits, some did not. In some countries they weren’t sure how they would employee these people. And while company relied on Foreign Staffing, Inc. to find the applicants, the company was still responsible for researching the legal and tax issues in each country.
There are so many different rules and regulations and they can greatly differ by country. It is vitally important to determine if your company is required to establish a legal entity, how much time this process could demand, if employees are to be on the company’s own payroll or if they can be assigned as contractors. Also, remember that all decisions made at the beginning of this new expansion can affect your company for years to come in terms of employment contracts and termination regulations. For American companies there is tremendous growth potential from expanding into Europe. The best course of action is to research and select the country that best suits your goals. Just make sure you do your homework.
About Foreign Staffing, Inc.
Foreign Staffing, Inc. (www.foreignstaffing.com ) is a provider of bilingual/international staffing and recruiting services finding qualified applicants anywhere in the world. The company services all industries and usually finds candidates in any country of the world within one week.
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