Author:
Mariana Villa da Costa – Littler Mendelson
A few weeks ago in the first post of this series, I provided five tips to get you started in the development of a Global Code of Conduct. In this post, we are back with five more tips to help you finish your Code.
Author:
Mariana Villa da Costa – Littler Mendelson
What is a Global Code of Conduct? Everybody talks about them, and they have become a necessity for global businesses in today’s environment, but truly, drafting one can be a big mystery and a lot of work. Who should draft them? A lawyer? Human resources personnel? The CEO? What content should be included? What language?
These questions, and many others, will be answered with my ten tips to develop a Global Code of Conduct. The first five tips are in this post; the remaining ones will follow soon in a follow-up post. Here we go:
Guest Author:
Jacqueline Vilet – TriNet
Editor’s Note: We are pleased to welcome Jacque Vilet as a guest author for the International HR Forum. Jacque is a Global HR/Benefits Consultant for TriNet, providing global Human Resources services to SME’s with international operations. She has over 20 years experience in International Human Resources with both local nationals and expatriates, and has been an expat twice during her career. Jacque holds the Certified Compensation Professional (CCP) designation from WorldatWork, and the GPHR (Global Professional in Human Resources) designation from the Society of Human Resources Management.
In Part 1 of “What Keeps Executives Up at Night”, we talked about the importance of employment contracts and how requirements vary from one country to another. But employment contracts are only one of the major labor issues that companies face when doing international business. Terminating local national employees can also create major problems.
Posted in Global HR Expertise, International Employment Law
Tagged employment, Labor Law, law, termination
Guest Author:
Jacqueline Vilet – TriNet
Editor’s Note: We are pleased to welcome Jacque Vilet as a guest author for the International HR Forum. Jacque is a Global HR/Benefits Consultant for TriNet, providing global Human Resources services to SME’s with international operations. She has over 20 years experience in International Human Resources with both local nationals and expatriates, and has been an expat twice during her career. Jacque holds the Certified Compensation Professional (CCP) designation from World at Work, and the GPHR (Global Professional in Human Resources) designation from the Society of Human Resources Management.
Everyone has heard the question “What keeps you up at night?” The answer usually depends on the context. If we ask C-level executives, the answer might cover such topics as market share, profit margins, stock price, ROI, etc.
Executives might also worry about their international operations – whether they picked the right people to run them, whether these managers are making inroads into the company’s potential customer base, hiring the right employees and remaining on target to meet business goals that are so important for expanding the company’s global market.
Posted in General, Global HR Expertise, International Employment Law
Author:
Mariana Villa da Costa – Littler Mendelson
Hello Readers! Sorry about the radio silence, but I am back with another edition of our “International Employment Law Quick Facts”! Based on our readers requests, I have chosen India for the next in this series.
India is a place of exotic food, beautiful architecture and Bollywood! But, it’s also a developing country with the world’s second largest labor force and an economy that is taking over many others, and becoming one of the best places for global companies to invest. One important observation – Indian Labour and Employment Law is among one of the most complex in the world, so while I know the outline that follows is a good start, it is always a great idea to consult a lawyer.
Posted in Global HR Expertise, International Employment Law
Tagged Global HR, India, international hr, Labor Law, law
Author:
Mariana Villa da Costa – Littler Mendelson
There are many situations when companies consider hiring “independent contractors” rather than direct employees. When considering such a step in an overseas market, each country’s labor law should be consulted to determine the specific requirements of independent contractors in that country. Here are some issues to consider that are commonly addressed by most country labor laws.
Independent Contractor or Employee?
The difference between an employee and an independent contractor is determined based on the requirements that one must have to be an employee. While each country is different, generally, an individual will be considered an independent contractor and, therefore, will not be covered by the labor legislation, if he or she has independence to perform the work and it is not subordinate to a company’s directives and regulations, and when there is no exclusivity in the relationship between the parties.
5 Questions to Assess Independent Contractor Status
Here are 5 questions to help you determine if a relationship is a true independent contractor:
Key Considerations for Independent Contractors
Before engaging an independent contractor, be sure to consider the following:
Additional Tests to Assess Independent Contractor Status
This checklist is based on the one developed by the US Internal Revenue Service (IRS). It gives valuable information that characterizes most independent contractor relationships across the globe:
Maintaining the proper classification of employees versus contractors is very important to ensure compliance with labor law regulations. The rules are unique to each country, and HR professionals are urged to review the specific requirements for each country as needed.
Important Note: These guidelines are intended to provide a brief overview of the independent contractor issues in foreign countries. It is not intended as a substitute for professional legal advice and counsel.
More About Mariana
Author:
Claudia Howe – Global Mobility Tax, LLP
Has anybody heard about the magic 183 days? So, if you stay in the host country for less than 183 days, you don’t have to pay tax in that country, right? … right? Well, actually the answer is: sometimes.
Many folks will remember the 183-day rule, but often they do not quite know why or how. But it sure lulls many international short-term business assignees (and their managers) into a false sense of security that as long as they are in the other country for less than that magic number of days, thinking they will be exempt from that country’s tax. Let’s step back.
Tax Treaties Help Prevent Double Taxation
Tax treaties come into play when two countries want to tax the same income leading to the dreaded “double taxation.” As the world has become smaller and more and more people are conducting business in countries other than their home, these folks find themselves in a position where they may be required to pay tax in both countries under the domestic law of each country. For example, a UK employee goes to the US for a four-month project. The UK will tax her on her world-wide income by virtue of being a tax resident in the UK. The US federal government will want to tax her US source income because she has “effectively connected income.”
How Tax Treaties Work
Tax treaties provide that if certain conditions exist, the person is not taxable in the foreign jurisdiction, in this case the US. Beware, each treaty is worded differently, but in general, the three main treaty conditions for an individual employed in the home country, and claiming exemption from tax in the host country under Article 15, the Dependent Services article, are:
As mentioned above, be careful to read the exact wording in each treaty to evaluate exactly what it says – there are variations on the theme. For example, the 183 days could be in a calendar year, fiscal year, or in a rolling 12 months. The US has concluded numerous treaties and neatly lists them on the IRS website. The UK also has a list.
The Fourth Requirement (in some countries)
Over the past few years, another hurdle to using the treaty has crystalized itself, also know as the “economic employer” approach. The term “employed” or “employment” as stated in Article 15 had not previously been defined, until the OECD (Organisation for Economic Co-operation and Development) stated that substance trumped form. This means that even if the person is legally employed by the home country, the entity that is receiving the benefit of the services, namely the host country entity, could be construed to be the real employer and therefore the Article would not be useable to exempt the income from tax in the host country. The US has not adopted this approach as of yet, but many of the European countries that follow the OECD model treaty have.
Our friend from the UK on the 4 month assignment remains on UK payroll, spends less than 183 days in the US during any 12 month period (even vacation days not related to the assignment count), and her company does not cross-charge her compensation cost to any US entity. So, is she off the hook?
State Tax Implications
Not completely. The treaty in this case will enable our UK friend to be exempt from US federal taxes, but since she is working in the beautiful (and broke) state of California, which does not accept any treaties concluded by the US federal government, she will still be subject to California tax, regardless.
Social Tax Implications
Our friend also has to make sure that her employer has applied for a certificate of coverage under the US/UK totalization agreement to exempt her from US social taxes (more on that another time).
Foreign Tax Credits
Even if the conditions for an exemption from the host country tax are not met, the treaty can still be helpful in avoiding double taxation: the income may now be taxable in the host country, but under the Relief of Double Taxation article (contained in most treaties), the home country must grant a credit for taxes paid in the host country, up to the amount of tax that would have been paid in the home country on that same income. This might also apply in cases where no treaties exist. Keep in mind, though, that in some countries, the practical requirements for claim a foreign tax credit are so complex that for small amounts, it may not even be worth the bother.
Summary
So, what should you, an HR professional, faced with the news of a short-term assignment and, the manager’s famous last words are: “we will make sure it’s less than 183 days,” do?
Unless you have checked all this out, you cannot rely on the famous 183 days. And don’t forget the reporting and filing requirements for each jurisdiction! You may want to call your favorite global mobility tax professional to assist with all of the above and to co-develop the options for the assignment step by step so you can articulate the risks and options to that manager and to your management.
More information on Claudia:
Author:
Alan Freeman – LOF International HR Solutions
We recently addressed a colleague’s question that echoed one we hear fairly often. “We have an operation in Country A and want to hire our first employee in Country B. He is a national of Country B, will continue to live there while working for our company, essentially all his work activities will be conducted in Country B and he will not be an expat. Can’t we simply put him on a Country A contract, enroll him in Country A social insurance and our company benefits schemes, pay him through the Country A payroll and all will be well?”
Indeed, it is a true story (I am NOT making this up!) that a senior executive once told me that he intended to hire seven employees in France under UK contracts and payroll from the UK. His rationale?, “We don’t want to have the extra burden of setting up new administrative capacity in France and, besides, I don’t want to get tangled up in those restrictive French employment laws.”
While the desire to avoid the costs and efforts of establishing operations and additional administrative burden in “new” countries is understandable, it is not wise. Here’s why.
What are the key issues?
In most countries, a person resident in the country and performing services in the country is considered an employee in that country. It doesn’t matter where the payroll is paid, where the contract is issued, or what country the employing entity is located in.
In our example above, the likely circumstances would be:
Is there a simple solution?
Yes. Local employees must be employed on local terms and conditions, in accordance with local market practice, by a local employer-entity, and paid via local payroll services that ensure compliance with employment, social insurance and income tax regulations. Oh, and by the way, if per chance the target employee doesn’t already have the appropriate immigration status, Work Permit and Residency Visa requirements come into play as well.
Exactly how the above can be accomplished is dependent upon what’s possible and appropriate in each country. It isn’t overly difficult or expensive to “do it right the first time” and it is much less expensive and disruptive to the business than not doing it correctly.
More about Alan:
LOF International Human Resources Solutions, Inc.
Author:
Mariana Villa da Costa – Littler Mendelson
The Chinese labor environment has changed considerably over the past few years, to keep up with China’s shift towards capitalism and explosive economic growth. The world’s attention is on China now, and in particular, the abuses of employees’ rights have caught the attention of the government and the international community, triggering new sets of laws that are being strictly enforced today.
Companies doing business in China must pay attention to these new laws and, in particular, HR practitioners need to understand the PRC’s employment laws to avoid conflicts in the country.
2008 PRC Employment Contract Law – A Very Liberal Piece of Legislation for Workers
The 2008 PRC Employment Contract Law (effective January 1, 2008) is a very generous law for workers, granting employees more protection than the old legislation. For example, employers in China used to profit from using temporary workers; however, with the new law, if employers keep using a temporary individual for more than one short-term contract period, this person would be viewed as a permanent employee, receiving all the benefits associated with permanent status.
Even though employers had concerns about the legislation they knew it would be important to show more clarity in the employer – employee relationship. This would, ultimately, send a message to the world about China’s willingness to adopt more transparent principles in support of positive employer-worker relations.
Below are more details on provisions of the new law.
2008 PRC Employment Contract Law – Mandatory Employment Contract
This considerably new law does not replace 1995 Labor Law of the People’s Republic of China, but substitutes some of the chapters in individual employment contracts and also, details and adds other portions of the existing labor laws.
Before 2008, it was not very common for employees to have formal contracts with the Chinese companies, a path to violations and abuses. With this new law, a very detailed written employment contract is mandatory. The contract must include details such as job description, working hours, and compensation, and it must be created during the first month of employment.
If the company fails to create the contract on time, then the employer is required to pay the worker twice his or her salary for every month that there is no contract.
More Protective Provisions
The law also has other interesting rules that increase the protection of employees in the workplace. Some of them are:
Complying With the New Provisions: Some Advice
Companies doing business in China are expected to comply with the new rules; therefore, it is important that HR practitioners bear in mind the following:
China, with its increasing economic power, has caused employers to focus more on operations there. HR Professionals should pay careful attention to how business is conducted in China and especially, how labor and employee relations are managed. Full compliance with the domestic laws will ultimately ensure the success of your operations in this fascinating land.
More About Mariana
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