Employer of Record and the Termination Process

Table of contents

Managing a global workforce can be very rewarding. Being able to provide employment and income to families across the globe is great, but even better when they are happy, productive and contributing to company success. However, when you hire global employees, you unfortunately have to be prepared to properly handle the firing of employees as well.

The employee termination process is a necessary part of every business that no one enjoys, but should never be taken lightly. Domestically, employee termination may appear straightforward, but giving notice to global employees is a complex process that is further complicated by the constantly changing international labour regulations surrounding employee termination. Prior to any termination, it is imperative that companies understand the exact correct protocol for terminating employees in foreign countries. Failure to legally adhere to the correct laws and processes could result in costly legal disputes and reputation damage.

Due to the complexity involved in global workforce management, many companies turn to a global employer of record for assistance. A global employer of record takes responsibility for all international employee management tasks, including the hiring and firing of company’s employees. Here are four ways that a global employer of record can manage the termination process for your company:

1. Local Knowledge

In the US, terminating an employee is regarded as a reasonably straightforward process due to the common practice of “at-will employment.” The concept of “at-will” allows employers the freedom to terminate employees without having fear of legal ramifications. However, outside of the US, the termination of global employees is a far more complicated process and the consequences of not correctly adhering to local termination policies can range from large fines to crippling lawsuits.

The local knowledge that a global employer of record provides ensures that the termination process is correct at the most important stage – the start. Having an understanding of local termination policies before an employment contract is drawn up, means less headaches later on. Local knowledge ensures you are drafting an employment contract that is fully compliant to local laws providing a documented agreement of employment, including its termination.  . Typically, these clauses address severance obligations notice periods, and permissable grounds for termination as per the different country’s’ requirements

2. Overcomes Complexities of International Employment Laws

With each border crossed, a new set of employment laws will have to be managed. While termination laws may vary considerably from country to country, the large penalties and legal recourses associated with failure to comply to these laws remain constant worldwide. Some examples of nuances within terminations processes can be seen in Austria , where there are no grounds for dismissal required and employees with fewer than six months of employment have no protection against unfair dismissal. In France, a country where it is notoriously difficult to terminate employees, termination of an employment contract is permissible only in limited and restricted circumstances. Notice periods differ as well. In the Czech Republic, there is a statutory two months’ notice period, whilst in Denmark only one month of notice is required.

A global employer of record navigates foreign employment law by ensuring that every aspect of the termination process is compliant with local regulations, even with special circumstances such as government COVID benefits, or the UK leaving the European Union. Any mistake made in the termination procedure can result in a costly legal action. In countries like France and Brazil, the cost of not getting the complex termination process correct can be very high indeed.

3. Ensures Accuracy

There is a financial side to the termination process that requires error-free implementation. There are major variables that can affect exactly how much an employee is entitled to receive in the event of a termination. Length of employment, outstanding benefits and bonuses, statutory payments, and vacation accruals, are just some of the differing variables that have to be accounted for and managed within a global payroll system during the termination process.

Using cloud-based technology, a global employer of record provides global payroll management by executing the correct severance and tax information across any border. The centralized platform accurately calculates how much an employee is entitled to, regardless of country of business.

4. Security

An often-overlooked part of the termination is in the security of the termination. This includes more than the theft of a company stapler as a disgruntled ex-employee is clearing their desk. Access to sensitive data is a big issue with terminated employees. A global employer of record puts procedures in place which legally protect and reacquire your company’s intellectual property. From the contract draft during the onboarding of a new employee, to blocking digitized access upon termination, the security and intellectual property of the company must be protected in accordance to the law.

Taking the Headache Out of Employee Termination

It doesn’t matter which side of the table you are on, employee termination is a hard part of any business. To ensure termination is handled correctly and compliantly in foreign fields, you need expert local knowledge. An employer of record provides innovative and customizable solutions to help your company not only compliantly on-board staff, but also to overcome the complex challenge of the terminating process with global employees.