Many employers are planning to take advantage of the work from anywhere
movement by tapping into the world's talent pool. But before you jump on the
bandwagon, you need to understand that employee protections are much stronger
outside of the U.S., so there are unique challenges that come with indefinite
(or long-term) employment in the global marketplace.
Learn more about indefinite employment and what it means when hiring in
foreign countries.
Understanding indefinite employment
Most companies in the U.S. operate with at-will employment contracts —with
some exceptions—and can change the terms of any agreement or terminate
employees without reasonable notice or consequences. But most other countries
operate under indefinite employment vs. at-will employment.
An employment contract of indefinite duration is fairly self-explanatory. It
allows for employment for an indefinite period of time, and offers relatively
more permanent and flexible employment relationships.
Where at-will employment allows employers to terminate employees whenever they
want, with little reason or forewarning, an indefinite contract forces a
business to go through a lengthy and costly process to terminate an employee.
That includes reasonable notice periods, government-mandated severance pay
that is tied to a worker’s length of employment, and court proceedings.
Employers can still terminate indefinite employees but the termination has to
be based on “just cause.” And even in circumstances where an employee is
provided a just cause dismissal, the employer may still have to prove that it
was a lawful termination.
Aside from a lawful termination, indefinite employment can still end via:
- Employee resignation
- Employee retirement
- Permanent business closure
Drawing up an indefinite employment contract
When creating indefinite duration contracts for potential employees, it’s
important to be as thorough and upfront as possible. Countries that use
indefinite employment contracts require comprehensive processes and due
diligence from employers.
When contracting for indefinite employment , make sure the agreement includes:
- General job description, location and hours
- Wages and benefits
- Social security payments
- Paid time off, vacation time and other general leave policies
- Probation and discipline processes
- Dismissal and termination processes, including severance policies, required notice periods, and reasons that constitute “just cause”
- Collective bargaining terms (if applicable)
This is not an exhaustive list, however. It’s vital to look up local labor
laws and make explicit any terms that may seem implied.
Fixed-term employment
A potential alternative to indefinite employment is a fixed-term employment
agreement . Also known as a limited-term employment
contract or temporary contract, these agreements allow for employment over a
fixed amount of time. During the duration of a temporary contract, the
employee receives full benefits. And at the end of the contract, the company
may choose to extend or renew the contract.
Fixed-term employment can be beneficial to both employers and employees.
Employers can hire based on seasonal demand or other company needs, and
employees can maintain full benefits and know the exact length of their
employment.
However, these contracts can come with some issues. Many countries limit how
often you can renew a fixed-term contract or cap the total contract period.
The idea is that, if an employer can afford to constantly renew the contract,
they can also hire them on a more permanent contract (like an indefinite
employment contract).
Potential advantages of indefinite employment
The main benefit of indefinite employment is employee empowerment. Indefinite
contracts are designed to support your employees through wages and benefits
that are guaranteed and properly outlined in their contracts.
With a more secure work arrangement, employees are ostensibly more committed
to their work and to the organization as a whole. Workers are empowered to
learn and grow while supporting and even improving business operations.
For the organization, there is less worry of turnover and productivity
improves as permanent employees typically have better morale and engagement
with the business.
Potential disadvantages of indefinite employment
While indefinite employment has several advantages, one downside is that it
can be costly to employers. Employers have more obligations with regard to
statutory benefits, like paid time off, paid leave, pension and medical care,
which add to employment costs. And in the event of a termination, the employer
is required to provide severance pay and benefits as outlined in the
employment contract. Some terminations can also result in litigation and
expensive legal fees.
With high costs on the line for any HR missteps, it’s critical to ensure
compliant employment contracts are in place to protect your business.
How to ensure compliant employment contracts
Unfortunately, local labor law varies from country to country, so crafting
compliant contracts can be a significant challenge for companies that lack in-
country expertise.
Local HR and legal experts can help draft compliant contracts in foreign
markets or companies can partner with a global employer of record (EOR), sometimes referred to as an international PEO.
An EOR, like GEO, is a local employer that hires workers on your behalf and takes
on the legal responsibility for complying with all the payroll and employment
laws where your employees reside. This partnership guarantees compliant
employment contracts with statutory entitlements for employees and employer
protections for you — a win win.
Have questions about drawing up an indefinite contract for your global team?
Our global employment outsourcing experts can help ensure worker contracts
are compliant with local legislation. Contact us today to learn more
.
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