As companies today look for ways to reduce their costs, it is inevitable that they will look at their expat population. Expatriate costs, such as premiums, assignment allowances, subsidies, tax assistance, family support, travel, shipping, and housing, are necessary, but quickly add up. Expatriate costs can often be four times what they are for employees who work in their home country.
It is not surprising, then, that companies ask if there are savings to be garnered if long-term expatriates are brought home before the original term of their assignment ends. When a company needs to “pull the plug” and find a way to bring the expatriate home as soon as possible, there are five things to consider.
- Assignment Letter and Global Assignment Policy. Many US expats are employed as “at will” employees. However, the “at will” employment relationship may be modified by an assignment letter. With any luck, the assignment letter will address what happens in the event the assignment is terminated early at the company’s request. If there is no such provision, then the next place to look is the global assignment policy. If the letter is silent, and if there is no global assignment policy (or the policy is silent), then the company should negotiate with the expatriate when and how to terminate the assignment, how to handle repatriation, what costs the company will pay for, etc.
- Host Country Employment Contract. In some cases, the expatriate may be subject to a local employment contract in addition to the assignment letter. Local employment is required in some jurisdictions to obtain a visa or work permit to work in the host country or to avoid creating a “permanent establishment” for the sending company. Whatever the reason, if a local employment contract exists, review it to determine what happens when the assignment is terminated early. Is advance notice required? Must you pay severance under local labor law or as required under the contract?
- Expatriate’s Expectations. Assess the personal impact of early termination on the expat and his/her family. Early termination of a long-term assignment is never easy. In addition to the usual steps of packing up and moving home, there will be disruption in the expatriate’s business and working relationship with customers/clients in the host country. An apartment lease may need to be broken, children may need to be pulled out of school, and if the spouse is employed in the host country, he/she will need to terminate as well.
- Job upon Return. What is rarely addressed in the event of early termination is what will happen to the expatriate once he/she returns to the home country. Will there be a suitable job for the expatriate? What if the position is not the same as what the expatriate had prior to the assignment? What if the compensation is less? The early termination scenario forces HR to quickly address these issues. Where there is no job acceptable upon return, is termination of employment a possibility?
- Dispute Resolution Process. While expats will understand if business reasons force an early termination of assignment, they may also be suspicious that it’s a “cover” for their eventual termination of employment. Expatriates who are terminated early are often unhappy and may be tempted to talk to a lawyer if they feel they have been mistreated. To be on the safe side, review the dispute resolution process set forth in the assignment letter or global mobility policy so you are prepared for any claims made by the expat.
Early termination of an expat assignment is not common, but cost reduction may force companies to exercise the option. In that case, keep in mind the five issues above to help better manage the early termination process.